'I Don’t Believe in Any Kind of "Gotcha" Regulation,' CFTC Commissioner Says on SEC Insider Trading Case

Commodity Futures Trading Commission (CFTC) member Caroline D. Pham told CoinDesk TV Wednesday her agency should have had “a seat at the table” before the Securities and Exchange Commission brought insider trading allegations against a former manager at crypto exchange Coinbase (COIN).

Pham, who was sworn in as a commissioner in April, said the CFTC also has insider trading enforcement authority.

“I believe that anything that might impact or implicate the CFTC’s jurisdiction, it’s our job to go in there to enforce the law, and to make sure that we’re prosecuting wrongdoing,” Pham said on CoinDesk TV’s “First Mover” show. “If the CFTC is involved in some way, I think we have to have a seat at the table; or if our jurisdiction [is] involved, we have to have a seat at the table.”

Commissioner Pham’s comments came after SEC allegations a former Coinbase product manager engaged in insider trading. The accused allegedly gave his brother and a friend confidential information about tokens that would be listed on the exchange in the near future.

The lawsuit also labeled nine digital tokens involved in the insider trading as “securities,” a first for an SEC action when the issuers of the alleged securities are not the defendants. With crypto regulation still in a gray area, this case “could have broad implications,” Pham said.

Pham said there’s still a lack of regulatory clarity around many tokens. There are “open questions around some of the tokens that are described in the complaint, particularly utility tokens and those involving DAOs,” or decentralized autonomous organizations.

A clear path toward regulation and compliance, according to Pham, can be established via the use of tools the agencies already have “that don’t involve bringing enforcement cases,” which she describes as “disruptive” in the SEC’s case.

“People need to know what the rules are so they can follow them,” she said. “I don’t believe in any kind of ‘gotcha’ regulation, where the rules are constantly changing on people and they don’t know what they’re supposed to be doing.”

This is not the first time Pham has commented on “regulation by enforcement.” She spoke on the topic in a July 21 speech where she noted an effective crypto framework would be best achieved in a collaborative manner.

In a similar vein, SEC Commissioner Hester M. Peirce has also expressed her disappointment with the SEC in the past when it comes to the agency's relationship with crypto. In June she highlighted the agency’s “puzzling” and “out-of character approach” to regulation.

Pham, meanwhile, told CoinDesk that “the most effective regulation is when it’s clear.” At the moment, she said, it is difficult to pinpoint which agency is spearheading an effective regulatory framework. “I think a lot of people are asking themselves questions,” she said.

Pham said that, ultimately, it is “incumbent upon regulators” to provide clarity for people to know what they can and can’t do within the crypto industry.

Read more: The SEC Is Providing Regulatory Clarity, Just Not How Anyone Wants

UPDATE (July 27, 2022 19:25 UTC) – Clarifies details of the SEC lawsuit.