CFTC chair warns of crypto regulatory gaps and political betting risks pre-resignation

The Commodity Futures Trading Commission (CFTC) chair, Rostin Behnam, has called out what he deems as gaping holes in crypto regulation. He also raised alarms over the risks of political betting markets as his term comes to an end.

Behnam, who has been in charge of the CFTC for four years, is set to step down on January 20, the same day President-elect Donald Trump will be sworn into office.

Behnam’s tenure has been anything but quiet. He’s been in the trenches, finalizing federal guidelines for carbon offsets, cracking down on crypto, and addressing controversial event-based contracts like political wagers.

But he has made it crystal clear that the US regulatory framework for digital assets is still miles behind where it needs to be. “You still have a large swath of the digital asset space unregulated,” he said. He argued that the surge in demand for crypto products from retail and institutional investors proves the urgency of fixing this.

US crypto regulation is a messy patchwork with no end in sight

While Behnam is not as notorious as SEC chair Gary Gensler, he’s still quite disliked in the crypto community. You see, the CFTC has traditionally regulated commodity derivatives—think futures and options—not the actual underlying assets.

But Behnam has been pushing to expand its role, claiming that many digital tokens qualify as commodities and that regulating spot markets for crypto would be a “natural fit.”

His argument is that the CFTC is better equipped to handle crypto than its larger counterpart, the Securities and Exchange Commission (SEC). With Congress on his side, Behnam’s been lobbying hard to make this happen.

Under Behnam, the CFTC hurt the industry with its lawsuit against Binance, the world’s largest crypto exchange. That case ended with a $4.3 billion settlement and Binance founder/former CEO, Changpeng ‘CZ’ Zhao, in prison for four months.

Meanwhile, President-elect Trump has yet to name Behnam’s successor. But Trump is famously pro-crypto and has since tapped Paul Atkins, a well-known crypto lover, to head the SEC. With this guy in charge, the CFTC might find itself locked in even more jurisdictional battles over crypto oversight.

The growing risk of political betting blurring legality lines

Behnam isn’t just worried about crypto. He’s also got a bone to pick with the rise of political betting markets, which he says could spiral out of control if left unchecked. The CFTC barred Kalshi, a retail-focused futures market, from offering contracts on congressional elections in 2023.

But that didn’t stick. Kalshi sued the agency, and a US judge lifted the ban, effectively throwing the doors wide open for more event-based trading.

Behnam called the ruling a red flag. He expressed “strong concern” about markets tied to elections, assassinations, terrorism, and gaming, warning that the legal and ethical boundaries are increasingly blurry.

“As technology and high retail demand drive growth in these markets, the line is going to be very blurred about what is legal, what’s illegal,” he said.

He urged his successor to prioritize this issue, saying a “renewed focus” is needed to establish clear rules on what kinds of contracts should be allowed.

Behnam’s fear is that without firm boundaries, these markets could create chaos, potentially undermining democratic institutions or trivializing serious global threats. Because, of course. Those are real concerns.

Banks, crypto, and the Trump administration

The Biden administration has been notably skeptical of letting banks play with crypto. The SEC’s Staff Accounting Bulletin 121, for instance, forces banks to count crypto assets as liabilities on their balance sheets.

This policy has effectively frozen many banks’ crypto ambitions, leaving projects like custody services and stablecoins gathering dust. But now many are betting that Trump’s administration will repeal SAB 121, opening the door for banks to jump back into crypto with both feet.

If that happens, stalled projects could finally move forward, and the financial industry might see a new wave of innovation in blockchain-based services.

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