Caroline Pham, acting chair of the Commodity Futures Trading Commission (CFTC), praised a new policy by the Justice Department policy that ends the practice of regulation by prosecution in the digital asset industry.
The policy stems from Executive Order 14178, which tasks the Justice Department and others with “protecting and promoting the ability of individual citizens and private-sector entities alike to access and use for lawful purposes open public blockchain networks without persecution.” In addition, it calls for “fair and open access to banking services for all law-abiding individual citizens and private-sector entities alike.”
In response, the Justice Department will no longer target virtual currency exchanges, mixing and tumbling services, and offline wallets for the acts of their end users or unwitting violations of regulations.
The policy also directed CFTC staff to comply with the executive order and policy. Pham supports the policy and has directed the CFTC staff and the Director of Enforcement to comply with it.
“For far too long, lawfare from multiple federal agencies against innovators in the digital asset space has created unfairness and uncertainty that has undermined trust in the regulatory process and impeded American competitiveness,” Pham said. “I welcome the Justice Department’s policy to focus on holding bad actors accountable while allowing regulators to set clear rules that foster responsible innovation. The CFTC is committed to complying with the President’s executive orders at the heart of this policy and has already taken important steps to end regulation by enforcement and direct limited resources toward fighting fraud and helping victims.”
The DOJ policy comes as Pham has refocused the CFTC’s enforcement resources on cases involving fraud and manipulation.
“In accordance with the President’s executive orders and Administration policy, I direct the CFTC staff and the Director of Enforcement to adhere to the Justice Department’s policy on digital assets enforcement priorities and digital assets charging considerations set forth in the Deputy Attorney General’s memorandum, Ending Regulation by Prosecution, dated April 7, 2025, with respect to ongoing investigations, litigation including the agency’s litigating position and arguments, and other enforcement matters,” Pham said.
Specifically, she directed CFTC staff and the Director of Enforcement to not charge regulatory violations in cases involving digital assets, particularly violations of registration requirements under the Commodity Exchange Act. This is unless there is evidence that the defendant knew of the licensing or registration requirement at issue and violated such a requirement willfully.
“Under Executive Order 14219, agency heads are required to ‘direct the termination of all such enforcement proceedings that do not comply with the Constitution, laws, or Administration policy.’ For ongoing CFTC litigation matters in U.S. federal court, pursuant to administrative law and precedent, the CFTC cannot dismiss a case or enter into a settlement consent order to terminate the enforcement proceeding, without agency action by the Commission requiring a majority vote. Currently, no party holds a majority on the Commission,” Pham said.
Since her appointment, Pham realigned the CFTC Division of Enforcement task forces to end regulation by enforcement and refocus on fighting fraud and helping victims. Further, the Division of Enforcement has also issued a new advisory on the CFTC’s new policy to promote self-reporting, cooperation, and remediation.
Pham also launched an initiative aimed at resolving a backlog of noncompliance matters that do not involve customer harm or market abuse. The initiative provides the opportunity to bring closure and clarity to firms in a timely manner while freeing up agency resources to focus on catching fraudsters and scammers and helping victims. So far, some two dozen firms have reached out to participate.