CFTC Moves Toward New Crypto Rules as Clarity Act Faces Uncertainty

• CFTC Chairman Mike Selig said the agency could move ahead with its own crypto rules if Congress fails to approve the Digital Asset Market Clarity Act.
• At the CFTC’s inaugural Innovation Advisory Committee meeting, Selig said agency staff are already examining how existing regulatory powers could be used to create a framework for digital asset markets.
• Should the Clarity Act fail to advance in the Senate, the CFTC could establish a new regulatory category for crypto markets modeled on its existing designated contract market, or DCM, system.
• Selig said he has directed staff to begin drafting a potential crypto market structure under the agency’s current authority, positioning the CFTC to act quickly if congressional efforts break down.
• The agency is also exploring rules for blockchain developers that could allow protocols to operate legally in the U.S. while providing clearer and more durable protections for developers.
• Selig criticized Democratic lawmakers over the stalled legislation and said the CFTC would continue pursuing President Donald Trump’s goal of creating a long-term regulatory framework for digital assets.
• The CFTC’s initiative comes as the SEC pursues its own crypto reforms. The Securities and Exchange Commission has proposed Regulation Crypto Assets, a framework intended to reduce some regulatory hurdles facing crypto startups and fundraising activities.
• The SEC and CFTC have previously issued joint guidance on the classification of different digital assets and the regulatory regimes that could apply to them, although the guidance does not constitute formal rules.
• SEC Chairman Paul Atkins said during a White House event with Trump on Wednesday that passing the Clarity Act remains the administration’s top crypto priority. He has argued that legislation would provide the industry with greater regulatory certainty.
• Selig also said congressional passage remains the preferred solution, arguing that the Clarity Act would offer stronger protection against future regulators pursuing aggressive enforcement campaigns against crypto companies.
• The meeting repeatedly brought up former SEC Chairman Gary Gensler, whose tenure remains a source of criticism among many crypto industry participants.
• Ripple CEO Brad Garlinghouse said Ripple was heavily affected by the SEC’s enforcement approach during the previous administration. He said the leadership change has significantly altered the regulatory environment.
• Garlinghouse said the uncertainty forced Ripple to build out operations outside the U.S. He argued that blockchain technology could improve the speed, efficiency and accessibility of payments, but said clear regulations are needed for those benefits to be realized.

Senate Decision Looms for Clarity Act

• The Clarity Act remains in the hands of the Senate, where disagreements over several provisions have reduced its prospects. Lawmakers have roughly three weeks left to try to secure the 60 votes required to advance the bill.
• Both Democrats and Republicans have raised concerns about the current draft. A proposed ethics provision from Sens. Ruben Gallego and Thom Tillis remains one of the key sticking points, with the White House’s position on the revised language still uncertain.

CFTC Steps Up Prediction Market Oversight

• Committee members also discussed artificial intelligence and prediction markets during the meeting.
• Selig has become a central figure in the CFTC’s legal challenge to state oversight of prediction markets. He has argued that federal law gives the agency primary jurisdiction over the sector.
• The CFTC has already begun developing prediction market regulations and plans to introduce additional rules.
• Selig said upcoming proposals will update corporate and listing requirements for DCMs offering event contracts while adding measures designed to strengthen consumer protections.