CFTC Commissioner Pham says agency may be infringing on SEC's authority in KuCoin charges

One of the Commodity Futures Trading Commission's leaders, Caroline Pham, criticized her own agency, saying the regulator may be infringing on its sister agency in charges it brought against crypto exchange KuCoin earlier this week. 

The CFTC, alongside the U.S. Department of Justice, charged KuCoin on March 26 for illegally operating a digital assets derivatives exchange. 

CFTC Commissioner Pham said in a statement on Friday that the agency's complaint "appears to assert that fund shares held by investors—namely, securities—can themselves constitute leveraged trading," pursuant to commodities laws. However, "this interpretation fails to distinguish between an investment in a fund, which would typically be a security under the jurisdiction of the SEC, and the trading activities of a fund, alleged here to be under the CFTC’s jurisdiction," Pham said. "The CFTC’s approach may infringe upon the SEC’s authority and undermine decades of robust investor protection laws by conflating a financial instrument with a financial activity, disrupting the foundations of securities markets." 

"Owning shares is not the same thing as trading derivatives," Pham added. 

At odds 

Over the past year, questions have frequently arisen about where the CFTC and SEC have authority over the crypto industry. 

For example, the SEC and CFTC publicly have been divided on whether ether is a security or a commodity. SEC Chair Gary Gensler has skirted the question but has said many cryptocurrencies are securities. The CFTC has said, as recently as in its charges against KuCoin this week, that ether is a commodity. 

CFTC Chair Rostin Behnam told lawmakers during a congressional hearing earlier this month that if the SEC were to constitute ether as a security, it would cause the CFTC's registrants who list ether as a futures contract into noncompliance with SEC rules, calling the situation "critical."