Last week, the CFTC solicited whistleblowers in connection with "potential [] fraud and manipulation" in "voluntary carbon markets," particularly in circumstances "in which high-quality carbon credits, also known as carbon offsets, are purchased and sold bilaterally or on spot exchanges."  In particular, the CTC announced that it was interested in information concerning "manipulative and wash trading, 'ghost' credits, double counting, fraudulent statements relating to material terms of the carbon credits, and potential manipulation of tokenized carbon markets," highlighting that individuals who supplied information could receive "monetary awards if that information leads to the success of a CFTC enforcement action." 

Irrespective of whether this announcement leads to any whistleblowers coming forward, or even any subsequent enforcement actions, this statement serves as a bold declaration of policy that "[t]he CFTC has enforcement authority and regulatory oversight over" "the voluntary carbon credit market."  The basis for this assertion of jurisdiction is the CFTC's oversight of futures contracts--indeed, the CFTC further stated that "[t]he CFTC's jurisdiction also applies to carbon allowances and other environmental commodities products that are linked to futures contracts."  In effect, the CFTC has announced that it will be exercising jurisdiction over the carbon markets, including the purchase and sale of carbon offsets, and that it plans to pursue enforcement actions related to alleged misconduct in connection with the carbon markets.  So, another federal regulator has asserted itself in the context of financial regulation concerning climate change, adding to the complexity of the regulatory environment that individual businesses need to navigate.

"The CFTC’s Whistleblower Office will work with market participants that report information related to potential fraud in the carbon markets including, but not limited to, manipulative and wash trading, “ghost” credits, double counting, fraudulent statements relating to material terms of the carbon credits, and potential manipulation of tokenized carbon markets. Individuals who submit such information . . . may be eligible for . . . monetary awards if that information leads to the success of a CFTC enforcement action. . . ."

"The CFTC has enforcement authority and regulatory oversight over DCMs [designated contract markets] and any trading in those markets. The CFTC also has anti-fraud and anti-manipulation enforcement authority over the related spot markets for carbon credits. The CFTC’s jurisdiction also applies to carbon allowances and other environmental commodities products that are linked to futures contracts."