Matthew Kulkin, Isabel Dai, Joshua Nathanson1

I. Introduction

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), significantly expanded the Commodity Futures Trading Commission's ("CFTC" or "Commission") anti-fraud and anti-manipulation statutory authority to monitor activity in futures, swaps, and options markets, as well as in the underlying "spot" markets.

For more than a decade, the CFTC has aggressively applied this new statutory authority. The CFTC has pursued fraud and manipulation in many contexts: misappropriation of material, nonpublic information by regulated entities, abusive practices in derivatives markets, such as spoofing, as well as fraud and manipulation in both traditional agricultural commodity and digital asset spot markets.

We do not expect this trend to change. As Chairman Rostin Behnam recently explained, "the Commission continues to remain laser-focused on stopping and deterring fraud and manipulation in the U.S."2 Consistent with the Chairman's statements, the CFTC's fiscal year 2023 enforcement results focus mostly on fraud and manipulation, both in the digital asset space and among registrants and market participants in CFTC-regulated markets.3 Moreover, on October 17, 2023, the CFTC Division of Enforcement issued an advisory announcing that "the Division is recalibrating how it is assessing proposed CMPs [civil monetary penalties] to ensure the CMPs are at the level necessary to achieve general and specific deterrence, which may result in the Division recommending higher penalties in resolutions than may have been imposed in similar cases previously."4 Market participants should continue to expect aggressive CFTC antifraud and anti-manipulation enforcement activity.

This paper will analyze the CFTC's anti-fraud and anti-manipulation enforcement authority. It will explore the relevant statutory provisions and adopting CFTC regulations. In the process, the paper will discuss some of the similarities and differences between the CFTC's anti-fraud and anti-manipulation enforcement authority under the Commodity Exchange Act ("CEA") and the Securities and Exchange Commission's ("SEC's") enforcement authority under section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 ("Securities Exchange Act"). Finally, the paper will focus on recent CFTC fraud and manipulation enforcement cases that involve unregistered and registered intermediaries.

II. CFTC Anti-Fraud/Anti-Manipulation Authority

A. "Regulatory" Authority vs "Enforcement" Authority

The CEA provides the CFTC with broad regulatory authority over futures and swaps markets. The CEA requires intermediaries like futures commission merchants ("FCMs"), introducing brokers ("IBs"), commodity pool operators ("CPOs"), commodity trading advisors ("CTAs"), and swap dealers to register with both the CFTC and the National Futures Association, the primary self-regulatory organization for the derivatives industry.5 The CFTC also oversees exchanges and clearinghouses, and it imposes a number of compliance requirements on market participants and intermediaries, including net capital requirements and disclosure requirements.6 In contrast, subject to one important exception7 , the CFTC does not have regulatory authority over commodity cash markets.8 It has only anti-fraud and antimanipulation enforcement authority.

B. Anti-Fraud/Anti-Manipulation Statutory Authority

The CFTC's anti-fraud and anti-manipulation statutory authority comes principally from CEA section 6(c)(1). Added to the CEA by Dodd-Frank, section 6(c)(1) prohibits the use or attempted use of "any manipulative or deceptive device or contrivance," "in connection with" a swap, futures or cash contract, in contravention of the rules and regulations required to be promulgated by the CFTC within one year after Dodd-Frank's enactment.9 Before Dodd-Frank, the CFTC had more limited anti-fraud and anti-manipulation enforcement authority over derivatives markets and some anti-fraud and anti-manipulation enforcement authority over cash markets so as to protect derivatives markets, but with the addition of CEA section 6(c)(1), the CFTC could exercise expansive authority over all transactions "related to futures or swaps markets, or prices of commodities ... or where fraud or manipulation has the potential to affect cash commodity, futures, or swaps markets or participants in these markets."10 Today, in practice, the CFTC relies on CEA section 6(c)(1) as essentially a catch-all anti-fraud and antimanipulation provision, comparable to section 10(b) of the Securities Exchange Act.11

CEA section 6(c)(1) is not the only anti-fraud or anti-manipulation provision in the CEA. CFTC anti-manipulation enforcement actions also frequently rely on CEA sections 6(c)(3) and 9(a)(2).12 6(c)(3) and 9(a)(2) prohibit price manipulation and attempted price manipulation in futures, swaps, and commodities markets. As discussed below, the CFTC applies a four-part test for price manipulation under 6(c) (the predecessor to 6(c)(3)) and 9(a)(2). 9(a)(2) makes market manipulation and certain knowing violations of the CEA a felony.

There are also more specific anti-fraud provisions that predate 6(c)(1) in the CEA. For example, section 4b makes it unlawful for any person, in or in connection with any order to make, or the making of, a futures contract, to cheat or defraud, or attempt to defraud, a counterparty or a person for whom or on whose behalf the order or contract was made.13 DoddFrank amended CEA section 4b to cover swaps and added new CEA subsection 4b(e) to make it unlawful, in connection with any order to make, or the making of, any covered instrument, to engage in fraud.14 Similarly, CEA section 4o is a special anti-fraud provision for CTAs, CPOs and associated persons of CTAs and CPOs.15

Finally, CEA section 4c(a) prohibits specific abusive trading practices in futures and swaps markets.16 Dodd-Frank added CEA section 4c(a)(5), which provides that it is unlawful for any person to engage in any trading, practice, or conduct on or subject to the rules of a registered entity that: (A) violates bids or offers; (B) demonstrates intentional or reckless disregard for the orderly execution of transactions during the closing period; or (C) is, is of the character of, or is commonly known to the trade as "spoofing" (i.e., bidding or offering with the intent to cancel the bid or offer before execution).17

C. Regulatory Authority

In Dodd-Frank, Congress instructed the CFTC to promulgate anti-fraud and antimanipulation regulations, and in 2011, the CFTC issued Rule 180.1 and Rule 180.2 pursuant to its general rulemaking authority (CEA section 8a(5)) and its authority under CEA sections 6(c)(1) and 6(c)(3).18 Rule 180.1 "prohibits fraud and fraud-based manipulation, and attempts: (1) by any person (2) acting intentionally or recklessly (3) in connection with (4) any swap, or contract of sale of any commodity in interstate commerce, or subject to the rules of any registered entity."19 New CFTC Rule 180.1 represents a significant expansion of the CFTC's enforcement authority.

Rule 180.2, by contrast, merely "codifies the Commission's long-standing authority to prohibit price manipulation by making it unlawful for any person, directly or indirectly, to manipulate or attempt to manipulate the price of any swap, or of any commodity in interstate commerce, or for future delivery on or subject to the rules of a registered entity."20 For the Commission to succeed under Rule 180.2, it must establish: "(1) that the accused had the ability to influence market prices; (2) that the accused specifically intended to create or effect a price or price trend that does not reflect legitimate forces of supply and demand; (3) that artificial prices existed; and (4) that the accused caused the artificial prices."21 In cases of attempted manipulation, the Commission will ignore the last two prongs. Instead, the Commission will search for evidence of (1) the requisite intent and (2) an overt act in furtherance of that intent.22 Unlike Rule 180.1, Rule 180.2 does not apply to reckless conduct.23

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1. Matthew Kulkin is Partner and Chair of WilmerHale's Futures and Derivatives Practice. Isabel Dai is counsel in WilmerHale's Securities and Financial Services Department. Joshua Nathanson is an Associate in WilmerHale's Securities and Financial Services Department. 2023 Summer Associate Julia Fay contributed to this paper.

2. CFTC Releases FY 2023 Enforcement Results, COMMODITY FUTURES TRADING COMMISSION (Nov. 7, 2023),

3. Id.

4. CFTC Releases Enforcement Advisory on Penalties, Monitors and Admissions, COMMODITY FUTURES TRADING COMMISSION (Oct. 17, 2023),

5. Who Has to Register, NATIONAL FUTURES ASSOCIATION (accessed on Nov. 30, 2023),

6. See, e.g., 17 C.F.R. § 1.17 ("Minimum financial requirements for futures commission merchants and introducing brokers."); 17 C.F.R. § 4.21 ("Required delivery of pool Disclosure Document.").

7. 7 U.S.C. § 2(c)(2)(D).

8. Statement of Commissioner Dawn D. Stump on the CFTC's Regulatory Authority Applicable to Digital Assets, COMMODITY FUTURES TRADING COMMISSION (Aug. 23, 2012), C%27s%20Regulatory%20Authority%20Applicable%20to%20Digital%20Assets,- August%2023%2C%202021&text=The%20CFTC%27s%20regulatory%20oversight%20authority,proper%20regula tory%20compliance%20be%20demanded.

9. 7 U.S.C. § 9(1).

10. Prohibition on the Employment, or Attempted Employment, of Manipulative and Deceptive Devices and Prohibition on Price Manipulation, 76 Fed. Reg. 41,398, 41,401 (Jul. 14, 2011) ("Adopting Release").

11. Adopting Release, 76 Fed. Reg. at 41,399.

12. 7 U.S.C. § 9(3); 7 U.S.C. § 13(a)(2).

13. 7 U.S.C. § 6b.

14. 7 U.S.C. § 6b(e).

15. 7 U.S.C. § 6o.

16. 7 U.S.C. § 6c(a).

17. See CFTC Staff Finalizes Guidance on Anti-Disruptive Trading Practices, WILMERHALE (May 23, 2011),

18. Adopting Release, 76 Fed. Reg. at 41,399. See also The Commodity Futures Trading Commission Issues Sweeping New Rules to Prohibit Fraud and Manipulation in the Swaps, Cash, and Futures Markets, WILMERHALE (Jul. 28, 2011),

19. Adopting Release, 76 Fed. Reg. at 41,400.

20. Anti-Manipulation and Anti-Fraud Final Rules, COMMODITY FUTURES TRADING COMMISSION (accessed on Nov. 30, 2023),

21. Id.

22. Id.

23. Adopting Release, 76 Fed. Reg. at 41,407.

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