Inside CFTC’s crypto backup plan – What happens if CLARITY Act stalls?
Here's why CFTC and SEC-led rule-making is still risky for the industry
U.S regulators are ready to fast-track crypto rules amid uncertainty around the CLARITY Act.
During a meeting on the 20th of August with industry players, CFTC Chairman Mike Selig took a swipe at Democratic Senators and warned,
If CLARITY continues to stall because of Democratic obstruction, the CFTC will utilize its existing authorities to begin establishing a regime for crypto asset markets. We owe it to the American people to do so.
Selig reiterated that he has instructed CFTC staff to begin exploring rules to codify the agency’s market structure for crypto assets.
If we have to utilize that authority to create rules without the supporting legislation, we’ll do it.
According to him, the move would allow the CFTC to grant current registrants and onchain protocols a Designated Contract Market license. Effectively, the move can allow these platforms to offer leveraged and margin trading in the U.S.
President Donald Trump recently confirmed that Hyperliquid was pursuing this U.S. pathway.
CLARITY Act fallout: CFTC to follow SEC steps
Unsurprisingly, the CFTC threat and planned action mirrored the Securities and Exchange Commission (SEC) recent moves. Notably, the SEC released a guideline for crypto fundraising (via initial coin offerings, ICOs) up to $75M. This was one of the provisions in the CLARITY Act.
For the CFTC, Selig wants control of crypto futures, pre-IPO perps, leveraged trading by onchain protocols, GPU futures, and prediction markets.
Unfortunately, CME is already challenging the CFTC’s approval of crypto perpetual futures for Coinbase and Kalshi in court.
Similarly, the agency’s perceived authority over prediction markets is being challenged by both sports betting firms and state attorneys general. The final verdict may depend on the Supreme Court.
In short, such agency-led guidelines, if not codified by Congress via legislation, can be challenged or reversed. AMBCrypto sees this manoeuvre as a temporary backup plan by the crypto industry if the CLARITY Act stalls.
For his part, White House’s chief crypto advisor, Patrick Witt, supported the regulators’ plans, calling them pro-innovation and growth.
Smart regulators like Mike Selig and SEC’s Paul Atkins understand that protecting consumers and market integrity doesn’t have to mean stifling growth and innovation. Exciting to hear what’s in store at the CFTC and SEC in the coming months.
Commenting on the updates, Coinbase CEO Brian Armstrong said that whichever way, regulatory clarity is coming. The only problem is that the second option is a temporary fix with its own regulatory risks.
Final Summary
- CFTC plans to “codify” crypto market structure rules if Congress stalls the CLARITY Act
- Coinbase CEO Brian Armstrong expects these rules to be released as soon as next month
