Bracewell’s Anne Termine spoke with The Block about regulatory challenges that come with frontrunning by crypto markets.
As a recent example from traditional markets, the Commodity Futures Trading Commission filed against Classic Energy last year for misappropriation of material, nonpublic information about a coming block trade. However, the mechanics of a new token listing are quite different from a block trade. A major crypto exchange will have a far bigger impact on the price of a small-cap token than any single exchange could have on a commodity with a larger more global market like, for example, West Texas Intermediate.
If crypto exchanges are treated as commodities markets, then it’s much tougher for the CFTC to bring a case in the event of possible trading on material non-public information – partially because they do not get information from spot markets as it becomes available, unlike the SEC.
“It is a harder case for the CFTC to bring, but it does fall squarely in their authorities,” said Termine. At the same time, she said, “If an exchange wants to announce ahead of time these are the tokens we’re considering, what they’re trying to do is take that out of the hands of people who are listening to rumors.”
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