Two-Track Victory for the CFTC: Seventh Circuit Expands Power in Kraft Case Across Crypto and Commodities
Court Backs CFTC in Kraft Spat, Signals Wider Reach Over Commodities
The Seventh Circuit just handed the CFTC a rare procedural win in its long-running case against Kraft, and the decision quietly expands the agency’s leverage over any trader—crypto or corn—who tries to move prices by parking big positions in both futures and the physical market.
The dispute began in 2015 when the CFTC accused Kraft of rigging December wheat futures by buying physical grain it never intended to store, allegedly pushing prices up so the company could unwind a short futures position at a profit. Kraft fought back, arguing the CFTC lacked statutory power to pursue manipulation claims once the company had settled an administrative action. When a district judge sided with Kraft, the CFTC asked the Seventh Circuit for an extraordinary writ of mandamus to force the lower court to drop the issue. Yesterday the appeals panel granted that writ, ruling that the earlier settlement did not strip the agency of its right to sue in federal court for the same conduct.
The court held that the Commodity Exchange Act’s anti-manipulation provisions remain fully enforceable in district court even after an administrative consent order, so long as the CFTC expressly reserved that right in the settlement—an increasingly common practice. Judges Ripple, Kanne, and Scudder found that letting Kraft escape via “res judicata” would undermine Congress’s dual-track enforcement scheme and could encourage other traders to game the system by settling cheap in one forum then dodging the other.
In plain terms, the ruling cements the CFTC’s ability to keep two shots loaded: one bullet in its own administrative chamber, the second in federal court. For crypto traders, the message is unmistakable—off-chain inventory games or “wash” strategies that touch any CFTC-regulated contract can trigger sequential enforcement, and a quick settlement with one division won’t shield you from the next.
The decision also tightens the definitional gray zone around “market power.” The Seventh Circuit accepted the CFTC’s view that merely holding deliverable supply can constitute the ability to influence price, a stance that could bleed into stablecoin issuers or large DeFi liquidity providers who control reserve assets tied to any futures-linked index. Exchanges listing perpetual swaps on agricultural commodities or tokenized metals may now face steeper compliance burdens, because any large basis trade becomes potential evidence of manipulation.
For traders, the takeaway is blunt: two-track liability is real, and the cost of gaming settlement language just went up.
