CFTC's Wells Process Reforms Favor Market Participants, Solidify Respondent Protections in Enforcement Action Review Process

On December 1, 2025, Acting Chairman Caroline Pham announced¹ significant reforms to the Commodity Futures Trading Commission's (CFTC) "Wells Process"—the stage in an investigation when a market participant is notified by agency staff of potential charges and given a final chance to respond before the Commission decides whether to bring an enforcement action. The changes took effect on December 3, 2025, when published in the Federal Register.²

The changes are aimed at ensuring that the Commission receives more balanced and timely information, and a more accurate and complete record when making decisions on potential enforcement actions. The changes should also give companies and individuals a more meaningful opportunity to advocate for their position at earlier stages in the enforcement process.

Market participants receiving notice of a potential enforcement proceeding will now be informed, in writing, of the specific charges that the Division of Enforcement (Enforcement) plans to recommend to the Commission, and may be provided with key evidence relied upon by Enforcement. Market participants will now have more time to respond to a notification of charges by Enforcement staff, receiving 30 calendar days as opposed to the previous 14 days.

Other changes focus on the Commission review process, allowing a potential respondent to request the prompt distribution of its written response to the Commissioners—possibly in advance of Enforcement's recommendation to the Commission. While an explicit request is required for "prompt" distribution, it is no longer required for market participants who merely wish for the Commission to receive their written response at the same time it receives Enforcement's recommendation. Enforcement is now required³ to submit market participant responses to the Commission as part of their review process.

The rule amendments also tighten requirements for Enforcement when recommending settlements, including an obligation to address unfavorable evidence and legal authority. The amendments also clarify that the Commission may approve settlements without first opening a formal adjudicatory proceeding. Taken together, these measures are intended to ensure Commissioners see a more full and balanced record in their seriatim review process before deciding whether to charge a market participant, and to give potential respondents greater ability to present a defense to the Commission's decisionmakers in the critical pre-charging stage.

The Wells Process and Why It Matters

The Wells Process, named for a similar process in place at the SEC⁴that is also used at FERC,⁵ is the stage in an investigation when Enforcement staff notifies a company or individual that Enforcement plans to recommend a formal enforcement action against it.⁶ The potential respondent then has the opportunity to respond and challenge Enforcement staff's alleged violations, with the response ultimately being reviewed by the Commissioners.

A Wells response can be a valuable chance to challenge the staff's evidence and legal theories, highlight potential misconceptions and persuade the Commission against pursuing charges. But in practice, its value as an advocacy opportunity can vary widely from case to case, often based on Enforcement staff working on the matter. Enforcement staff often provide only limited and vague descriptions of the potential charges, along with little detail about the supporting evidence or legal theories. Similarly, often Enforcement staff does not give ample time for counsel to craft an effective response, and then only provides that response to the Commission at the end of the matter alongside its recommendation to bring the enforcement action. As a result, the Commission is not getting the intended benefit of the Wells Process and is limited in how it can play its role, and market participants are limited in their ability to submit an effective and persuasive response. The current changes are designed to provide market participants with additional transparency and to bring a more uniform approach to the agency's process.

Changes to the CFTC's Wells Process and Settlement Procedures

The CFTC's revised rules⁷ address several shortcomings that have historically limited the effectiveness of its Wells Process. Respondents now have at least 30 days to submit a response, up from 14 days under the prior rules.⁸ The notice, which must either be in writing or, if given orally, promptly confirmed in writing, must identify the specific charges Enforcement plans to recommend to the Commission. The revisions also clarify that Enforcement may refer to specific evidence when describing the factual basis for the proposed charges. While this language is permissive only⁹ and does not mandate any evidentiary disclosures, the intent of the rule change is to promote disclosure where practicable.¹⁰

Under the revised rules, Wells responses will be provided to the Commission as a matter of course, helping to ensure that the agency's decisionmakers receive a more complete and balanced picture of the facts and law.¹¹ Potential respondents may also request that their submissions be given to the Commission "promptly." This marks a significant change from the prior rules, under which Enforcement was only required to provide the response alongside its final charging recommendation.¹² This can alter the balance of information at an earlier point in the decision-making process, giving potential respondents the opportunity to shape the Commission's view of a case before it has received a final charging recommendation from Enforcement. And while there is nothing to prevent staff from refining its theories in response to those arguments, getting a potential respondent's initial defenses in front of the Commission earlier in the process may reduce Enforcement's incentives to dig in on aggressive theories of violations. At that point, staff may not feel as compelled to defend a theory that they have not yet put their weight behind in a formal charging recommendation.¹³ Making sure the Commission is aware of key factual and legal deficiencies in an Enforcement submission may also invite further dialogue between Enforcement and market participants following Commission review.

The rule changes also impose greater rigor on Enforcement when recommending settlement of an investigation.¹⁴ Staff must now submit an "objective memorandum" with a "comprehensive explanation" of the factual and legal basis for the settlement recommendation, including citations to the investigative record, stipulations, and legal authorities. The staff's memorandum must also distinguish unfavorable facts and legal precedents.¹⁵ This requirement has the potential to impact settlement dynamics, because the need to present an objective analysis and affirmatively take on bad facts and law may discourage staff from proffering more extreme theories of violations as a negotiating position. Notably, these changes follow three CFTC enforcement advisories issued earlier this year, which as we discussed here,¹⁶ give the agency's operating divisions a greater role and discretion in referring matters to Enforcement.

Finally, the amended rules clarify that the CFTC can accept a settlement by issuing an order without first initiating a formal adjudicatory proceeding.¹⁷

Alignment with Broader Regulatory Trends

The CFTC's reforms mirror similar changes announced by SEC Chairman Paul Atkins in an October 7, 2025 speech.¹⁸ Respondents in SEC investigations now have at least four weeks to respond to a Wells Notice, and staff are expected to disclose key evidence to respondents so they can better understand the staff's theories and evidentiary support, including, where appropriate, testimony transcripts and key documents. Similarly, by rule, subjects of FERC investigations have 30 days to respond to staff's notice that it intends to recommend an enforcement action, and staff's notice must "provide sufficient information and facts" to enable the subject to respond to the recommendation.¹⁹

Chairman Atkins highlighted the benefits of an improved Wells process in making the SEC aware of potential weaknesses in its cases, including "the full context of the relevant facts, problems with legal theories or the use of legal authorities, potential defenses, and policy or programmatic reasons not to pursue an enforcement action."

In her announcement, Acting Chairman Pham also grounded the Wells process reforms in concerns about the agency's conduct in past cases, citing her previous remarks²⁰ addressing a district court's order earlier this year that sanctioned the CFTC for misconduct associated with pending litigation.²¹ Another court imposed sanctions against the SEC in a 2023 case for similar reasons.²² The recent emphasis on procedural protections and timely disclosure of evidence comes against this backdrop, and indicates that the CFTC's enforcement approach has been impacted by the recent court sanctions. To further advance its stated policy objectives, the CFTC could take a page out of the FERC Enforcement playbook and allow potential respondents to submit written advocacy materials directly to the Commission, without relying on Enforcement staff to relay those submissions.

Both agencies' reforms reflect a broader push by the current administration to promote fairness and transparency in investigations, ensure enforcement staff give due consideration to evidence and law that may weigh against bringing charges, and move away from novel interpretations that expand the reach of existing regulations.²³

¹ Acting Chairman Pham Announces Reforms to Wells Process, Amends Rules of Practice and Rules Relating to Investigations (Dec. 1, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9144-25.

² Amendments to CFTC Rules of Practice and Rules Relating to Investigations, 90 Fed. Reg. 55,642 (Dec. 3, 2025) (amending 17 C.F.R. Parts 10 and 11), available at https://www.federalregister.gov/documents/2025/12/03/2025-21888/amendments-to-cftc-rules-of-practice-and-rules-relating-to-investigations. 

³ Under the prior rules, Enforcement did not have to provide the participant's submission to the Commission unless the participant made an explicit request to do so. 

⁴ 17 C.F.R. § 202.5(c); SEC Division of Enforcement, Enforcement Manual § 2.4 (Nov. 28, 2017), available at https://www.sec.gov/divisions/enforce/enforcementmanual.pdf.

⁵ 18 C.F.R. § 1b.19.  Under the regulation, the subject has 30 days to respond from the date that FERC enforcement staff gives notice that it intends to recommend that the Commission initiate an enforcement action.    

⁶ Enforcement has discretion whether to notify the subject before making its recommendation to the Commission, but typically does so absent exigent circumstances where notice would compromise an ongoing or parallel investigation, or risk the diversion of proceeds or funds that the agency would be seeking to recover.  CFTC Division of Enforcement, Enforcement Manual § 5.11.1 (May 20, 2020) (listing factors for staff to consider in deciding whether to provide a Wells Notice), available at: https://www.cftc.gov/sites/default/files/2021-05/EnforcementManual.pdf.

⁷ The rule amendments apply to Appendix A to Part 11 of the Commission's Rules Relating to Investigations, 17 C.F.R. § 11.   

⁸ While the amended rules permit Enforcement staff to shorten this 30-day timeframe, it may do so only for "good cause" and with the authorization of the Director or Deputy Director of Enforcement. Under the prior rule, there was no explicit requirement of good cause for staff to shorten the time to respond.

⁹ As noted in the "Supplementary Information" section accompanying the rule amendments, "Establishing that Enforcement can choose to disclose specific evidence learned during the investigation promotes transparency and enhances the Division's ability to have productive dialogues with the entity or individual who may be named" (emphasis added).

¹⁰ Certain evidence may be subject to legal or prudential limitations on disclosure, such as information that could reveal the identity of a whistleblower or compromise an ongoing criminal investigation.

¹¹ 17 C.F.R. Part 11, Appendix A – Informal Procedure Relating to the Recommendation of Enforcement Proceedings ("In the event the Division recommends the commencement of an enforcement proceeding to the Commission, the Division shall forward any such written statement to the Commission promptly."). This is a change from prior rules that required this only if the potential respondent made an explicit request.

¹² In her statement announcing the Wells process reforms, Acting Chairman Pham referenced a dissenting opinion she issued in a prior case, where in her view, a failure to timely provide the respondent's submissions to the Commission had negatively impacted the agency's decision. See Dissenting Statement of Commissioner Caroline D. Pham on Commercial End-User Enforcement Action (Aug. 27, 2024) available at https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement082724.  

¹³ For comparison, FERC's enforcement policy explicitly recognizes that subjects of an investigation may provide written statements of their position directly to the Commission at any point in the investigation, including before any charging recommendation by staff and up to the time when the Commission issues an Order to Show Cause. Revised Policy Statement on Enforcement, 123 FERC ¶ 61,156 at PP 27, 40 (2008).

¹⁴ These amendments modify applicable sections of Part 10 of the Commission's Rules of Practice, 17 C.F.R. § 10. 

¹⁵ 17 C.F.R. § 10.108(d) (as amended). 

¹⁶ Client Alert: CFTC Joins FERC and SEC in Issuing Guidance on DOJ Referrals for Criminal Offenses, David Isaak, Daniel A. Mullen, Ryan Hayden & Vito Arethusa, Steptoe LLP (Aug. 11, 2025), https://www.steptoe.com/en/news-publications/cftc-joins-ferc-and-sec-in-issuing-guidance-on-doj-referrals-for-criminal-offenses.html.

¹⁷ 17 C.F.R. § 10.108(d) (as amended). The amendments also revise the definition of an "Adjudicatory proceeding" to include "an order by the Commission instituting proceedings pursuant to the Act, making findings, and imposing remedial sanctions."  17 C.F.R. § 10.2(b).

¹⁸ Keynote Address at the 25^th Annual A.A. Sommer, Jr. Lecture on Corporate, Securities, and Financial Law (Oct. 7, 2025) available at https://www.sec.gov/newsroom/speeches-statements/atkins-100925-keynote-address-25th-annual-aa-sommer-jr-lecture-corporate-securities-financial-law.

¹⁹ 18 C.F.R. § 1b.19. 

²⁰ Acting Chairman Pham Statement on Court Sanctions Against CFTC (May 13, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9074-25.

²¹ Order, CFTC v. Traders Glob. Grp. Inc., No. 23-cv-11808-ESK-EAP, Dkt. No. 260 (D.N.J. May 13, 2025) (adopting the Special Master's report and recommendations to dismiss the complaint with prejudice and to sanction the CFTC); Opinion and Order, CFTC v. Traders Glob. Grp. Inc., No. 23-cv-11808-ESK-EAP, Dkt. No. 269 (D.N.J. July 14, 2025) (awarding the defendant $3,148,482.22 in legal fees pursuant to motion to sanction CFTC).

²² See SEC's Response to November 30, 2023 Order to Show Cause, SEC v. Digital Licensing Inc., No. 2:23-cv-00482-RJS, Dkt. No. 233 (D. Utah Dec. 21, 2023).

²³ See Acting Chairman Pham Lauds DOJ Policy Ending Regulation by Prosecution of Digital Assets Industry and Directs CFTC Staff to Comply with Executive Orders (Apr. 8, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9063-25 (cited in Acting Chairman's announcement of the Wells process reforms).