Crypto Regulation Shifts Toward CFTC Oversight

• U.S. lawmakers are advancing proposals that would expand the CFTC’s authority over crypto markets.
• The shift would reduce the SEC’s role in spot crypto oversight, particularly for non-security tokens.
• DeFi protocols and altcoin issuers could face a clearer, commodity-style regulatory framework.

A long-running regulatory divide in Washington may be entering a decisive phase. U.S. lawmakers are increasingly backing proposals that would place a larger share of crypto market oversight under the Commodity Futures Trading Commission, marking a potential shift away from the enforcement-led approach associated with the Securities and Exchange Commission.

The move, informally dubbed by industry observers as a “regulator flip,” reflects growing political momentum to classify a significant portion of digital assets as commodities rather than securities. If enacted, the change could reshape how crypto trading venues, decentralized finance (DeFi) protocols, and altcoin markets operate in the U.S., with implications for compliance costs, product design, and institutional participation.

A Regulatory Divide Comes to a Head

For years, U.S. crypto oversight has been split between the SEC and the CFTC, with neither agency granted comprehensive authority over spot crypto markets. The SEC has argued that most tokens fall under securities law, pursuing regulation primarily through enforcement actions. The CFTC, by contrast, has historically overseen derivatives markets and has taken a lighter-touch approach, emphasizing market integrity and fraud prevention.

This divide has created uncertainty for crypto firms, particularly those operating DeFi protocols or issuing tokens without traditional equity-like features. Legal ambiguity has also been cited by banks and asset managers as a barrier to deeper participation in U.S.-based crypto markets.

Recent legislative efforts aim to resolve that uncertainty by drawing clearer lines between securities and commodities in the digital asset space.

Legislative Momentum Toward the CFTC

In the House of Representatives, lawmakers have advanced the Financial Innovation and Technology for the 21st Century Act, commonly known as FIT21. The bill proposes granting the CFTC primary oversight of spot markets for digital commodities, while limiting the SEC’s jurisdiction to tokens that explicitly meet securities criteria.

Under the proposal, crypto trading platforms listing commodity tokens would register with the CFTC, adhere to disclosure and market conduct standards, and face ongoing supervision rather than case-by-case enforcement. Supporters argue this framework aligns more closely with how most crypto assets function in practice.

The bill has passed the House but faces an uncertain path in the Senate, where lawmakers remain divided over consumer protection, systemic risk, and the role of decentralized protocols.

Implications for DeFi and Altcoins

If enacted, a CFTC-led regime could significantly affect  DeFi  projects and altcoin markets. Many DeFi protocols facilitate trading, lending, or derivatives linked to tokens that do not convey ownership or profit claims, characteristics that fit more naturally within a commodity framework.

A clearer classification could reduce legal risk for developers and users, particularly if compliance focuses on platform-level standards rather than the underlying code. Altcoin issuers may also benefit from more predictable listing rules, potentially lowering barriers to exchange access.

However, the shift would not eliminate regulatory scrutiny. The CFTC has signaled it would expect robust anti-fraud measures, transparency around token economics, and safeguards against market manipulation.

Market and Industry Impact

So far, markets have shown limited immediate reaction, reflecting uncertainty over whether the proposed changes will become law. Institutional participants have largely taken a wait-and-see approach, with many emphasizing that clarity, rather than regulatory leniency, is the primary requirement for increased exposure.

Industry groups have welcomed the prospect of a unified framework but caution that implementation details will matter. Questions remain around how decentralized protocols would register, how cross-border platforms would be treated, and whether state-level regulators would align with a federal regime.

What Happens Next

Attention now turns to the Senate, where lawmakers are expected to debate crypto market structure alongside broader financial reform priorities. Amendments could narrow or expand the CFTC’s role, and timelines remain uncertain, particularly in an election year.

Regulators are also preparing for multiple outcomes. Both the SEC and CFTC have continued to assert their existing authorities, signaling that enforcement activity will persist until Congress provides explicit direction.

Conclusion

The push to expand CFTC oversight marks a potential inflection point for U.S. crypto regulation. While not yet settled law, the effort reflects a growing consensus that digital asset markets require a tailored framework rather than reliance on legacy securities rules. Whether this shift ultimately brings crypto closer to mainstream finance will depend less on the regulator in charge and more on how clearly and consistently the new rules are applied.