WASHINGTON, D.C. – Amanda Fischer, Policy Director & COO at Better Markets, released the following statement in connection with a comment letter filed at the Commodity Futures Trading Commission (CFTC) regarding its proposal to bless vertically integrated market structures:  

“As we correctly warned the CFTC when it was considering Sam Bankman-Fried’s application to approve his crypto conglomerate in 2022, vertically integrated market structures raise critical conflict of interest issues that cannot be mitigated by mere policies and procedures. As the FTX implosion subsequently demonstrated, commingling custody of customer funds, running an exchange, serving as a clearing agency, and operating a trading arm cannot coexist within the same firm without dire risks for investors and the market. 

“Rather than learn from these lessons of the recent past, the CFTC seeks to enshrine the recent phenomenon of vertical integration into its rules. Most concerningly, it would allow trading venues—which are supposed to neutrally match customer buy and sell orders—to trade on their own exchange. It would also allow clearing agencies to own trading firms that are members of their own clearinghouse, even though they are supposed to guard against counterparty risk by acting as a utility that buffers against individual firm failures. 

“These functions are fundamentally in tension.  That is why the CFTC has historically prevented such business combinations. But in the name of blessing crypto and prediction market business structures, the CFTC is unleashing a new wave of conglomerates that prioritize crypto and prediction market profits over fair competition and customer protection. 

“As Better Markets urged in our comment letter, the CFTC should require structural separation for these disparate business models and adopt prescriptive rules to mitigate conflicts of interest.” 

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.