SEC and CFTC Team Up on "Project Crypto"
Commentary by Steven Lofchie
SEC Chair Paul Atkins and CFTC Chair Michael Selig announced that "Project Crypto" will now proceed as a joint initiative between the two agencies to unify federal oversight of digital asset markets.
The collaboration is part of the agencies’ broader CFTC-SEC Harmonization Initiative, an ongoing effort to reduce duplicative regulation and strengthen coordination across U.S. financial markets.
Chair Atkins emphasized the necessity of ending the "turf war" between the agencies, saying that the current "maze of overlapping" frameworks confuses rather than protects investors. (See also previous coverage.) He advocated for applying the "minimum effective dose of regulation," stating that the agencies must coordinate to ensure the future of finance is built domestically rather than offshore. Mr. Atkins stated that the initiative aims to unleash "creative energies" by implementing clear rules of the road while Congress finalizes market structure legislation.
Chair Selig outlined the practical steps of the partnership. He said that staff from both agencies will work to codify a taxonomy clarifying that digital commodities and tools are not "securities," even when sold as part of an investment contract. He described the initiative as a generational opportunity to draw a "bright jurisdictional line" that resolves long-standing disputes and removes duplicative compliance requirements. Chair Selig declared that the prior administration’s approach effectively ended with the launch of this partnership, pledging to upgrade regulations to accommodate a "Golden Age" of American innovation.
Detailing specific deregulatory actions, Chair Selig said he plans to expand the use of tokenized collateral and create pathways for "true perpetual derivative products" to list onshore. He criticized previous policies for forcing these markets abroad and directed staff to explore a new registration category tailored to retail leveraged crypto trading. Chair Selig committed to establishing safe harbors for non-custodial software developers.
In addition, Mr. Selig announced the immediate withdrawal of the 2024 proposal to ban political and sports event contracts, vowing to defend the CFTC’s exclusive jurisdiction over prediction markets.
Commentary
While most of the remarks are peace and love, there is one aspect that is not, although it does not concern the historic jurisdictional fighting between the SEC and the CFTC. It is CFTC Chair Selig's statement that the CFTC "has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives," by which he means that the CFTC intends to resist any authority of the States over prediction markets, such as markets for sports events.
It is not at all obvious how the fight between the CFTC and the States as to authority over prediction markets will play out. (See, e.g., Massachusetts Court Says Prediction Market Subject to State Gambling Regulation.) The States have very little reason to concede to the CFTC on the issue of exclusive jurisdiction.
Further, this is not inherently a Democrats vs. Republicans issue. The Administration can assume that most Democratic officials will oppose the complete federalization of event contracts, but many Republican officials will as well. While the first set of battles over exclusive federal jurisdiction will be fought in courtrooms, it would not be surprising if ultimately this becomes a question for legislators to decide.
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The SEC and CFTC will host a joint event to discuss regulatory harmonization and efforts to establish the United States as the "crypto capital of the world." The event is scheduled for January 27, 2026.
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SEC Chair Paul S. Atkins unveiled "Project Crypto," an initiative to modernize the agency’s approach to digital assets.
