In an excellent story by John Cassidy of the New Yorker, the outlet covers how the demise of FTX should inform how we regulate crypto. He talks to Better Markets CEO Dennis Kelleher about why the crypto industry wants the CFTC as its regulator and the influence of Washington’s revolving door. You can find the full story here.
Below are several excerpts from the story:
“FTX followed the standard playbook of influencing Washington, and that’s buying influence on a bipartisan basis,” Dennis Kelleher, the president of the not-for-profit organization Better Markets, told me, last Friday.
Kelleher told me that handing over primary regulatory authority to the C.F.T.C. would be a massive win for the crypto lobby. “The C.F.T.C. has been chronically underfunded, and it is easily penetrated and captured by an industry it is supposed to regulate,” he said. “FTX and other crypto firms wanted the weakest possible regulator, and that’s the C.F.T.C.”
At the same hearing, Stabenow said that passage of the legislation she and Boozman proposed could have prevented FTX’s collapse, an assertion that Kelleher dismissed as unfounded.
Kelleher, who has been around Washington a long time, said that, given the enduring strength of the crypto lobby even after Bankman-Fried’s downfall, optimism for any legislation imposing a tight rein on the industry was “unmerited.”
A number of Democratic senators, including Sherrod Brown and Elizabeth Warren, have called for the passage of new and comprehensive crypto legislation, but Kelleher, who has been around Washington a long time, said that, given the enduring strength of the crypto lobby even after Bankman-Fried’s downfall, optimism for any legislation imposing a tight rein on the industry was “unmerited.” (That Congress will be divided again, come January, doesn’t help either.) He suggested a more immediate stopgap: Congress should put another two hundred million dollars into the omnibus spending bill that it is currently haggling over, allocating three-quarters of this additional money to the enforcement budget of the S.E.C. and the other quarter to the enforcement budget of the C.F.T.C. Then, Congress should tell the regulators to go out and clamp down on the crypto industry using their existing powers to prosecute financial frauds and market manipulation. “What the regulators need is the political support and the resources to bring this lawless industry to book,” Kelleher said. ♦