In a Bloomberg Law article, “Reducing ‘Too-Large’ Whistleblower Awards Undermines Enforcement,” Labaton Keller Sucharow attorneys Allison Herren Lee, Andrew Feller, and David Saldamando examine the Commodity Futures Trading Commission (CFTC)’s decision to reduce certain whistleblower awards based on their size.  The authors argue that this approach introduces uncertainty into the award process and could discourage individuals from reporting misconduct.

The article follows the CFTC’s announcement of more than $150 million in awards to four whistleblowers.  Although the agency acknowledged that the whistleblowers provided significant information leading to successful enforcement actions, it reduced certain recommended awards, citing concerns about potential adverse incentives from oversized payouts.  The authors question the factual basis for that reasoning and explain why predictable financial incentives matter to individuals weighing the personal and professional risks of coming forward.

“Whistleblowers value certainty when providing information that exposes them to great risk,” the authors write.  They contrast the CFTC’s approach with the Securities and Exchange Commission’s decision to permit consideration of an award’s dollar amount only to increase, rather than decrease, the award.  They also explain that targeted procedures can address frivolous submissions without weakening incentives for individuals with valuable information.

The authors emphasize whistleblowers’ contribution to enforcement, noting that their reports helped produce CFTC enforcement actions resulting in more than $3.3 billion in financial remedies from 2011 through 2025.  They also explore potential legal challenges to the CFTC’s reasoning and the implications for detecting misconduct in evolving markets.

“The promise of meaningful financial rewards is the engine that drives whistleblower reporting, and that engine can’t run on uncertainty,” they write.