Overview
On July 9, 2025, the Commodity Futures Trading Commission's Division of Enforcement (CFTC Enforcement) issued an advisory providing internal guidance as to which potential regulatory violations should be referred to the Department of Justice (DOJ) for criminal enforcement.1 The advisory was issued pursuant to Executive Order 14294 (the Order), which requires each federal agency to publish a plan to address criminal liability in the Federal Register. The guidance includes the factors CFTC Enforcement will consider when deciding whether to refer criminal offenses to the DOJ2 and underlines the point we have recently written about regarding the importance of a comprehensive compliance program.
This advisory is the third issued by CFTC Enforcement since Acting Chair Caroline Pham was named,3 and follows the DOJ-referral advisories issued by both the Federal Energy Regulatory Commission (FERC) and the Securities Exchange Commission (SEC) enforcement divisions on June 20, 2025.4
Introduction
The Commodity Exchange Act (CEA) authorizes the CFTC to refer alleged violations of criminal regulatory offenses to the DOJ, including cases where the CFTC acts in parallel with the DOJ and other criminal authorities.5 Current policy requires the director of CFTC Enforcement to consider enforcement staff recommendations, including input from the division's Office of Cooperative Enforcement, when deciding whether to make a referral to the DOJ.6 Likewise, CFTC Enforcement policy is to work in parallel with criminal agencies "where appropriate," provided that its civil investigation is not conducted solely to obtain evidence for the criminal prosecution.7 This criminal referral authority is in addition to the Commission’s authority to bring civil and administrative enforcement actions.
In April, the CFTC's operating divisions, including the Market Participants Division (MPD), the Division of Clearing and Risk (DCR), and the Division of Market Oversight (DMO), published a staff advisory in collaboration with CFTC Enforcement. The advisory describes which self-reported violations or issues related to supervision or non-compliance should be referred to CFTC Enforcement.8 This advisory marked a significant shift in longstanding commission policy by, among other changes, allowing firms to disclose non-compliance issues to a relevant operating division, in lieu of CFTC Enforcement, in exchange for self-reporting credit.9
Referral Factors
Under the advisory, CFTC Enforcement staff will consider the following non-exhaustive factors when deciding whether to refer alleged violations of criminal regulatory offenses to the DOJ (bolded factors are also listed in the FERC and SEC advisories):
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The harm or risk of harm, pecuniary or otherwise, caused by the potential offense.
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The potential gain to the putative defendant that could result from the offense.
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Whether the putative defendant held specialized knowledge, expertise, or a license in an industry related to the rule or regulation at issue.
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Evidence, if available, of the putative defendant’s general awareness of the unlawfulness of their conduct as well as their knowledge or lack thereof of the regulation at issue.
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Whether the putative defendant is a recidivist or has otherwise engaged in a pattern of misconduct, and
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Whether the involvement of the DOJ will provide additional meaningful protection to participants in the derivatives markets.
The Order defines a criminal regulatory offense as a "federal regulation that is enforceable by a criminal penalty." Felonies under the CEA are considered potential criminal regulatory offense; for example, Section 9 of the CEA makes it a felony to willfully violate any rule or regulation promulgated under the CEA.10 As noted above, the CFTC lacks the authority to independently enforce that (or any) criminal offense, and therefore relies on referrals to the DOJ.
Examples of CEA Statutory Felonies:
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Embezzlement with a value in excess of $100.
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Manipulation, or attempted manipulation of the price of any commodity in interstate commerce.
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Cornering or attempting to corner a commodity.
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Knowingly delivering or causing to deliver false or misleading or knowingly inaccurate reports concerning information or conditions that affect or tend to affect the price of any commodity in interstate commerce.
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Knowingly making or causing to make any statement in any application, report, or document required to be filed under the CEA that is false or misleading with respect to any material fact.
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Willfully falsifying, concealing, or covering up a material fact; making false statements or representations; or using false documents to a registered entity, board of trade, swap data repository, or futures association.
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Willfully violating any provision of the CEA or rules or regulations promulgated thereunder, and
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Abusing the end-user clearing exemption.11
The referral factors outlined in the CFTC advisory align closely—but not identically—with those issued by other agencies. For instance, FERC's guidance does not reference recidivism or the concept of providing "meaningful protection to the market,"12 while the SEC considers whether DOJ involvement "will provide additional meaningful protection to investors."13 Despite the considerable overlap, firms should closely consider DOJ referral factors on an independent basis.
Separately, the Order requires the CFTC to submit a report to the director of the Office of Management and Budget (OMB) by May 9, 2026. This report must include the following:
(1) a list of all criminal regulatory offenses enforceable by the CFTC and/or the DOJ, and
(2) the range of potential criminal penalties for each offense, as well as the applicable mens rea standard.
Parallel Criminal Actions
Generally, the CFTC pursues civil enforcement for violations while referring potential criminal offenses arising from the same underlying conduct to the DOJ for parallel criminal actions. For example, in May, the CFTC filed a civil complaint against a defendant alleging fraud and misappropriation in violation of the CEA.14 At the same time, the DOJ unsealed a parallel indictment charging the same defendant with wire fraud and aggravated identity theft connected to the same underlying activities.15
Fraud, along with related violations like the misappropriation of material non-public information, represents some of the most likely offenses for which the CFTC and DOJ will pursue joint criminal enforcement actions. For instance, the CFTC filed a complaint against a defendant alleging fraud in the issuance of voluntary carbon credits—a commodity under the CFTC's jurisdiction.16 Nevertheless, because the alleged fraud involved wire fraud and potentially unregistered securities, both the DOJ and the SEC initiated parallel criminal and civil enforcement actions.17 On the other hand, offenses that mostly or entirely involve violations of CFTC-related statutes or regulations may not involve a DOJ referral, such as swap dealer rules under Part 23 of Title 17.
Takeaways/Conclusion
This advisory marks CFTC Enforcement's first effort to list specific factors it will consider in the DOJ referral process. Previously, the CFTC Enforcement Manual served primarily to provide notice to market participants, identifying types of violations– such as willful breaches of CEA and CFTC provisions or regulations– that could trigger criminal referrals. By clarifying its referral criteria, the advisory offers market participants greater transparency into the DOJ referral process – a point at issue, particularly in market or price manipulation cases.
The advisory's factors emphasize the importance of evaluating the impact of the alleged criminal offense and the potential defendant's prior conduct. For example, CFTC Enforcement is less likely to refer a non-"recidivist" company or individual without significant market experience or expertise to DOJ for criminal prosecution.
Recent changes under the new administration and recent court sanctions have significantly influenced CFTC Enforcement’s approach.18 Earlier advisories issued by CFTC Enforcement and its operating divisions sought to limit the agency's engagement in handling technical regulatory and non-criminal offenses. However, this advisory retains the CFTC Enforcement's authority over criminal referrals and parallel investigation programs. But the relevant referral factors — introduced by the CFTC and mirrored in the guidance issued by FERC and the SEC— may ultimately reduce the number of referrals made to DOJ. In such cases, certain violations may be handled directly by CFTC Enforcement through civil proceedings.
The effectiveness of a company's compliance programs remains critical in mitigating criminal and civil enforcement risk. Organizations should focus on supervising and monitoring trader-related conduct and activities, given the CEA's statutory felonies related to trader misconduct, manipulation, and fraud. Although compliance programs are not expressly listed as a factor to be considered in referring a matter to the DOJ, they can still serve as a mitigating element in reducing company risk associated with individual misconduct.
1 Commodity Futures Trading Comm'n, Press Release: CFTC Issues Advisory on Referrals for Potential Criminal Enforcement (July 9, 2025), https://www.cftc.gov/PressRoom/PressReleases/9094-25.
2 Enforcement Advisory: Advisory on Referrals for Potential Criminal Enforcement, CFTC Letter No. 25-19 (July 9, 2025), https://www.cftc.gov/csl/25-19/download.
3 See Enforcement Advisory: Advisory on Referrals to the Division of Enforcement, CFTC Letter No. 25-13 (Apr. 17, 2025), https://www.cftc.gov/csl/25-13/download; see also Enforcement Advisory: Advisory on Self-Reporting, Cooperation, and Remediation (Feb. 25, 2025), https://www.cftc.gov/media/11821/EnfAdv_Resolutions022525/download.
6 Commodity Futures Trading Comm'n, Enforcement Manual at 36 (May 20, 2020).
8 Staff Advisory on Materiality or Other Criteria That Operating Divisions Will Use to Determine Referrals to the Division of Enforcement, CFTC Letter No. 25-13 (Apr. 17, 2025), https://www.cftc.gov/csl/25-13/download.
12 90 Fed. Reg. 26285.
13 Id.
14 Commodity Futures Trading Comm'n, Press Release: CFTC Charges Syracuse, N.Y. Man, His Firm with Fraud, Misappropriation (May 8, 2025), https://www.cftc.gov/PressRoom/PressReleases/9072-25.
16 Commodity Futures Trading Comm’n, Press Release: CFTC Charges Former CEO of Carbon Credit Project Developer with Fraud Involving Voluntary Carbon Credits (Oct. 2, 2024), https://www.cftc.gov/PressRoom/PressReleases/8994-24. See also Steptoe’s article covering the CFTC action. Ryan Hayden et al., CFTC "Heats Up" Pursuit of Bad Environmental Actors Involved in Carbon Offsets, Steptoe (Aug. 2, 2024), https://www.steptoe.com/en/news-publications/cftc-heats-up-pursuit-of-bad-environmental-actors-involved-in-carbon-offsets.html.
17 Id.
