All news is rigorously fact-checked and reviewed by leading blockchain experts and seasoned industry insiders. - Michael Selig directed CFTC staff to explore a crypto market structure under the agency’s existing authority.
- Leveraged crypto trading could eventually operate through CFTC-supervised market venues.
- DeFi developers are being brought into discussions over compliant U.S. access.
- Prediction markets and AI compute markets form separate pillars of the regulator’s new agenda.
The Commodity Futures Trading Commission used the inaugural meeting of its Innovation Advisory Committee on August 20 to outline something more consequential than another industry consultation: Chairman Michael Selig said the agency is preparing to build a crypto market framework itself if Congress fails to advance the CLARITY Act. The meeting brought crypto executives together with leaders from traditional exchanges and financial infrastructure firms, extending the regulatory push that began a day earlier when President Donald Trump hosted industry executives at the White House and urged Congress to move the stalled legislation forward.
Selig Gives Congress a Choice, but the CFTC Is Preparing Plan B
The most consequential part of the meeting concerned what happens if the CLARITY Act does not make it through the Senate.
Selig said congressional legislation remains the preferred route because it could establish a durable statutory division between the SEC and CFTC. The bill would address one of the central unresolved questions in U.S. crypto regulation: which assets and activities belong under securities regulation and which fall within the commodities framework.
The CFTC, however, is no longer treating congressional action as the only route.
According to Bloomberg Law, Selig has directed staff to begin exploring rules that would codify a CFTC market structure for crypto assets using authority the Commission already possesses. He said the agency would give the CLARITY Act room to advance, but could move quickly with its own proposals if the legislation remains stalled.
That is an important distinction. The CFTC cannot reproduce through rulemaking every power Congress could grant through legislation. What it can do is reinterpret, adapt and formalize requirements within its existing statutory jurisdiction.
Selig made that distinction explicit in an interview ahead of the meeting, saying crypto market structure could be developed through both rules and laws.
Crypto Exchanges Could Get a New Route Into CFTC Oversight
The early framework being considered is notable because it goes beyond simply issuing guidance on whether particular tokens are commodities.
Under Selig’s concept, existing CFTC registrants and currently unregistered crypto exchanges could potentially become a type of designated contract market, or DCM, structured specifically for crypto assets.
Such venues could then offer leveraged or margined crypto trading under CFTC supervision, subject to rules designed for digital-asset markets.
For exchanges, that could provide something the U.S. market has struggled to establish: a defined federal route for offering certain leveraged crypto products rather than relying on a mixture of state licenses and interpretations of federal commodities and securities laws.
For customers, the consequences would depend heavily on the eventual rules. CFTC supervision could bring requirements covering market integrity, reporting, risk controls and customer protections, while still allowing products that have often been more widely available through offshore platforms.
The proposal remains exploratory. No final crypto market rule was approved at Thursday’s meeting.
DeFi Is Being Treated as a Regulatory Design Problem
Selig also directed CFTC staff to engage directly with developers of onchain finance protocols.
The objective is to establish ways developers can legally make protocols available in the United States and, in Selig’s words, provide more durable protections for software development.
That approach matters because DeFi does not map neatly onto rules written for centralized intermediaries.
A conventional exchange has identifiable operators who can register, maintain compliance departments and implement customer-level controls. An onchain protocol may instead consist of smart contracts, governance mechanisms, front-end interfaces and developers who no longer directly control execution.
The regulatory question is therefore not simply whether “DeFi should be regulated.” The harder issue is determining which participant is responsible for which activity.
Direct engagement with developers gives the CFTC an opportunity to separate software publication from activities that more closely resemble operating an exchange, arranging leveraged transactions or exercising control over customer-facing financial services.
Coinbase’s Armstrong Still Thinks Congress Can Deliver
The industry has not abandoned the legislative route.
Coinbase CEO Brian Armstrong argued during the discussions that the CLARITY Act still has a strong chance of passing, describing the negotiations as a process in which both political sides could ultimately receive most of what they want.
That optimism follows Wednesday’s White House meeting, where Trump publicly called for a “fair version” of the bill. The gathering included senior executives from Coinbase, Kraken and other major financial and crypto companies alongside SEC and CFTC officials.
The immediate obstacle is arithmetic.
Republicans hold 53 Senate seats, while moving the legislation through the procedural stage requires 60 votes.
The Senate is expected to confront that test after returning from recess, with cloture on the motion to proceed scheduled to ripen on September 15.
Armstrong’s argument is therefore about the possibility of a bipartisan compromise rather than Republicans being able to pass the measure alone.
Robinhood Points to the Cost of 50 Different State Regimes
Robinhood CEO Vlad Tenev focused on another structural problem: state-by-state regulation.
Crypto companies operating nationally can face different licensing and compliance requirements depending on where customers live. Tenev argued that this fragmentation ultimately affects consumers rather than merely creating administrative inconvenience for large companies.
The logic is straightforward. A sufficiently large financial platform can build separate compliance processes for individual jurisdictions. Smaller companies face a much higher relative cost, while customers can end up with different product access depending on their state.
A federal market structure could reduce some of that fragmentation, although state authority would not disappear entirely.
This is one reason the industry’s debate around CLARITY extends beyond the question of whether a token belongs to the SEC or CFTC. Market structure also determines where platforms register, which products they can offer and how consistently Americans can access them.
Wall Street Is Moving Into Tokenization While Washington Writes Rules
Traditional finance executives brought a different perspective to the committee.
DTCC leadership pointed to increasing SEC-CFTC coordination as creating a clearer route for established financial institutions to experiment with blockchain and tokenization.
The comment reflects how the regulatory debate has broadened. Digital-asset policy is no longer confined to determining how crypto exchanges list tokens. Traditional securities infrastructure is increasingly examining whether blockchain rails can be incorporated into issuance, settlement, collateral management and asset servicing.
For incumbent financial institutions, regulatory coordination may matter more than whether regulators adopt explicitly pro-crypto policies. A bank, clearing organization or exchange needs to know which regulator supervises an activity before committing substantial capital to new infrastructure.
Selig’s broader argument at the meeting followed that logic. He pointed to the CFTC’s history of regulating new derivatives markets through flexible core principles rather than dividing jurisdiction according to the underlying asset.
Prediction Markets Are Heading Toward Their Own Rulebook
Crypto was only one part of the August 20 agenda.
The CFTC is simultaneously preparing changes for prediction markets, an area where federal and state regulators have increasingly collided.
Selig argued that the CFTC has exclusive jurisdiction over derivatives traded on federally regulated designated contract markets and criticized state attempts to apply gambling laws to federally supervised event contracts. The
Commission has already proposed amendments to Rule 40.11 that would clarify key definitions and establish criteria for assessing public-interest concerns.
Further changes are planned.
Selig said he expects amendments covering DCM core principles and event-contract listing rules, including requirements addressing consumer protection, product governance, market design and incentive programs.
The participation of prediction-market executives in the committee gives the CFTC direct industry input as those rules are developed. Kalshi and Polymarket are already central to the debate over whether event markets should primarily be treated as federally regulated derivatives or subject to additional state gambling restrictions.
AI Compute Markets Become the CFTC’s Next Frontier
Perhaps the least developed, but potentially most unusual, component of Selig’s agenda involves artificial intelligence.
The CFTC chairman wants the United States to develop markets for computing capacity, arguing that access to GPU clusters and other compute infrastructure is becoming an economically significant resource.
The regulatory thesis is that as compute becomes scarce and expensive, companies may need spot, forward and derivatives markets that allow them to establish prices and hedge future costs. The CFTC is working with the Department of Commerce and has already sought public input on the structure of such markets.
That places AI infrastructure within a familiar CFTC framework. Rather than regulating AI models themselves, the agency is examining whether the scarce resources powering those models can support commodity-style financial markets.
The more immediate deadline remains September 15. If the Senate demonstrates that a bipartisan coalition exists for CLARITY, Congress could still define the central architecture of U.S. crypto regulation. If it cannot, Selig has now made clear that CFTC staff are preparing an administrative alternative, with crypto exchanges, leveraged trading and onchain protocols potentially falling within the agency’s next round of rulemaking.
