CFTC & SEC Joint Event on Harmonization
OVERVIEW
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On January 29, the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) held a joint event on regulatory harmonization and U.S. financial leadership. The event began with Chairman Atkins’ introductory remarks, followed by opening remarks from Chairman Selig and a fireside chat with the Chairmen, moderated by Eleanor Terrett, the Co-Founder and Host of Crypto in America.
Below is a summary of the event prepared by Delta Strategy Group. It includes several high-level takeaways, followed by summaries of the Chairmen’s statements.
Key Takeaways
- SEC Chairman Atkins highlighted harmonization between the Commissions as critical to global competitiveness, framing the importance of applying the minimum effective dose of regulation and coordinated action to reduce uncertainty, lower compliance costs, and foster innovation.
- CFTC Chairman Selig announced the CFTC’s intent to withdraw prior staff guidance unfavorable to sports event contracts and will soon issue new staff guidance highlighting how the CFTC views these markets ahead of starting a rulemaking process to support lawful innovation in prediction markets. He stated the CFTC will assess how they should engage with ongoing legal battles around the country on sports event contracts, saying that, where jurisdictional questions are at issue, the Commission has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives.
- Chairman Selig also raised how the CFTC will work with the SEC to develop a joint interpretation of Title VII definitions to reduce regulatory ambiguity between the Commissions on the treatment of commodity options, security options, swaps, and security-based swaps.
- The Chairmen outlined how future-proofing a partnership between the CFTC and SEC requires institutionalizing collaboration through a finalized memorandum of understanding (MOU), regular staff coordination, and consistent leadership-level engagement. Discussions reiterated how effective coordination between the Commissions will ensure the avoidance of regulatory arbitrage, with an emphasis on consistent standards, simplified and streamlined requirements, and a clear regulator with a bright jurisdictional line.
- Chairmen Atkins and Selig underscored the importance of their Commissions working to harmonize and modernize their rule books for digital assets. The Chairmen stated that Project Crypto will be a joint effort going forward, reflecting a cohesive regulatory approach.
SUMMARY
Harmonization & Jurisdictional Clarity
- Chairman Atkins described overlapping jurisdiction as the core challenge in harmonization between the Commissions as he emphasized that collaboration, not competition, between the CFTC and SEC is necessary to maintain U.S. leadership in global financial markets. He noted that the U.S. is uniquely bifurcated between commodities and securities regulation.
- Chairman Selig stated that the Commissions are pursuing coordination, not consolidation, in working together to eliminate gaps and reduce duplicative compliance burdens, referencing issues faced by dually registered entities subject to divergent standards stemming from historical rule development. He highlighted the need for standardization, referenced substituted compliance as one solution, and pointed to expanded data sharing and surveillance coordination as practical next steps.
- Chairman Selig referenced that innovations in trading, clearing, settling, margining, and collateralizing commodity price exposures can reduce operational frictions by enhancing liquidity and streamlining post-trade processes. He highlighted that the CFTC has an opportunity to build on its legacy as a forward-looking regulator by applying clear rules, principles-based oversight, and harmonizing with fellow regulators to support the onshore development of emerging commodity markets through thoughtful engagement and a commitment to principled innovation.
- Chairman Selig emphasized that both the SEC and CFTC must regulate based on a shared playbook and standardized regulatory expectations, paired with clear and regular communication. He referenced that the CFTC’s experience regulating markets with fewer informational asymmetries than securities markets and recognized that the CFTC has significant authority, including over fraud, manipulation, and retail leveraged spot markets, but underscored that in a post-Chevron world, statutory clarity is essential for regulatory predictability and to insulate markets from shifts in administrative direction.
- Chairman Selig remarked how an MOU would formalize interagency processes and highlighted the importance of career staff relationship-building and day-to-day coordination. He noted that both mandatory and non-mandatory joint rulemakings could support harmonization and consistency across agencies, referencing the need to avoid operating in isolated silos.
- Chairman Selig stated that fragmented oversight between the CFTC and SEC imposes barriers to entry, reduces competition, increases compliance burdens, and incentivize regulatory arbitrage. To address this, he committed the CFTC to working closely with the SEC to identify opportunities for better regulatory alignment to reduce duplicative requirements that do not enhance market integrity. He outlined that as a part of this harmonization, the CFTC will examine whether substituted compliance can deliver equivalent or improved regulatory outcomes at lower cost, allowing market participants to offer multiple products through a single platform without navigating overlapping regimes.
- Chairman Selig referenced his direction to staff to reassess the CFTC’s role in ongoing court cases involving jurisdictional questions, emphasizing the CFTC’s responsibility to defend its exclusive jurisdiction over commodity derivatives. He also stated that the CFTC will work with the SEC to develop a joint interpretation of Title VII definitions to clarify the regulatory treatment of commodity options, security options, swaps, and security-based swaps to reduce the regulatory ambiguity and “no man’s land” between the Commissions.
Role of Congress & Legislative Efforts
- Chairman Atkins outlined how Congress is closer than ever to passing bipartisan market structure legislation as he emphasized that a federal framework for markets innovating faster than prescriptive rules is overdue. He stated that Congress’s role must address the need for a level playing field that permits competition and accommodates new methods, allowing investors to decide their preferences. He cited how the SEC has provided technical assistance to Congress, stating that the Commissions are prepared to use their authority to fill any gaps left by legislation to provide market certainty.
- Chairman Selig praised the Senate Agriculture Committee’s legislation for recognizing the CFTC’s role while reaffirming the need for clear communication and aligned standards to enhance U.S. competitiveness. He noted the role of market structure legislation being put into statute, but that the CFTC will not wait for Congress to act. He cited how he has directed CFTC staff to use existing authorities to begin upgrading regulations to support innovation regarding both incumbents and new entrants.
- Chairman Selig stated that the Senate Agriculture draft is in a great place, highlighting the importance of its inclusion of broad exemptive authority to address evolving digital asset markets. He emphasized the need for flexibility, such as with substituted compliance, and expressed referenced future collaboration with the Senate Banking Committee while acknowledging that certain issues, such as yield, fall beyond the CFTC’s remit.
Project Crypto & Interagency Initiatives
- Chairman Atkins discussed how modern market functions do not divide neatly across traditional regulatory boundaries, citing how trading, clearing, custody, and risk management now flow across asset classes, technologies, and platforms. He described how Project Crypto is designed to ensure that, when Congress acts on market structure legislation, the Commissions are ready to implement any new legislation faithfully and thoughtfully in deploying tools to reduce friction, harmonize standards and definitions where appropriate.
- Chairman Selig credited Acting Chairman Pham’s Crypto Sprint with helping orient the agency toward the opportunities and challenges of crypto assets and announced that the CFTC is now building on that foundation through a joint effort with the SEC. He outlined how Project Crypto will bring coordination, coherence, and a unified approach to federal oversight in recognition of how crypto markets span both agencies’ regulatory frameworks.
- Chairman Selig highlighted the role of the Innovation Advisory Committee (IAC) and how the previously announced CEO Innovation Council’s fifteen CEOs will be members of the IAC. He said that additional members will be announced soon and emphasized that the IAC will play a key role in the CFTC’s regulatory approach. He referenced how it will be composed of CEOs from digital asset firms, prediction markets, and exchanges in helping the CFTC develop appropriate market structure rules.
- Chairman Atkins noted that work on an innovation exemption remains ongoing, with a focus on ensuring it is fit-for-purpose and allows product development with predictability, including an end date and off-ramp. He framed how both the SEC and CFTC have broad exemptive authority under existing statutes and should use it appropriately but emphasized that legislation is critical to provide lasting guidance and prevent future reversals of regulatory progress.
- Chairman Selig stated that within the CFTC’s and SEC’s partnership, they aim to advance a crypto asset taxonomy, clarify jurisdictional lines, eliminate duplicative compliance, and reduce regulatory fragmentation in efforts to ensure innovation occurs under U.S. law. He emphasized that regulators should not uphold outdated rules to block competition, but instead meet innovators and markets where they are, ensuring alignment with statutory policy rationales without prescribing a specific market structure.
- Chairman Selig noted that Chairman Atkins’ proposed crypto asset taxonomy would clarify that digital commodities, digital collectibles, and digital tools are not securities, even when sold via investment contracts. He confirmed that he has directed CFTC staff to consider joint codification of the framework with SEC staff as an interim measure pending legislative action by Congress.
Novel Products & Markets
- Chairman Selig raised the increasing use of prediction markets, stating that although such event contracts have operated within the CFTC’s regulatory perimeter for over two decades, they remain misunderstood. He asserted that it is time for clear rules and a clear signal that the CFTC supports lawful innovation in these markets, with the current uncertainty not serving markets well nor public interest. He reaffirmed his support for the responsible development of event contract markets and outlined several steps the CFTC will take to provide clarity and certainty.
- On event contracts, Chairman Selig cited his direction for staff to withdraw the 2024 proposed rule prohibiting political and sports-related event contracts and the 2025 staff advisory on sports contracts, citing their contribution to market uncertainty. He announced that the CFTC will move forward with drafting new event contract rulemaking to establish clear standards and improve the existing framework, which he framed as having proven difficult to apply and failed market participants.
- While recognizing the promise of decentralized financial (DeFi) systems, Chairman Selig underscored the continued relevance of intermediated trading in crypto markets, both on- and off-exchange, involving leverage, margin, and financing. He outlined that in efforts to support these activities, he directed CFTC staff to begin: drafting rules to clarify when leveraged, margined, or financed retail commodity transactions in crypto assets may be offered off exchange under an actual delivery exception; drafting rules codifying requirements for designated contract markets (DCMs) offering such transactions to ensure consistent application of core protections; and exploring the creation of a new category of DCM specifically tailored to retail leveraged, margined, or financed crypto asset trading under a purpose-fit regulatory framework.
- Chairman Selig outlined that with the establishment of a clear taxonomy, the next step is determining how blockchain technologies can enhance market resilience and functions. He emphasized that 24/7 trading and high-quality tokenized collateral offer advantages such as dynamic liquidity and stronger market infrastructure. To support this, he cited directives for CFTC staff to develop rules enabling the responsible deployment of additional forms of eligible tokenized collateral.
- Chairman Selig noted the significant interest in tokenized securities, tokenized derivative instruments, and leveraged products. He emphasized that the CFTC must not fear the future or allow these markets to remain offshore, citing offshore trading activity, but instead meet it by setting appropriate rules and guardrails. He stated that the CFTC will work closely with industry to ensure that when such markets come on chain in the U.S., proper safeguards are in place.
- Chairman Selig noted the emergence of perpetual contracts and referenced how past administrations failed to provide a domestic regulatory pathway. He stated that under his leadership, the CFTC will work to onshore perpetual and other novel derivatives through transparent, common-sense frameworks, applicable to both centralized and decentralized markets. He acknowledged that existing CFTC rules were built for a centralized intermediary model and must be revisited to address on-chain financial markets and enable permissionless innovation, otherwise risking ceding U.S. leadership.
- Chairman Selig stated that on-chain systems exist on a spectrum of decentralization and that the CFTC will explore how to support innovation in software development, including evaluating whether an innovation exemption may be appropriate. He emphasized the importance of and commitment to establishing clear, unambiguous safe harbors for software developers to ensure crypto innovation occurs in the U.S.