Ooki DAO Case So ‘Egregious,’ CFTC Had No Choice, Chair Behnam Says
The controversial case against Ooki DAO was “so egregious and so obvious” that the U.S. Commodity Futures Trading Commission (CFTC) had to pursue it, said Chairman Rostin Behnam.
People getting involved with a decentralized autonomous organization (DAO) should be aware that they’re not immune to government attention, Behnam said Tuesday at DC Fintech Week in Washington. His agency highlighted this last month when it settled accusations against blockchain protocol and company bZeroX (bZx) and two of its founders, which the regulator accused of offering illegal trading and lending services. But the real drama came from the CFTC also formally suing Ooki itself for wrongdoing as bZeroX’s successor.
"It was hardly decentralized,” Behnam said. “There were a few individuals who were very much at the center."
He added that, “it was pretty clear that a few individuals were clearly trying to evade our rules," saying they openly sought the DAO path as a way to avoid regulators.
Ooki’s participants are running out of time to defend the organization against the CFTC’s enforcement action, creating a potential win for the agency.
Despite crypto generally growing in a regulatory limbo and U.S. officials and lawmakers spending much of their time lately debating how it should be overseen by the government, Behnam argued that this was an obvious case of “clear fraud.”
He said the CFTC would have been “failing to do our job if we didn’t bring this case.”
And Behnam contends that a theoretically decentralized approach to finance won’t inoculate participants from U.S. laws and oversight.
"Don't expect this to be a free pass," he said.
Behnam has been pursuing a much longer reach for his agency in crypto, asking that Congress give it power to oversee the spot market for digital commodity tokens. That’s a favored idea in more than one piece of legislation introduced this year, but the bills will likely have to wait for the next Congress after November’s midterm elections (and the bills themselves don’t always clearly define where the CFTC’s jurisdiction might begin and end).
He said the U.S. government will have to make changes to regulate crypto in what he called an “evolutionary time” in the markets.
"We're going to have to adapt; there is no doubt about it," he said. “This technology is very different. It's very new, and all the agencies are going to have to adapt."