In the United States, the SEC and CFTC serve as market regulators for the cryptocurrency industry, but their roles often overlap, leading to confusion. The CFTC considers most altcoins as commodities, while the SEC views them differently. The CFTC has recently issued a warning to crypto investors about the risks associated with AI trading bots.
Understanding the CFTC’s Warning
The rise of AI trade bots, particularly after the launch of ChatGPT in November 2022, has caught the attention of cryptocurrency investors. Despite AI’s advantages in certain areas, its performance in trading can be suboptimal. The CFTC emphasizes that AI, like humans, cannot predict the future of markets.
A new advisory from the CFTC, “Customer Advisory: Public Cautioned Against Artificial Intelligence Fraud,” alerts the public that AI crypto trade products, which are expected to proliferate this year, may lead to substantial financial losses for investors.
Melanie Devoe, from the CFTC’s education and outreach office, urges investors to be wary of deceptive practices. Scammers exploit AI’s allure to craft more believable fraudulent schemes, particularly targeting inexperienced crypto investors with promises of high returns.
The CFTC’s advisory comes after several U.S. state observers filed a lawsuit against an AI trade bot company claiming to generate daily returns of up to 2.2% through AI. The CFTC questions why developers would sell such a bot instead of using it to amass wealth, highlighting the implausibility of such claims.