The CFTC has sowed more confusion regarding the regulatory status of stablecoins under United States laws through its order of October 15, 2021 instituting and settling proceedings against four Tether entities.

In filing this action, the CFTC alleged that its jurisdiction was grounded in the principle that all "[d]igital assets such as bitcoin, ether, litecoin and tether tokens are commodities" and because of that, all digital assets are subject to applicable provisions of the Commodity Exchange Act (CEA) and CFTC regulations.

However, under the CEA, no grant of potential jurisdiction to the CFTC "supersede[s] or limit[s] the jurisdiction at any time conferred on the Securities and Exchange Commission or other regulatory authorities under the laws of the United States or of any State."

The CFTC alleged that the Tether entities at various times made untrue or misleading statements regarding the backing of tether tokens. The CFTC claimed that, from at least June 1 2016 through February 25, 2019, while the Tether entities were publicly representing that tether tokens were 100 percent backed by corresponding fiat assets, the tokens were often backed, at best, by a mixture of assets and only fully backed by fiat currency 27.6 percent of the time. The Tether entities agreed to pay $41 million to resolve the CFTC's allegations.

However, what's left very unclear by the CFTC's settlement order, is whether the CFTC views stablecoins exclusively as commodities (just like bitcoin) or also as securities (or even other financial products) and subject to oversight by the SEC as well as by other federal and state regulators too. Indeed, in her thoughtful concurrence, CFTC Commissioner Dawn Stump noted that "I wish to reiterate my concern that enforcement actions such as this involving digital assets may cause confusion about the CFTC's role in this area.... [I]n pursing and settling this matter, do we provide users of stablecoins with a false sense of comfort that we are overseeing those who issue and sell these coins such that they are protected from wrongdoing."

Regulation by enforcement only confuses the landscape and is a poor substitute for clears laws and rules, or even meaningful guidance.