Jonathan Marcus is of counsel and Trevor Levine and Daniel O’Connell are associates at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on a Skadden memorandum by Mr. Marcus, Mr. Levine, Mr. O’Connell, and Stuart Levi.
The Commodity Futures Trading Commission (CFTC) is considering how smart contract applications on the blockchain implicate its jurisdiction and enforcement authority. Smart contracts are pieces of code on a blockchain that execute certain steps (such as moving a cryptocurrency from one wallet to another) when a condition or set of conditions is met. They are not “contracts” in the traditional legal sense, nor are they “smart” in the sense of using artificial intelligence or similar technologies.
In October 2018, CFTC Commissioner Brian Quintenz discussed at the GITEX Technology Week Conference how the existing Commodity Exchange Act (CEA) regulatory framework may apply to this new technology. If the CFTC determines that smart contracts that execute on a blockchain facilitate trading in off-exchange futures, swaps with retail customers or event contracts the agency deems contrary to the public interest, how will it approach enforcement? While Quintenz addressed this question in hypothetical terms, it is clear that applying the CEA to potential trading applications on a blockchain will require the CFTC to expand its focus to smart contracts. In doing so, the CFTC will need to consider how to adapt a preexisting regulatory scheme to new technology—in this case, a technology whose decentralized structure is fundamentally different from the structure of intermediation—exchanges, brokers and advisors—on which the CEA is based.
Comment Letter Regarding Mandatory Arbitration Bylaw Proposal at Johnson & Johnson
More from: Jeffrey Mahoney, Council of Institutional Investors
Jeff Mahoney is General Counsel of Council of Institutional Investors. This post is based on a comment letter from CII to Chairman Jay Clayton of the U.S. Securities and Exchange Commission.
I am writing on behalf of the Council of Institutional Investors (CII). CII is a nonprofit, nonpartisan association of public, corporate and union employee benefit funds, other employee benefit plans, state and local entities charged with investing public assets, and foundations and endowments with combined assets under management exceeding $4 trillion. Our member funds include major long-term shareowners with a duty to protect the retirement savings of millions of workers and their families. Our associate members include a range of asset managers with more than $25 trillion in assets under management. [1]
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