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US CFTC OKs crypto firm Bitnomial's vertical integration plan

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US CFTC OKs crypto firm Bitnomial's vertical integration plan
December 13, 2023

NEW YORK (Reuters) - The U.S. Commodity Futures Trading Commission on Wednesday voted to approve a plan from a Chicago cryptocurrency derivatives exchange and brokerage to also act as its own registered clearinghouse.

The approval of the plan by Bitnomial, an exchange founded in 2014, marks the first time the commodities regulator has voted to allow a vertically-integrated market structure. Bitnomial also has exchange and broker licenses. Two Democratic and two Republican commissioners voted to OK the firm's application, while the third Democratic commissioner dissented.

"Now that the licensing process is complete, we can shift our focus to expanding Bitnomial's product offering and customer base," the firm's founder and CEO Luke Hoersten said in a statement.

The CFTC approval also marks a win for an industry beset by scandal. Binance, the world's largest crypto exchange, in November agreed to pay over $4.3 billion to settle U.S. charges it violated laws designed to prevent illicit finance. Its former CEO Changpeng Zhao faces up to 18 months in prison. A few weeks earlier, a jury found FTX founder Sam Bankman-Fried guilty of fraud.

The White House and a slew of other regulators have criticized vertical integration in the crypto sector for creating potential conflicts of interest.

At the same time, federal agencies are facing industries that are quick to turn to the courts when matters are decided against them. Last month, an events betting platform sued the CFTC for rejecting its plan to allow investors to bet on U.S. elections.

CFTC Chair Rostin Behnam, who voted in favor of Bitnomial's application, said in Wednesday's meeting: "We have to apply the rules fairly and equally to all registrants. Otherwise, in my view, that is a complete dereliction of duty and a very scary direction of government we would head in."

(Reporting by Chris Prentice; Additional reporting by Hannah Lang; Editing by Daniel Wallis)


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