CFTC crackdown on DeFi firms’ unlawful transactions

Regulator says that firms believe smart contracts allow unregistered trading.

The US Commodity Futures Trading Commission brought enforcement actions against three decentralized finance firms and signaled that more may be coming.

The CFTC alleged on Thursday that the companies Opyn Inc., ZeroEx Inc. and Deridex Inc. broke the agency’s rules by illegally allowing US customers to trade digital-asset derivatives without registering. The regulator ordered the firms to cease and desist from violating CFTC rules and required them to pay civil penalties of $250,000, $200,000, and $100,000, respectively.

None of the three companies admitted or denied the regulator’s allegations as part of their settlements. The firms didn’t immediately respond to requests for comment.

The US government has increasingly set its sights on decentralized finance, or DeFi as its known by the industry. The platforms allow users to trade, borrow and lend digital assets without having to go through an intermediary. Over the last several months, agencies have put out rules, levied sanctions, and brought enforcement actions to put DeFi actors on notice.

“Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts,” CFTC enforcement director Ian McGinley said in a statement. “They do not.”

The CFTC recently notched a win against a decentralized autonomous organization called Ooki DAO that it claimed operated an illegal trading platform and violated other agency rules. A federal judge in June ordered the firm to shut down and pay a penalty of more than $600,000.

Not every member of the CFTC was supportive of the agency’s action on Thursday. Summer Mersinger, a Republican commissioner, issued a dissenting statement, saying the regulator should focus first on providing clear rules for DeFi rather than enforcement, especially when dealing with platforms that haven’t committed fraud or harmed their users.

“I am concerned that the commission in these cases is taking another step down the path of bringing enforcement actions when we should be engaging with the public,” she said.