SEC and CFTC reach a historic settlement, bringing an end to the battle for US crypto regulation.

Recently, a long-awaited regulatory dialogue in Washington, D.C., captured the attention of global financial markets. For the first time in fourteen years, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) sat down together for a joint roundtable discussion on the future of the market. The SEC and CFTC are attempting to break a years-long deadlock. Former CFTC Chairman Rostin Behnam believed that most crypto assets should be considered commodities, while former SEC Chairman Gary Gensler insisted that most crypto assets were securities. This disagreement has not only created jurisdictional confusion but also left market participants unsure about the path to compliance. Now, CFTC Acting Chairwoman Caroline Pham stated at the conference that the "turf war" over crypto regulation is over, marking a historic shift in US crypto regulation. From the outset of the meeting, Pham offered a message of stability. She emphasized that since taking the helm in January of this year, the CFTC has completed dozens of supervisory and enforcement actions in less than nine months, including several targeting crypto assets. She bluntly stated that the market no longer needs to doubt the CFTC's proper functioning. "The FUD (fear, uncertainty, and doubt) can finally be put to rest." It's worth noting that the CFTC chairmanship is still undecided, with Pham currently the only serving CFTC commissioner. SEC Chairman Paul Atkins' remarks directly addressed market rumors. In response to speculation about a possible merger between the two agencies, he explicitly stated that such an idea has never been on the regulatory agenda. "Collaboration, not merger," he said, emphasizing that any institutional restructuring must be decided by Congress and the president. Atkins also revealed that crypto asset regulation is currently at the top of the list of priorities. The meeting was divided into three parts, bringing together representatives from institutions such as Kraken, Crypto.com, Bank of America, and JPMorgan Chase. The first discussion focused on the historical relationship between the SEC and the CFTC, the root causes of the jurisdictional dispute, and the evolution of the system. The second discussion focused on how trading platforms and related intermediaries (including exchanges, trading interfaces, and clearing houses) can maximize their economic value while protecting investors in a more coordinated regulatory environment. Finally, the meeting explored how regulatory coordination can benefit end users and institutional investors by reducing costs, improving participation efficiency, and expanding choice for market participants. Atkins stated at the meeting that decades of regulatory fragmentation have hindered innovation. Entrepreneurs have been forced to navigate two sets of often conflicting rules. They hope to find a model that preserves the US market's hallmark investor protections while also incorporating innovation-friendly mechanisms. How will the work be divided after the settlement? However, institutional alignment is not a one-time process. In Washington, lawmakers are drafting market structure legislation known as the Clarity Act, which seeks to clarify the roles of the SEC and CFTC. The bill's core mechanism is to classify crypto assets into three categories: digital commodities, investment contract assets, and permitted payment stablecoins. It then clarifies the regulatory obligations of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) based on these categories. The goal is to distinguish crypto asset trading from the analysis of investment contract securities under the Howey test, which ultimately determines the division of jurisdiction. Furthermore, the bill creates a structured entry point for innovation and is committed to providing investor protection. Specifically, the bill would grant the CFTC exclusive jurisdiction over anti-fraud and anti-manipulation enforcement involving crypto assets, including those traded in cash or spot transactions. The bill also requires intermediaries handling crypto assets (including cryptocurrency exchanges or other brokers and dealers that currently dominate the market) to register with the CFTC. The bill would grant the SEC exclusive jurisdiction over issuers and offerings of investment contract assets, including registration and reporting requirements. The SEC would also maintain anti-fraud and anti-manipulation powers over crypto assets traded at SEC-registered brokers, dealers, or national securities exchanges. For approved payment stablecoins, issuers would be subject to oversight by banking regulators. However, the CFTC and SEC would maintain anti-fraud and anti-manipulation jurisdiction over any transactions conducted on CFTC- and SEC-registered crypto exchanges, respectively. If this bill passes, US crypto asset regulation would have a codified institutional framework for the first time. "To the extent permitted by existing regulations and consistent with the public interest, our respective agencies should consider harmonizing product and venue definitions; streamlining reporting and data standards; aligning capital and margin frameworks; and leveraging existing exemptions within each agency to establish a coordinated innovation exemption mechanism," the two Chairmen stated. "By working together to harmonize regulatory frameworks, the SEC and CFTC can reduce unnecessary barriers, improve market efficiency, and create space for innovation to flourish. Our shared goal is to ensure that the United States continues to maintain its leading position in global capital markets."