The regulatory oversight of digital assets in the United States is divided between two federal agencies: the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Understanding which agency has authority over which crypto assets is essential for anyone participating in the market.
In broad terms, the SEC oversees crypto assets that function like investments in a company. If a digital token is offered to investors with the expectation of profit derived from the efforts of others, it likely falls under SEC jurisdiction as a security. The agency’s Howey Test, derived from a 1946 Supreme Court case, remains the primary framework for making this determination.
The CFTC, by contrast, handles assets that behave like commodities. Bitcoin and Ethereum have both been classified as commodities by the CFTC. The agency also oversees futures and derivatives contracts tied to digital assets, including the Bitcoin and Ethereum futures products traded on regulated exchanges like the Chicago Mercantile Exchange.
This dual-regulator structure creates complexities. Some tokens may start as securities during an initial offering and later become commodities once a network is sufficiently decentralized. Determining exactly when this transition occurs has been a source of legal uncertainty for projects and exchanges alike.
The SEC and CFTC have pursued different enforcement strategies. The SEC has brought major cases against exchanges and projects it alleges offered unregistered securities, while the CFTC has focused on fraud and manipulation in derivatives markets and spot commodity crypto trading. The two agencies have also clashed over which should have primary authority over the crypto spot market, with both claiming jurisdiction in different contexts.
Legislative efforts such as the Clarity Act aim to resolve this jurisdictional ambiguity by defining clear regulatory boundaries. The proposed bill would give the CFTC greater authority over digital commodities while clarifying when the SEC’s securities framework applies. Until such legislation passes, the current dual-agency approach remains in place, creating both challenges and opportunities for market participants navigating the U.S. regulatory landscape.
This article was adapted from The Block. Read the original here.
