'America is now the crypto capital of the world,' CFTC's Selig says as digital asset rules take shape

U.S. Commodity Futures Trading Commission Chair Michael Selig said that "America is now the crypto capital of the world" during a Monday speech at the FIA's annual industry conference, reiterating a series of regulatory initiatives aimed at providing clarity for crypto market participants after years of enforcement-led oversight.

Speaking before an audience of futures industry executives at the Boca Raton Hotel, Selig said the U.S. is "at the beginning of another great wave of innovation, as markets continue to digitize and crypto assets become mainstream." 

The CFTC chair pointed to the adoption of blockchain technologies, crypto assets and smart contracts as forces introducing new methods for trading, clearing, settling and collateralizing commodity price exposure, alongside artificial intelligence systems executing orders "at speeds and volumes far beyond human capacity."

The remarks marked a sharp departure from the approach taken by regulators under the prior administration, which Selig said "weaponized" agencies against innovative industries. He cited the SEC's enforcement-driven oversight under former SEC Chair Gary Gensler, which he said "drove the crypto industry offshore," as well as the previous CFTC's attempt to ban political prediction markets ahead of the 2024 elections.

"This means the CFTC has a generational opportunity to build on its historical role as a forward-looking regulator that applies principles-based oversight," Selig said.

'Project Crypto' and regulatory clarity

Selig said he has partnered with SEC Chair Paul Atkins on the "Project Crypto Initiative," an effort he described as ending "the days of CFTC-SEC infighting." The initiative aims to increase coordination between the two agencies and deliver clarity for market participants through a joint framework.

The initiative is expected to advance a "clear crypto asset taxonomy," according to Selig, allowing market participants to understand whether their products fall within CFTC jurisdiction, SEC jurisdiction, both or neither. He described such harmonization as "integral to opening up new avenues for entrepreneurs."

Selig also outlined plans to issue specific guidance for software developers.

"I have directed staff to provide guidance concerning the application of the CFTC's intermediary registration requirements to developers of non-custodial software systems, like digital wallets and decentralized finance applications," Selig stated.

The move addresses a long-standing question about whether software providers trigger the agency's registration requirements, according to Selig.

On retail trading, Selig said CFTC staff is "giving considerable thought" to new rules clarifying when leveraged, margined or financed retail commodity transactions in crypto may be offered off-exchange under an "actual delivery" exception. The agency is also considering establishing "purpose-fit standards for margined spot trading on exchanges" and examining the classification of true crypto-perpetuals.

Selig also acknowledged the political support behind the agency's pivot, saying President Trump "deserves all the credit for pushing the U.S. marketplace to finally fully commit to a financial future with crypto playing a central role."

Prediction markets 

On prediction markets, Selig said the agency is moving to assert its jurisdiction after what he characterized as neglect by previous administrations. He noted the CFTC first recognized the University of Iowa's political prediction markets through a no-action letter in 1992, later expanded into formal policy under the Clinton administration.

Selig said he has directed staff to draft guidance addressing how event contracts may be listed and traded in line with the CFTC's statutory framework. He also announced an advanced notice of proposed rulemaking to solicit feedback on issues affecting the market.

Meanwhile, the CFTC filed an amicus brief a few weeks ago in a state-led lawsuit against one of its registrants, Selig said, adding that the agency will "continue to assess litigation strategies" to defend its exclusive jurisdiction over commodity derivatives against challenges from states.

"It's my hope that, by marrying prediction markets with blockchains, we can see how decentralized trust and truth can act as a check on disinformation, outright falsity and the threat of debanking," Selig said.