Why Close SEC–CFTC Coordination Is Key to Unlocking U.S. Market Innovation

The SEC and CFTC issued a joint statement on Sep. 5 announcing new regulatory harmonization efforts along with a roundtable on Sep. 29 to discuss priorities such as aligning capital and margin frameworks, syncing product definitions, and exploring coordinated innovation exemptions.

This is a watershed moment for cooperation that can have outsized benefits for innovation, efficiency, and investor protection. The question at hand is whether the inherent remit overlap between the SEC and CFTC will remain a blocker to progress, or become a potential unlock for novel products and companies.

Historically, the SEC and CFTC typically find themselves in fierce competition over jurisdictional matters, fighting over regulatory power for different projects like two referees clamoring to officiate the same football game but with different rulebooks. Effective coordination between the SEC and CFTC is essential for building consistent, modern rules that allow innovative products to come to market in the U.S, especially in a space like crypto that criss-crosses many existing jurisdictional lines and rubrics.

The prerequisite for such coordination is simple: The chairs of both agencies must share a vision for forward progress, aligned on the importance of regulatory streamlining, innovation, and competitiveness.

Why Coordination Matters

The SEC and CFTC regulate overlapping parts of the U.S. markets, especially in areas like swaps or equity futures where both agencies have a reasonable and demonstrated interest in regulatory oversight. When the two agencies act in isolation, market participants often must navigate duplicative requirements and lingering jurisdictional uncertainty. Fragmentation raises compliance costs and creates inefficiencies as firms spend time and money navigating regulatory contradictions. That capital should be deployed to create new products that benefit investors and the broader economy, rather than wasted on unclear rules.  Conversely, the benefits are immediate and significant when agencies coordinate. Aligned definitions and consistent compliance expectations reduce the opportunity for regulatory arbitrage. Market participants can operate and build with confidence without dealing with conflicting standards. On the regulators’ side, this level of clarity avoids wasting taxpayer dollars filing amicus briefs against its sister regulator. Joint rulemakings post-Dodd-Frank, cross-border swaps guidance, and data-sharing agreements all show that collaboration is possible, even if it's imperfect. 

Agency coordination and innovation go hand-in-hand. Cutting-edge products, especially those that involve digital assets, straddle the line between securities and derivatives. Without joint oversight, these products risk falling into a gray area that deters development. With coordinated efforts, regulators can keep innovators onshore by establishing clear guardrails that let innovation flourish. 

What’s Possible If the SEC and CFTC Work Together

A coordinated SEC-CFTC agenda could unlock several long-discussed innovations that straddle jurisdictional boundaries. For example:

Equity Perpetuals

Contracts that track the price of equities but roll indefinitely rather than expiring after a set amount of time, as typical futures or options do, which allows for far greater capital efficiency. First seen in crypto, the idea of the perpetual contract can be applied to traditional finance products as well. Today, however, these sit in regulatory limbo. With harmonized rules, investors could access a transparent, well-regulated market for equity exposure in perp form. (The CFTC is already working on the facilitation of crypto perpetuals.)

IPO Pricing Contracts

Prediction markets on whether an IPO will price above or below an expected range. If an investor in the equity of a private company invests at a substantial premium to the stocks of comparable companies that are publicly traded, they may choose to hedge risk (where not prohibited), against an eventual IPO underpricing their current position. In addition, issuers can seek guidance on market pricing through pre-IPO prediction markets or pre-IPO equity perpetuals.

Markets on Shareholder Vote Outcomes / Decision Markets

Prediction markets on corporate governance: “Will XYZ company’s shareholders approve the CEO’s new compensation package?” These could enhance transparency in contested votes. A further extension of this would be the application of futarchy to the decision-making of public companies; the clearing price of a decision market would determine the outcome: the shareholders’ decision in a shareholder vote. Investors typically express opinions on the value of a merger or the potential impact of a board ousting a CEO via buying or selling that company’s stock. Decision markets would price this possible value (or value destruction) into the decision itself.

Markets on Corporate Bond Default / Restructuring Outcomes

Prediction contracts on whether a distressed issuer misses an interest payment, gets downgraded, or restructures, which could serve as a lightweight alternative to Credit Default Swap (CDS) markets, which have many layers of embedded complexity and risk.

Side-by-Side Listings of Securities and Non-Securities

Imagine a trading platform where tokenized equities, crypto commodities, event contracts, and other instruments trade together under a unified compliance framework. Instead of siloed venues, investors could access both types of assets with consistent disclosures and protections. Liquidity pools are deeper, spreads are tighter, and intermediaries face renewed competition. This would likely require a harmonized dual registration framework, assigning each agency responsibilities that match its risk expertise, while ensuring registrants don’t face duplicative requirements. SEC Chair Paul Atkins has discussed this, calling the potential regulations “Reg SuperApp.”‎

Shared Margin Accounts

Today, traders often need to post separate collateral for securities and derivatives positions. Coordination could allow unified margining, freeing up capital and improving liquidity. For example, a trader long equities and short futures could net those exposures in one account, reducing redundant collateral requirements. This also improves firms' recordkeeping and reduces the risk of accidental rehypothecation.

Security-Based Swaps

This market has struggled with inconsistent jurisdictional boundaries. Dating back to Dodd-Frank, the CFTC has jurisdiction over most swaps while the SEC has jurisdiction over security-based swaps, albeit with some involvement from the CFTC. As a result, this asset class is a desert, with just ~$3B in daily volume. A coordinated framework could make products like total return swaps on equities easier to launch and manage, with clear rules for disclosure, reporting, and margin.

Enhanced Data Sharing

If the SEC and CFTC seamlessly exchanged trade and position data, regulators would have a fuller picture of systemic risk. That would make it easier to identify stress across correlated exposures, whether in equities, swaps, or digital assets. This would be a massive improvement from the current muted data-sharing, not to mention interoperability issues of the long-troubled Consolidated Audit Trail and Swap Data Repositories.

Each of these examples is tangible and actionable, even in the short term of the next year. But rapid change is possible only if the two agencies work together under aligned leadership.

The payoff of strong SEC-CFTC coordination is broader than smoother rulemaking. It unlocks economic activity by lowering the cost of compliance and barriers to entry for new market entrants. It increases the pace of technological advancement, as founders are able to focus on building innovative new products, rather than spending time and financial resources trying to resolve which regulator is their primary overseer. It even provides comfort and confidence that the agency will be able to identify the good actors from the bad, giving founders confidence to throw their whole body and soul into their projects. Ultimately, a simplified ruleset and widespread technological creativity bolsters the attractiveness of US markets.

In short, when the agencies coordinate, the President’s agenda for growth and innovation becomes easier to deliver.

Conclusion

The SEC and CFTC will always have some jurisdictional overlap. The choice for us is whether that overlap creates friction or fosters innovation.

For harmonization to succeed, the whole of each agency must coordinate. For that coordination to be real and lasting, the Chairs themselves must be aligned and committed to working together.

For crypto specifically, the stakes are high. Tokenized assets, stablecoins, and crypto trading platforms cut across securities and commodities law. Without coordination, the U.S. risks driving this innovation overseas. With coordination, it can lead.