What Can Market Participants Expect as the CFTC and SEC Continue to Advance Regulatory Harmonization Efforts in the Digital Asset Space? 

CFTC–SEC Harmonization: US Financial Leadership in the Crypto Era

The U.S. Commodity Futures Trading Commission (CFTC) and U.S. Securities and Exchange Commission (SEC) held a joint event on January 29, 2025, to discuss agency harmonization efforts and developments in digital assets regulation.^[1] SEC Chairman Paul Atkins introduced the event, CFTC Chaiman Mike Selig provided remarks, and then both chairmen participated in a fireside chat moderated by Eleanor Terrett, the cofounder and host of the podcast and newsletter Crypto in America.

The crypto-focused harmonization event expanded on the regulatory harmonization efforts discussed at a previous roundtable held by the two agencies on September 29, 2026. Our earlier article, “Navigating New Regulatory Harmonization Efforts Between the SEC and CFTC,” summarized key takeaways from that roundtable, including the agencies’ efforts to establish cross-agency harmonization in new product registration requirements, innovation exemptions, 24/7 markets, overlapping regulatory requirements, and cross-margining approvals.^[2]

Echoing sentiments from the September roundtable, Chairman Atkins and Chairman Selig emphasized that their agencies needed to harmonize and future-proof the developing regulatory framework for digital assets, while still adhering to their core missions of protecting investors and market integrity.

The Future of Project Crypto and Digital Asset Regulatory Priorities

The chairmen delivered the key harmonization announcement that the CFTC would partner with the SEC on Project Crypto rather than continue its parallel Crypto Sprint initiative. Chairman Selig noted that this partnership “will advance a clear crypto asset taxonomy, clarify jurisdictional lines, remove duplicative compliance requirements, and reduce regulatory fragmentation.”^[3] Both chairmen emphasized that fragmented regulation does not serve our rapidly changing markets and that today’s markets do not fit under just one regulatory regime. Chaiman Selig underscored that the partnership would further advance Project Crypto’s primary goal of ensuring that the US remains a leading global market as digital asset innovation and adoption continues.

Chairman Selig also highlighted actions underway at the CFTC that advance Project Crypto’s agenda and support market innovation.^[4]

• Crypto Asset Taxonomy: Chairman Selig directed CFTC staff to work with SEC staff to consider joint codification of a crypto asset taxonomy. A clear taxonomy would allow market participants to better determine which agency’s jurisdiction they are subject to in the absence of legislation. Chairman Selig praised Chairman Atkins’s “common-sense” crypto asset taxonomy, which suggests that digital commodities, digital collectibles, and digital tools are not securities, as they do not carry an “expectation of profits arising from the essential managerial efforts of others” under the Howey Test, while tokenized securities would be classified as securities.^{[5] [6]}
• Expanding Eligible Forms of Tokenized Collateral: Chairman Selig also directed CFTC staff to draft rules to enable the deployment of additional forms of eligible tokenized collateral, which he believes will create a more transparent and efficient market infrastructure. Chairman Selig noted the relationship greater tokenization could have with respect to embracing 24/7 trading.
• Enhancing Optionality for Market Participants: Recognizing that intermediated trading will continue to play a role in crypto markets, Chairman Selig directed CFTC staff to draft rules explaining when certain retail crypto transactions may be offered off-exchange under an “actual delivery” exception, as well as rules for DCMs that offer these transactions. CFTC staff will also explore adding a new DCM registration category for firms offering leveraged, margined, or financed crypto asset trading.
• Safe Harbors for Technology Innovators: The CFTC will look for opportunities to encourage technology innovators to remain in the US. Chairman Selig noted that this rule modernization initiative includes assessing circumstances where innovation exemptions and other safe harbors may be appropriate.
• Reducing Duplicative Oversight: Chairman Selig raised the importance of aligning CFTC and SEC regulatory requirements, especially in developing requirements for digital assets. The CFTC plans to explore whether there are opportunities for substituted compliance, which will promote efficiency and reduced costs of compliance for market participants subject to overlapping regulatory regimes.
• Perpetual Contracts: In another effort to foster responsible innovation, the CFTC plans to develop a framework for offering perpetual contracts (i.e., derivatives without a fixed maturity date) and other novel derivative products in the US.

Rulemaking for Prediction Markets

Chairman Selig addressed the need for clear rules for prediction markets (or event contracts) to promote continued innovation. Chairman Selig directed CFTC staff to withdraw previously proposed rules and staff advisories that may have had a chilling effect or contributed to uncertainty about participation in prediction markets. The CFTC plans to draft new rules that will provide clearer parameters for prediction markets and will develop a joint interpretation of Title VII definitions with the SEC to clarify swap product classifications and jurisdiction.

Chairman Selig also stated that CFTC staff members have been instructed to reassess the agency’s participation in current prediction market cases before the federal courts. While the CFTC has shifted its stance to embrace prediction markets, firms offering event contracts are facing numerous lawsuits brought by state and tribal gaming commissions over prohibited “gaming” in their jurisdictions.^[7] Chairman Selig noted, “Where jurisdictional questions are at issue, the Commission has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives.”^[8]

Operationalizing Regulatory Harmonization

During the fireside chat, the chairmen reiterated their commitment to increasing agency harmonization, noting the agencies share the same goal of modernizing the regulatory framework and developing consistent standards. The chairmen emphasized that these harmonization efforts were not a consolidation of the agencies, but rather a purposeful collaboration. They plan to operationalize this harmonization through weekly calls, fostering collaboration and coordination among staff, sharing market data and surveillance across the agencies, and in joint rulemaking efforts. The chairmen also want to publish a Memorandum of Understanding (MOU) between the two agencies to future-proof their regulatory harmonization initiatives and formalize processes between the agencies, including supervision and oversight responsibilities.

Expectations for Market Structure Legislation

The fireside chat also delved into the agencies’ recent engagement with legislators and industry. Chairman Selig noted that the CFTC recently launched an Innovation Advisory Committee to provide feedback on industry developments and consult on rule development. The Committee will be comprised of members of CFTC’s CEO Innovation Council, which includes executives from prediction markets, crypto firms, and exchanges.

The chairmen also reported that both agencies have been supporting Congress’s efforts to draft new crypto market structure legislation. The chairmen recognize that ongoing agency engagement will better position them to prepare rules and guidance to mitigate any regulatory voids once legislation is finalized. The chairmen pointed out that the agencies have exemptive authority and they are not necessarily waiting for bills to be passed before taking actions like issuing an innovation exemption. However, they noted that having settled legislation helps to prevent unwinding of such regulatory actions from administration to administration.

On the same day as the harmonization event, the Senate Agriculture Committee advanced the Digital Commodity Intermediaries Act (DCIA), its version of crypto market structure legislation which builds upon the House-passed Clarity Act.^[9] The DCIA will need to be reconciled with the Senate Banking Committee’s draft crypto market structure bill once it passes Committee vote to form a comprehensive piece of legislation before moving through the full Senate. While Congress continues to negotiate a final package of crypto market structure legislation, the CFTC and SEC will continue their efforts to modernize and harmonize the digital assets regulatory framework.

How A&M Can Help

Market participants need to be prepared for significant changes in market structure and the regulatory environment. A&M has extensive experience working with all major US regulatory agencies and is well-positioned to provide tailored, risk-based solutions for clients across different sectors of the financial services industry. Our team has assisted numerous digital asset firms and exchanges in a range of operational, regulatory risk, and compliance-focused engagements. A&M is ready to support your firm in understanding changes and implementing enhancements that arise from this regulatory harmonization initiative.

Our Services:

• Regulatory change management guidance and implementation 
• Compliance program evaluations
• Risk assessments
• Control testing
• Surveillance program review and remediation
• Systems calibration and enhancement
• Regulatory data reporting 
• Data governance, mapping, and validation

Learn more about A&M Disputes and Investigations offerings and other broader A&M services.^[10]

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