The Commodity Futures Modernization Act of 2000 (CFMA) is a United States federal law that ensures that over-the-counter (OTC) derivatives remained unregulated.

The Commodity Futures Trading Commission (CFTC) had desired to have "functional regulation" of the market, but the CFMA rejected this approach. Instead, the CFTC continued to do "entity-based supervision of OTC derivatives dealers". The CFMA's handling of OTC derivatives, such as credit default swaps, has become controversial, as these derivatives played a major role in the 2008 financial crisis and the Great Recession. The Commodity Futures Modernization Act (CFMA) of 2000 is a landmark piece of legislation in the United States that significantly altered the regulation of financial markets. Signed into law on December 21, 2000, the CFMA had several major impacts on the trading of derivatives, futures, and other financial instruments. Key Provisions: Deregulation of Over-the-Counter (OTC) Derivatives: One of the most significant features of the CFMA was that it removed the regulatory oversight of over-the-counter (OTC) derivatives, such as credit default swaps (CDS). Prior to this, derivatives had been subject to varying degrees of regulation. The CFMA clarified that these contracts were exempt from oversight by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).

Before and after the CFMA, federal banking regulators imposed capital and other requirements on banks that entered into OTC derivatives. The U.S. Securities and Exchange Commission (SEC) and CFTC had limited "risk assessment" authority over OTC derivatives dealers affiliated with securities or commodities brokers and also jointly administered a voluntary program under which the largest securities and commodities firms reported additional information about derivative activities, management controls, risk and capital management, and counterparty exposure policies that were similar to, but more limited than, the requirements for banks. Banks and securities firms were the dominant dealers in the market, with commercial bank dealers holding by far the largest share. To the extent insurance company affiliates acted as dealers of OTC derivatives rather than as counterparties to transactions with banks or security firm affiliates, they had no such federal "safety and soundness" regulation of those activities and typically conducted the activities through London-based affiliates.

The CFMA continued an existing 1992 preemption of state laws enacted in the Futures Trading Practices Act of 1992 which prevented the law from treating eligible OTC derivatives transactions as gambling or otherwise illegal. It also extended that preemption to security-based derivatives that had previously been excluded from the CEA and its preemption of state law. The CFMA, as enacted by President Clinton, went beyond the recommendations of a Presidential Working Group on Financial Markets (PWG) report titled "Over-the Counter Derivatives and the Commodity Exchange Act" (the "PWG Report"). President's Working Group on Financial Markets, November 1999:

Although hailed by the PWG on the day of congressional passage as "important legislation" to allow "the United States to maintain its competitive position in the over-the-counter derivative markets", by 2001 the collapse of Enron brought public attention to the CFMA's treatment of energy derivatives in the "Enron Loophole". Following the Federal Reserve's emergency loans to "rescue" American International Group (AIG) in September 2008, the CFMA has received even more widespread criticism for its treatment of credit default swaps and other OTC derivatives.

In 2008 the "Close the Enron Loophole Act" was enacted into law to regulate more extensively "energy trading facilities." On August 11, 2009, the Treasury Department sent Congress draft legislation to implement its proposal to amend the CFMA and other laws to provide "comprehensive regulation of all over-the counter derivatives." This proposal was revised in the House and, in that revised form, passed by the House on December 11, 2009, as part of H.R. 4173 (Dodd–Frank Wall Street Reform and Consumer Protection Act). Separate, but similar, proposed legislation was introduced in the Senate and is still awaiting Senate action at the time of the House action.

The PWG Report was directed at ending controversy over how swaps and other OTC derivatives related to the CEA. A derivative is a financial contract or instrument that "derives" its value from the price or other characteristic of an underlying "thing" (or "commodity"). A farmer might enter into a "derivative contract" under which the farmer would sell from next summer's harvest a specified number of bushels of wheat at a specified price per bushel. If this contract were executed on a commodity exchange, it would be a "futures contract". Before 1974, the CEA only applied to agricultural commodities. "Future delivery" contracts in agricultural commodities listed in the CEA were required to be traded on regulated exchanges such as the Chicago Board of Trade.

The Commodity Futures Trading Commission Act of 1974 created the CFTC as the new regulator of commodity exchanges. It also expanded the scope of the CEA to cover the previously listed agricultural products and "all other goods and articles, except onions, and all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in." Existing non-exchange traded financial "commodity" derivatives markets (mostly "interbank" markets) in foreign currencies, government securities, and other specified instruments were excluded from the CEA through the "Treasury Amendment", to the extent transactions in such markets remained off a "board of trade." The expanded CEA, however, did not generally exclude financial derivatives.