National Futures Association

Product innovation (including in pooled investment vehicles) is encouraged, but innovation must be consistent with the law.

By Yvette D. Valdez, Douglas K. Yatter, J. Ashley Weeks, and Deric Behar

The US Commodity Futures Trading Commission’s (CFTC’s) Division of Swap Dealer and Intermediary Oversight (DSIO) Director Joshua B. Sterling issued a statement on February 10, 2020, supporting responsible digital asset product innovation, including pooled investment vehicles seeking exposure to digital assets and digital asset derivatives. The statement included an offer to assist innovators with the evaluation of new digital asset products that may not be subject to existing National Futures Association (NFA) disclosure and document review requirements.

Operators of pools that trade futures and options, swaps, or leveraged transactions referencing commodities (including digital assets such as Bitcoin and stablecoins) are required to register as commodity pool operators (CPOs) and must comply with attendant disclosure, record-keeping, and reporting requirements (unless otherwise exempt). Regardless of whether CPOs are exempt from supervisory oversight by the CFTC, they remain subject to the anti-fraud provisions of the Commodity Exchange Act when they market and offer interests in commodity pools to investors, in addition to regulatory and enforcement authority by the US Securities and Exchange Commission.