CFTC Chief Orders Staff to Prepare Crypto Rules if Clarity Act Stalls

• Commodity Futures Trading Commission Chairman Mike Selig told the agency’s first Innovation Advisory Committee meeting that the CFTC is prepared to act if Congress fails to pass comprehensive crypto legislation.
• Selig said the derivatives regulator is already considering alternative rules for digital assets if the U.S. Senate does not approve the Digital Asset Market Clarity Act.
• He said a failure to advance the bill would prompt the CFTC to explore creating a regulatory framework for crypto markets similar to the agency’s existing designation for designated contract markets, or DCMs. Selig said he has instructed CFTC staff to begin work on the initiative.
• Selig also said the agency could use its current legal authority to establish a framework for crypto asset markets if the Clarity Act remains stalled. He directly criticized Democratic lawmakers for blocking progress and said the CFTC would follow President Donald Trump’s push for a long-term digital asset market structure.
• The CFTC chairman said staff had been tasked with examining rules that could establish a crypto market structure under the agency’s existing powers. He added that the agency wants to move quickly and is also working with developers on rules that would allow blockchain protocols to operate legally and compliantly in the U.S. while providing lasting protections for developers.
• The Securities and Exchange Commission, the CFTC’s sister agency, proposed its first major crypto-focused rule this week, Regulation Crypto Assets, which would reduce some regulatory barriers for crypto startups and fundraising. The two agencies have also previously released a joint framework categorizing different types of digital assets and outlining which regulatory regimes could apply, although that guidance was not adopted as a formal rule.
• SEC Chairman Paul Atkins emphasized at a White House event with Trump on Wednesday that Congress passing the Clarity Act remains the top priority. He has repeatedly argued that legislation would provide a more permanent foundation for U.S. crypto policy.
• Selig echoed that position Thursday, calling passage of the Clarity Act the strongest way to prevent future regulators from pursuing aggressive enforcement strategies against crypto companies.
• The meeting also repeatedly referenced former SEC Chairman Gary Gensler, whom many crypto industry participants blame for the regulatory crackdown that characterized previous years.
• Ripple CEO Brad Garlinghouse said his company was heavily targeted by the SEC under the previous administration. He argued that the change in leadership has created a significantly different environment for the crypto industry.
• Garlinghouse said the previous regulatory climate forced Ripple to expand its operations outside the U.S. He added that blockchain technology could make payments faster, cheaper and more accessible, but clear rules are needed for that potential to be realized responsibly.
• The Clarity Act’s future remains dependent on the Senate. Its chances have weakened as lawmakers have struggled to resolve outstanding disagreements, leaving the chamber with a final three-week window to secure the 60 votes required for passage.
• Both Democrats and Republicans have raised concerns about the current version of the bill, with a key unresolved issue involving whether the White House will support an updated ethics provision proposed by Sens. Ruben Gallego and Thom Tillis.

CFTC Also Targets Prediction Markets and AI

• The Innovation Advisory Committee also discussed artificial intelligence and prediction markets during Thursday’s meeting.
• Selig has drawn increasing attention for challenging state-level efforts to regulate prediction markets. The CFTC chairman said the agency is defending what it considers its exclusive federal jurisdiction in a number of court cases.
• The agency has already begun developing rules for the prediction market sector and plans to introduce additional proposals, Selig said.
• Future rules could update the corporate and listing requirements for DCMs that offer event contracts while adding new consumer protection standards.

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