New CFTC Enforcement On Carbon Markets Misconduct

Introduction

On June 20, 2023, the United States Commodity Futures Trading Commission ("CFTC") Whistleblower Office, a unit of the agency's Division of Enforcement ("DOE"), issued a rare alert, soliciting tips about potential fraud and manipulation in the carbon markets. This is an exceedingly unusual move by the CFTC. It signals an aggressive new posture in its regulation of the nascent market for carbon allowances, carbon credits, and other environmental commodities, including "tokenized" credits. Less than two weeks later, the CFTC announced the formation of a new DOE Environmental Fraud Task Force ("EFTF") to "combat environmental fraud and misconduct in derivatives and relevant spot markets." The EFTF will be comprised of DOE attorneys and investigators who will prosecute cases, serve as subject-matter experts, and coordinate efforts with the CFTC's other divisions and offices.