CTFC slammed for ‘blatant regulation by enforcement’ in Ooki DAO case

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The Commodities Futures Trading Commission (CFTC) has drawn heavy criticism from the community after filing a federal civil suit against members of the decentralized self-governing organization Ooki DAO for violating digital asset trading.

In a September 22 ReleaseThe CFTC said it simultaneously filed and settled charges against the founders of decentralized trading platform bZeroX Tom Bean and Kyle Kistner for their role in “unlawfully offering leveraged retail trades and margin on digital assets”.

However, the community started an agitation about a simultaneous civil action against Ooki DAO associated with bZeroX and its members, which it claimed were using the same software protocol as bZeroX after taking control of it, and therefore “violating the same laws”. as respondents.

The enforcement action has drawn the ire of a number of crypto lawyers and even a CFTC commissioner, fearing it will set an unfair regulatory precedent.

In a September 22 dissenting statement, CFTC Commissioner Summer Mersinger Noted that while it supports the CFTC’s charges against the founders of bZeroX, the enforcement body is entering uncharted legal territory when it takes action against DAO members who voted on the governance proposals.

“I cannot agree with the Commission’s approach of determining the liability of DAO token holders based on their participation in the governance vote for a number of reasons.”

“This approach constitutes blatant ‘regulation by enforcement’ by establishing policy based on new definitions and standards never before articulated by the Commission or its staff, or subject to public comment,” she said.

Jake Chervinsky, attorney and policy officer at the US Blockchain Association on Twitter, said the enforcement action “may be the most egregious example” of regulation by enforcement in crypto history. , and drew comparisons between the United States Securities and Exchange Commission and the CTFC. , noting that:

“We complained at length about the SEC’s abuse of this tactic, but the CFTC put them to shame.”

The DeFi Education Fund has also chimed noting that the CFTC charges also offer a grim outlook for people trying to innovate via DAOs.

Related: CFTC Commissioner Tours Ripple Offices as Ruling in SEC Case Looms

“‘Legislation via application’ is stifling innovation in the United States, and today’s action will sadly further discourage any American person from not only developing but also *merely participating* in DAOs,” writes- he.

The list of charges includes illegally offering retail leverage and margin trading; “engage in activities that only Registered Futures Commission Merchants (FCMs) may engage in; and not having integrated a customer identification program under the banking secrecy law.

The CTFC also pointed out that Bean and Kistner had indicated that they wanted to transfer bZeroX to the Ooki DAO as part of an initiative to avoid repressions in the gray area of ​​decentralization.

“By transferring control to a DAO, the founders of bZeroX announced to members of the bZeroX community that the operations would be law enforcement proof – allowing the Ooki DAO to violate CEA and CFTC regulations. with impunity,” the CFTC said.