CFTC: Calling All Whistleblowers in Carbon Markets

June 23, 2023

With an “alert” issued June 20, 2023, the Commodity Futures Trading Commission (CFTC) is targeting carbon markets by asking whistleblowers to come forward with information about fraudulent or manipulative trading of carbon credits and other environmental commodities as well as related derivatives.

The CFTC’s whistleblower program is not a new concept. The program offers whistleblowers, even those who are not company “insiders,” between 10% and 30% of the amount of monetary sanctions collected due to the information provided. And the payments can be major: A recent payment was nearly $200 million. This whistleblower alert is unusual because it specifically asks whistleblowers to come forward, a rare move by the CFTC. It also targets a particular sector: environmentally related products.

Carbon Markets

The CFTC has claimed “anti-fraud and anti-manipulation enforcement authority” over trading in “spot markets for carbon credits [and] … carbon allowances and other environmental commodities products.” The call for whistleblowers is not limited to energy companies. Industry entities that historically have emitted a lot of carbon may trade in these markets and be subject to investigations and subsequent enforcement proceedings. This also may affect commodity trading and brokerage firms involved in these markets.

Additionally, if an entity is involved in voluntary market-based carbon trading programs such as the Regional Greenhouse Gas Initiative (RGGI) or the Western Climate Initiative (WCI), or it trades in derivatives relating to such credits in CFTC-jurisdictional Designated Contract Markets, it should pay special attention to the CFTC’s green push.

Targeted Misconduct

The whistleblower alert specifically lists types of misconduct that potential whistleblowers should keep in mind. This misconduct includes wash trading, ghost credits, double counting of carbon credits, or manipulation of tokenized carbon credits. It also includes fraudulent statements relating to material terms of the carbon credit, such as the quality of credits held or what the entity’s carbon trading positions do for its carbon footprint.

Essentially, the CFTC usually focuses on any effort to artificially affect market prices. For example, the CFTC often looks for aggressive noneconomic trading — offering to pay or actually paying more to buy than is needed, or offering to sell or actually selling for less than is needed — to move the price because a related position prices out better. Another example of conduct that could come under scrutiny is prearranging trades with a counterparty that are supposed to be transacted instead on an open clearing-type market.


The CFTC’s push to investigate and punish entities that specifically trade in these spot markets for carbon credits is likely driven in part by President Biden’s green agenda that is being pursued across a variety of regulatory agencies. The whistleblower alert indicates that any resulting investigations will be exacting, and punishments could be severe. At a minimum, this rare call for whistleblowers suggests that entities trading in these carbon markets should prioritize compliance in this area.

The author thanks McGuireWoods summer associate Lisa Valdes for assistance preparing this legal alert. She is not licensed to practice law.