CFTC Scrutiny of Carbon Markets Has Implications for Carbon Credit Registries
In Short
The Situation: In a speech delivered in September 2026, David Miller, the director of enforcement for the Commodity Futures Trading Commission ("CFTC"), identified alleged fraud relating to carbon credits as a new enforcement priority and confirmed that at least one investigation is under way.
The Result: CFTC scrutiny exposes carbon credit registries—and potentially the independent third-party auditors whose verification reports registries rely upon—to investigation and perhaps enforcement on theories of aiding and abetting misconduct by project developers or recklessly transmitting false information provided by dishonest developers.
Looking Ahead: Carbon credit registries should anticipate subpoenas from the CFTC's Division of Enforcement, analyze available defenses, and assess whether to proactively alert the CFTC to any suspicions of misconduct by developers whose projects they registered or to whom they issued credits.
A voluntary carbon credit ("VCC") is a tradable instrument representing the reduction, avoidance, or removal of one metric ton of carbon dioxide equivalent ("tCO2e") of greenhouse gases ("GHGs"). Physical reductions in GHGs are created by project developers, who design and build projects that avoid or remove GHG emissions. Developers seeking to create VCCs register their projects with crediting programs (often called standards), which are typically non-profit organizations that set project eligibility rules, approve the methodologies developers must use to quantify GHG reductions or removals, and decide whether to issue VCCs.
Before VCCs are issued, the project design and the developer's claimed emission reductions or removals must be validated and verified by independent third-party auditors, known as validation and verification bodies ("VVBs"), approved by the crediting program. Each crediting program maintains a registry, which serves as a repository for tracking certified mitigation projects and into which the crediting program issues VCCs to accounts held by the developer. Registries track the change of ownership of VCCs and record the "retirement" of used VCCs so that they cannot be resold or reused. As used in this commentary, "registry" refers to a crediting program together with the registry it maintains, unless otherwise noted.
Market participants wishing to obtain VCCs can trade them in the spot or derivatives markets. The CFTC takes the position that, because VCCs are commodities, the Commission has fraud and manipulation authority over VCCs traded on a spot basis and full regulatory jurisdiction over VCC derivatives. A 2024 enforcement action in which the CFTC fined a VCC project developer $1 million for reporting false data to a VCC registry to inflate the number of credits that it received illustrates how fraud by developers has the potential to impact registries. See In re CQC Impact Investors, LLC, CFTC Dkt. No. 24-37. The CQC Order documented how the registry at issue published false and misleading information provided by the developer. Because 17 C.F.R. § 180.1(a)(4) penalizes the reckless transmission of false or misleading commodity information, registries could be exposed to enforcement for publicizing misleading information provided by developers without conducting sufficient diligence. And a registry deemed to have assisted a developer in a scheme to fabricate or double-count VCCs could be held liable for commodities fraud under an aiding and abetting theory. See 7 U.S.C. § 13c(a). Exposure is likely greatest for the crediting program that makes issuance decisions and publishes project data; VVBs that verify developer data could face similar theories.
Given this scrutiny, registries should consider whether they are aware of any facts that should be self-disclosed to the Commission, but not before analyzing all potential theories of liability. Shifting regulatory pronouncements from the CFTC, combined with the absence of recognized standards for accounting for VCCs pose challenges to bringing an enforcement action premised on recklessness or deception.
A 2023 CFTC request for comment on proposed guidance regarding the listing for trading of VCCs noted an "absence of a standardized methodology or protocol to quantify emissions reduction. . . ." 88 FR 89410 (Dec. 27, 2023). The Commission issued VCC guidance in 2024, which a dissenting Commissioner described as doing "very little to provide clarity." 89 FR 83378 (Oct. 15, 2024). And in 2025 the Commission withdrew its VCC guidance. 90 FR 44321 (Sept. 15, 2025). Depending on the facts, this regulatory pedigree could be relied upon to defend against an allegation that a registry recklessly disseminated misleading VCC data.
Market participants considering self-disclosure should evaluate whether the CFTC's public statements about VCC investigations could impact eligibility for self-disclosure credit. The CFTC's Policy on Cooperation provides for a declination if, among other things, the reporting party makes a "Voluntary Self-Report to the CFTC," which requires that the Commission be notified "before any known or reasonably anticipated imminent threat of an investigation of the matter by an exchange, self-regulatory organization, or state or federal government entity." See CFTC Letter No. 26-15 (May 19, 2026).
A self-disclosure before a registry is contacted by the CFTC would likely increase the chances that the Commission would regard the disclosure as "voluntary" and would put the disclosing entity in a strong position to argue for a reduction in fines should the CFTC decide to take action. Moreover, a self-disclosure that does not result in a declination from the CFTC could impact a criminal prosecutor's view of the matter. Although several of CQC's officers were criminally indicted, the U.S. Department of Justice declined to prosecute the company on the basis of its "voluntary and timely self-disclosure," notwithstanding that the CFTC proceeded with regulatory enforcement.
Four Key Takeaways
- Registries should undertake—and document—sufficient diligence before publishing any information provided by a carbon credit project developer, including appropriate oversight of the independent third-party auditors on whose verification they rely.
- Registries that become aware of misconduct by a carbon credit developer should consider alerting the Commission; doing so could support an argument that the registry acted in good faith should the CFTC examine its conduct.
- Registries should continually reassess developer compliance and integrity and should consider severing ties with any developer whom the registry suspects of misconduct.
- A self-disclosure of potential violations before being contacted by investigators increases a registry's chances of obtaining a declination from regulatory and criminal enforcers.
