Washington, DC, February 9, 2023—Last year was dubbed the “Crypto Bowl” because of the amount of cryptocurrency ads that aired around the Super Bowl, including the FTX ad featuring Larry David. This year crypto companies have pulled their Super Bowl ads, some because of the fallout from the FTX collapse, according to media reports. The disappearance of these ads reflects the current turmoil in the cryptocurrency markets.
With the prominence of digital assets and the failure of some of the larger ones (FTX, Celsius), there is a need for a clearer and workable regulatory framework to protect the retail investor. Currently, both the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have some authority over cryptocurrency, along with the Internal Revenue Service (IRS).
“The current lack of a clear regulatory structure for digital assets leaves retail investors easy prey for fraud and corruption,” said Sam Brown, whistleblower attorney at Phillips and Cohen LLP. “Increased transparency and oversight will allow regulators to prevent the pervasive fraud we currently see or at least catch it before consumers have lost their investments.”
Proper whistleblower protections will also play an integral part in ensuring retail investors are protected. “People with inside knowledge of crypto fraud and corruption will be essential to reporting fraud and bringing corruption to light,” added Brown.
Last week, the Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam discussed the agency’s cryptocurrency enforcement at the ABA’s Business Law Section Derivatives & Futures Law Committee Winter Meeting, suggesting the issue remains a priority for CFTC enforcement.
“According to CFTC data, 20 percent of the 82 enforcement actions the agency filed in 2022 involved digital assets,” said Brown. “We know enforcement will only increase in the cryptocurrency arena as Chairman Behnam’s remarks indicate the agency is committed to using the full breadth of their authority to address illegal offering of transactions, fraud, and manipulation in digital assets. But without a clear regulatory framework, investors are still at a huge risk for fraud and the crypto market operates largely in the dark.”