Key Takeaways:
The US Commodity Futures Trading Commission rescinded its 28-year-old "no-deny" settlement policy on Wednesday, removing a rule that required defendants to refrain from publicly disputing the agency's allegations as a condition of settling enforcement actions.
"For nearly three decades, the Commission has refused to settle cases unless the defendant promised not to publicly deny the Commission's allegations," CFTC Chairman Mike Selig said. "I am pleased that we are rescinding the no-deny policy consistent with regulators throughout the government."
The policy, first adopted in 1998, barred the CFTC from accepting settlements if defendants continued to deny the agency's claims. The CFTC said the rule "may have created an incorrect impression that the Commission is trying to shield itself from criticism," according to a press release. The move follows the Securities and Exchange Commission's rescission of an identical policy in May under Chair Paul Atkins, who said at the time that "speech critical of the government is an important part of the American tradition."
The New Civil Liberties Alliance, a nonprofit legal group, first petitioned against the CFTC gag rule in 2019, arguing it restricted truthful expression and lacked legal basis. Crypto companies that faced enforcement actions from both agencies had also criticized the provision as a violation of First Amendment rights.
The CFTC said it will not enforce existing no-deny clauses already embedded in past settlements and will take no action if parties violate them. However, the agency may still require some defendants to admit certain facts or liabilities in future settlements, particularly in cases involving fraud or significant public harm.
The policy shift arrives amid a broader recalibration of US crypto enforcement under the Trump administration. On Thursday, the CFTC moved to vacate its $5 million settlement with crypto exchange Gemini, a case Selig described as "politically targeted." Tim Massad, who chaired the CFTC under the Obama administration, told Cointelegraph the reversal was "extraordinarily unusual."
David Miller, director of the CFTC's Division of Enforcement, said the change "harmonizes the Commission's settlement approach with those taken by other agencies and ensures fairer resolutions in enforcement matters." The American Securities Association's president, Chris Iacovella, applauded the SEC's parallel shift, contending the former policy had undermined free expression.
Critics, however, warned that allowing defendants to deny allegations after settling could weaken the deterrent effect of enforcement actions. Ben Schiffrin of the financial advocacy group Better Markets called out the SEC for implementing its rule change without public consultation, saying the agency "should want the public to have no doubt that its sanctions are based on violations of the securities laws."
The CFTC's policy change takes immediate effect upon publication in the Federal Register. The agency said the rescission provides greater flexibility when resolving enforcement actions, preserving administrative resources and accelerating victim restitution.
This article is for informational purposes only and does not constitute investment advice.
