CFTC Issues Guidance for Referrals of Criminal Regulatory Offenses to DOJ

On July 9, 2025, the Commodity Futures Trading Commission (CFTC) issued an advisory describing its plan to address criminally liable regulatory offenses in accordance with Executive Order 14294, Fighting Overcriminalization in Federal Regulations. The advisory provides a framework for the Division of Enforcement (DOE), as the CFTC Division responsible for making referrals to the Department of Justice (DOJ), to follow when determining whether to refer potential violations of criminal regulatory offenses to the DOJ. This advisory follows the CFTC’s cooperation guidance that we discussed in a previous Legal Update, and continues the CFTC’s trend towards increased transparency. 

Background

On May 9, 2025, President Donald Trump signed Executive Order 14294, Fighting Overcriminalization in Federal Regulations (the “Order”). The purpose of the Order “is to ease the regulatory burden on everyday Americans and ensure no American is transformed into a criminal for violating a regulation they have no reason to know exists.” Section 7 of the Order, Agency Referrals for Potential Criminal Enforcement, states that within 45 days of the Order, and in consultation with the Attorney General, each agency should publish guidance describing its plan to address criminally liable regulatory offenses, defined as federal regulations enforceable by criminal penalty. More specifically, the Order requires that each agency’s guidance make clear that when the agency is deciding whether to refer alleged violations of criminal regulatory offenses to the DOJ, it should consider certain factors.

Pursuant to Section 7 of the Order, the CFTC issued its guidance on July 9, 2025.

CFTC Advisory

In its advisory, the CFTC announced that when the DOE staff is deciding whether to refer alleged violations of criminal regulatory offenses to the DOJ, the staff should consider:

• The harm or risk of harm, pecuniary or otherwise, caused by the potential offense;
• The potential gain to the putative defendant that could result from the offense;
• Whether the putative defendant held specialized knowledge, expertise, or was licensed in an industry related to the rule or regulation at issue;
• Evidence, if any is available, of the putative defendant’s general awareness of the unlawfulness of his conduct as well as his knowledge or lack thereof of the regulation at issue;
• Whether the putative defendant is a recidivist or has otherwise engaged in a pattern of misconduct; and
• Whether the involvement of the DOJ will provide additional meaningful protection to participants in the derivatives markets.

These considerations are designed to promote fairness, encourage transparency, and reserve criminal sanctions for cases involving willful wrongdoing and public harm. In keeping with the general aims of the Order, the advisory suggests that mere ignorance of provisions should not automatically result in criminal punishment. Instead, the CFTC will engage in a fact-specific analysis to determine whether criminal referral to the DOJ is warranted. Importantly, however, the advisory signals the CFTC’s heightened scrutiny for recidivism or repeated patterns of misconduct.

As required by the Order, the CFTC – in consultation with the Attorney General – will provide the Director of the Office of Management and Budget a report containing (1) a list of all criminal regulatory offenses enforceable by CFTC or DOJ, and (2) for each such criminal regulatory offense, the range of potential criminal penalties for a violation and the applicable mens rea standard for the criminal regulatory offense. This report must be made by May 9, 2026.

Key Takeaways

The advisory provides further information for companies and individuals to consider in assessing their potential criminal exposure in connection with CFTC regulatory actions, and when assessing potential regulatory violations. This information can assist companies when deciding whether to voluntarily self-disclose regulatory violations to the CFTC and when advocating against a criminal referral. The CFTC’s action aligns with the federal government’s broader initiative to avoid overcriminalization by tailoring criminal enforcement to alleged violations that are knowing, harmful, and cannot be adequately remedied through civil or administrative means. Entities subject to the CFTC’s regulations should review and understand this framework and remain proactive in compliance efforts to minimize the likelihood, and mitigate the consequences, of potential criminal referrals to the DOJ.