SEC and CFTC Advance Crypto Policy Alignment Efforts

U.S. Commodity Futures Trading Commission (CFTC) Chair Michael S. Selig said on May 12 that the agency is working with the Securities and Exchange Commission (SEC) on regulatory oversight, rulemaking, and enforcement alignment across increasingly connected financial markets. Speaking at the FINRA 2026 Annual Conference in Washington, Selig also highlighted participation in the SEC’s Project Crypto and work on a crypto asset taxonomy aimed at improving regulatory clarity.

As securities and derivatives activity increasingly intersect, regulators face pressure to reduce gaps between their rulebooks. Selig noted the CFTC and SEC have taken several steps toward more unified oversight where their jurisdictions meet. Those efforts include a memorandum of understanding, a joint harmonization initiative, and expected joint requests for comment tied to portfolio margining and swap data reporting.

Regulators are also working to better align CFTC swap reporting requirements with SEC Regulation SBSR, the framework governing security-based swap reporting. Much of the coordination effort spans broader securities and derivatives oversight, although crypto policy initiatives featured prominently in the discussion. Selig detailed:

“In recent months, we’ve entered into a memorandum of understanding, launched a joint harmonization initiative, joined the SEC’s Project Crypto, and advanced a common-sense crypto asset taxonomy to deliver clarity to our nation’s builders and innovators.”

Broader coordination between the agencies also extends to enforcement activity. Selig stated that parallel actions and information sharing have reduced the risk of duplicative or inconsistent outcomes tied to the same underlying conduct. Staff collaboration between the agencies, he added, can streamline compliance efforts and improve regulatory effectiveness across overlapping jurisdictions.

FINRA and NFA Face Growing Cross-Market Oversight Demands

Self-regulatory organizations also need closer alignment as market activity cuts across securities and commodity derivatives, Selig explained. FINRA and the National Futures Association (NFA) increasingly operate in overlapping territory, leaving firms subject to both regulatory structures in ways older frameworks did not always anticipate.

Coordinated examinations, stronger recordkeeping alignment, and shared surveillance practices could help regulators and market participants manage those overlapping obligations more efficiently. Selig framed the effort as cooperation rather than consolidation. He noted that alignment should preserve each organization’s specialization while improving consistency where coordination adds value. Selig described the opportunity, stating:

“We have a real opportunity here for greater collaboration. Not to merge identities or flatten important differences, but to align the organizations in ways that help regulators and market participants.”

Legal and compliance teams could benefit from clearer coordination across agencies and self-regulatory organizations, Selig said. He added that more consistent oversight standards may help firms reduce interpretive risk, lower compliance costs, and allocate resources more effectively in fast-moving financial markets.

Regulatory Milestone

Crypto exchange Crypto.com has announced on May 11 that its United Arab Emirates (UAE) entity, Foris DAX Middle East FZE, has been granted a stored value facilities (SVF) license by the Central Bank of the UAE (CBUAE). This achievement makes Crypto.com the first virtual asset service provider (VASP) in the UAE to secure this specific regulatory status.

In a media statement, the crypto exchange characterized the license as the “missing link” for retail crypto utility in the region. With the SVF authorization, Crypto.com, through its partnership with the Dubai Department of Finance, enables residents to pay government fees using virtual assets.

To ensure financial stability, all settlements will be processed in UAE dirhams or CBUAE-approved dirham-backed stablecoins. The SVF license also clears the path for Crypto.com to integrate crypto payment options with major regional players, including Emirates Airlines and Dubai Duty Free.

“To be the first VASP to receive this license is an incredible achievement and proves our strong commitment to compliance and to advancing the regulated digital assets ecosystem in the UAE,” said Eric Anziani, President and COO of Crypto.com.

Anziani added that the exchange is always developing our presence in the UAE market, which he described as a digital-savvy market.

Mohammed Al Hakim, President and GM for UAE & Bahrain at Crypto.com, added: “We are now able to offer what no other digital asset platform can. It is such an honor to be able to now launch our Dubai Finance partnership and play our role in not only enabling the cashless strategy, but also advancing the future of digital payments in the UAE.”

While both are vital to operating in the UAE, the CBUAE SVF license and the Virtual Assets Regulatory Authority (VARA) license serve distinct regulatory purposes. The VARA license allows a company to operate an exchange, provide brokerage services, or act as a custodian for crypto.

On the other hand, the license that Crypto.com has been granted is specifically designed for facilities where users can “store” value to make future payments for goods and services. It bridges the gap between digital assets and the traditional fiat economy.

Grayscale Frames CLARITY Act as a Crypto Rulebook

Crypto asset manager Grayscale Investments examined the CLARITY Act’s place in Washington’s digital asset policy debate as lawmakers consider how crypto markets should be supervised. Zach Pandl, Grayscale Head of Research, outlined the bill’s role in shaping digital asset regulation on May 7.

Rather than treating the legislation as a narrow policy update, Pandl described CLARITY as a broad market structure bill. He wrote that it would clarify which federal regulator oversees which activities. The proposal would create a framework separating investment contracts from digital commodities. Under that approach, the Securities and Exchange Commission (SEC) would regulate investment contracts, while the Commodity Futures Trading Commission (CFTC) would oversee digital commodities. The Grayscale head of research stated:

“The CLARITY Act matters because for much of the past decade, digital asset regulation has been shaped primarily through enforcement rather than formal rulemaking.”

That enforcement-led approach has shaped Grayscale’s view of the bill’s importance. Pandl wrote that tens of billions of dollars in regulatory fines have been paid. He also said many potential participants have avoided crypto due to fears of regulatory backlash, even as the market expanded into a multi-trillion-dollar ecosystem.

Grayscale Sees Broad Impact Across Market Participants

Developers, investors, exchanges, brokers, custodians, and asset issuers would all be affected, according to Grayscale. Developers would receive clearer guidance for structuring and launching projects. Investors would face less legal uncertainty around ownership and project outlook. Trading venues, brokers, and custodians would gain clearer registration paths.

Asset issuers would also face more defined requirements for token distribution and ongoing compliance. Regulators, in Grayscale’s view, would operate within a clearer framework instead of relying on fragmented enforcement decisions. Pandl presented that structure as central to reducing uncertainty across digital asset markets.

Public pressure has also entered the Senate debate. Stand With Crypto delivered a petition with more than 28,000 signatures to Washington on April 30, urging the Senate Banking Committee to mark up the CLARITY Act. A survey released on May 7 found 52% of voters supported the bill after reviewing a neutral summary, while 70% said the United States should already have passed clear crypto legislation. Committee timing sharpened after the Senate Banking Committee scheduled a May 14 executive session to consider H.R.3633, the Digital Asset Market Clarity Act of 2025.

Pandl wrote:

“The CLARITY Act can catalyze the next phase of innovation and capital formation in digital assets by replacing uncertainty with structure, providing developers, business, and investors with a long-awaited asset and regulatory legal framework.”

Passage remains uncertain, despite renewed movement in Washington. Pandl cited Polymarket odds giving the CLARITY Act a 67% chance of passing in 2026. The bill still must advance through the Senate Banking Committee, pass the full Senate, and win approval from both chambers. Grayscale said meaningful progress before the July recess would be important to maintain momentum.

Senate Banking Takes Up Long-Delayed Crypto Bill

The U.S. Senate Banking Committee scheduled a May 14 executive session to consider H.R.3633, the Digital Asset Market Clarity Act of 2025, after months of delays and negotiations over crypto market oversight. The markup, which marks the Senate’s first formal committee debate over the legislation, is scheduled for 10:30 a.m. in Room 538 of the Dirksen Senate Office Building. Committee materials said live video will be available once proceedings begin.

Industry voices quickly lined up behind the CLARITY Act after the Senate Banking Committee scheduled its May 14 markup, framing the session as a long-awaited opening for federal digital asset rules following months of Capitol Hill negotiations.

That urgency has become a central theme for supporters as the Senate calendar tightens. Blockchain Association said the markup is a critical procedural step because the bill still requires a 60-vote threshold on the Senate floor, reconciliation with the Senate Agriculture Committee’s version, alignment with the House-passed bill, and a presidential signature before becoming law.

CLARITY Act Would Set Rules for Crypto Oversight

The legislation is designed to establish a federal framework for digital asset markets while emphasizing consumer protections, disclosure standards, and regulatory clarity for crypto firms. Supporters of the CLARITY Act said the bill would create clearer lines between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), while setting registration and operational requirements for brokers, dealers, and exchanges serving digital asset customers. The proposal also outlines disclosure obligations for developers and seeks to create legal pathways for digital asset fundraising and trading under federal oversight.

Faryar Shirzad, chief policy officer at Coinbase, tied the markup to the broader push for U.S.-based crypto regulation and said clear market structure rules are needed to protect consumers, support innovation, and keep development from moving offshore. He said on X:

“Big step forward … Clear market structure rules are essential for protecting consumers, supporting innovation, and ensuring this technology develops in the United States rather than offshore.”

Kristin Smith, president of the Solana Policy Institute, which advocates for policies supporting public blockchain networks, also described the notice as a major step for U.S. digital asset policy. Smith said years of advocacy, education, and engagement from builders helped drive the current policy momentum in Washington. She stressed: “The momentum in Washington is real, and so is the opportunity for the U.S. to lead the world in this technology.”

Blockchain Association stated: “The CLARITY Act would resolve something that has lingered for too long: which federal regulator governs digital asset markets, under what rules, and with what protections for investors and consumers.”

ETF Access and SEC Authority Shape Crypto Debate

Securities and Exchange Commission (SEC) Commissioner Hester Peirce on May 8, 2026 framed crypto as part of a broader retail trading shift across exchange-traded funds (ETFs), options, prediction markets, and perpetual futures. Speaking at the 13th Annual Conference on Financial Market Regulation, the commissioner urged regulators to understand changing market activity before deciding whether a response is needed.

Retail activity has remained strong beyond the COVID-19-era trading surge, Peirce said. Investors now trade crypto, gold, silver, perpetual futures, and active ETFs through easier interfaces. She also pointed to AI bots and new technologies that allow market access to expand beyond traditional trading patterns. Many assets are not securities, she said, but are still entering ETF structures. According to Peirce:

“Retail investors like trading all of these asset classes and more, including crypto, gold, silver, and perpetual futures.”

Legal boundaries were central to the commissioner’s message. Peirce said the SEC must work within statutes set by Congress when responding to new products and technologies. Those jurisdictional limits could affect how crypto firms, ETF sponsors, and other market participants seek regulated market access. She also linked those questions to research on market behavior, investor flows, and crypto regulation.

Legal Limits Frame SEC Approach to Crypto Markets

Jurisdiction may limit how far the SEC can go when markets evolve quickly. The commissioner noted that the agency cannot pursue fraud without a securities-law cause of action. She also said the SEC cannot block an ETF if sponsors follow rules, provide proper disclosures, and secure an exchange listing.

Regulatory restraint should not be read as approval, Peirce warned. A product’s launch on SEC-regulated markets does not mean the agency views it as useful or durable. That distinction could matter as crypto-linked products, active ETFs, and other retail-facing instruments continue moving through regulated exchanges and investment products. She also said the SEC does not dictate how often retail investors can trade. The commissioner stated:

“Don’t expect to see a flurry of prescriptive rulemakings.”

Peirce closed by favoring innovation that supports investors, entrepreneurs, and growing companies. She highlighted tools that help people build resilient portfolios, understand investment expenses, and trade with lower costs. The speech did not announce crypto rules, but it reinforced a limited-intervention view relevant to crypto markets, ETF issuers, and platforms serving retail traders.

Iowa Adds Penalties and Oversight for Crypto Kiosks

Iowa Attorney General Brenna Bird announced May 6, 2026, that Governor Kim Reynolds signed SF2296 into law, requiring crypto ATM operators across Iowa to obtain money transmission licenses. The measure places digital financial kiosks under Iowa’s financial regulatory framework while giving state authorities broader powers to pursue violations tied to consumer fraud.

Under the legislation, operators must hold a license before owning, operating, marketing, or facilitating kiosks in Iowa. The bill also defines covered digital financial assets, updates fee disclosure rules, requires location reporting, and classifies violations as unlawful practices under Iowa consumer protection statutes. Attorney General Bird said:

“Finally, we continue to fight to protect Iowans from the scammers who prey on them through crypto ATMs.”

Location reporting is now part of the oversight structure. Kiosk businesses must provide the Iowa Division of Banking with each site they own, operate, or manage. Any change must be reported within 30 calendar days, and the division must publish each list online.

The 2026 licensing measure follows SF449, which Governor Reynolds signed May 19, 2025, and which took effect July 1, 2025. That earlier law targeted crypto ATM scams through transaction limits, refund requirements, fee caps, fraud warnings, customer support rules, and detailed receipt requirements.

Crypto ATM Operators Face Licensing Rules

Enforcement authority rests with the Iowa Attorney General when there is reasonable belief a violation occurred. The office may seek injunctions, compel compliance, and pursue civil penalties of up to $10,000 per violation involving digital financial asset kiosks.

Fee provisions also changed under the new rules. Businesses must disclose the dollar amount of all charges collected in a digital financial asset transaction. The statute also replaces certain exchange-price references with the prevailing market value of the asset at the transaction time. Bird stated:

“Thank you to the legislature for passing these bills with huge bipartisan support and to Governor Reynolds for signing them into law.”

Under SF449, kiosk users cannot transfer or receive more than $1,000 per calendar day through a machine. New consumers are also limited to $10,000 in aggregate transactions during their first 30 days with a specific operator. The law requires operators to issue refunds when users are fraudulently induced into transactions, if victims report the fraud within 90 days and provide required documentation.

Violations are now treated as unlawful practices under Iowa consumer protection provisions. The measure also permits penalties of up to $100,000 for violating injunctions tied to digital financial asset kiosk enforcement actions. The law took effect upon enactment and applies to civil actions commenced on or after that date.

The legislation arrives as multiple states increase scrutiny of crypto ATM activity tied to fraud complaints and financial exploitation cases. During the 2025 House debate, Representative Shannon Lundgren said an Iowa Attorney General investigation found Iowans had lost about $20 million to crypto ATM scams over the prior three years. Iowa’s updated framework increases state supervision of kiosk businesses while applying licensing and reporting standards similar to other money transmission services.

States Say Sports Markets Belong Under Gambling Oversight

A multistate coalition sent an April 30, 2026, letter to Commodity Futures Trading Commission (CFTC) Chairman Michael S. Selig, arguing that sports-related prediction markets should remain under state gambling oversight rather than federal derivatives regulation. The attorneys general said the CFTC lacks exclusive authority over these contracts because they function as wagers, not swaps or other financial instruments.

The letter draws a sharp line between derivatives markets and sports betting. The states said prediction market users can wager on game winners, point spreads, totals, and individual player statistics, closely matching sportsbook activity. The letter states:

“Traditional sports bets and sports-related event contracts offered on designated contract markets (‘DCMs’) have no meaningful differences.”

The coalition argued that a new label does not change the underlying transaction. Bettors still risk money on uncertain sports outcomes for possible payouts.

Federal Court Fights Raise Stakes for Kalshi Contracts

The attorneys general also challenged whether sports contracts qualify as swaps under the Commodity Exchange Act. They said swaps must involve events tied to financial, economic, or commercial consequences. Game results and player statistics, they argued, do not create the kind of measurable economic exposure that derivatives are designed to hedge. Expanding federal derivatives law to cover sports betting, the letter warned, would move a traditional state-regulated activity into CFTC control.

That fight intensified in 2026. A federal court in Tennessee granted Kalshi a preliminary injunction on Feb. 19 after concluding Kalshi was likely to succeed on arguments that the contracts qualify as swaps under the Commodity Exchange Act. On April 6, the Third Circuit affirmed an injunction against New Jersey, holding that federal preemption likely shields Kalshi from state gambling enforcement. The CFTC also joined federal prosecutors in April in a first-of-its-kind prediction market insider trading case involving an Army soldier accused of using nonpublic government information.

The states warned that expanded federal oversight could weaken protections built around gambling risks. Their letter cites licensing rules, minimum age limits, voluntary exclusion programs, suspicious activity reporting, and restrictions meant to protect sports integrity. The attorneys general said the CFTC’s framework is built for financial markets, not gambling harms such as addiction, financial distress, and improper wagering by insiders or sports participants. The letter states:

“States have the expertise, experience, and tools to regulate sports betting as they have for more than a century.”

The letter was signed by attorneys general from Ohio, Nevada, New Jersey, New York, Tennessee, Utah, Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, and Wisconsin. The District of Columbia also joined.

Key Takeaways:

Rejecting the Digital Asset Market Clarity Act over a rule, banks seek to prevent deposit flights. Eleanor Terrett notes big banks aren’t 100% aligned, so they will next lobby the Senate over market risks. On May 4, the American Bankers Association demanded a fix for a loophole enabling future stablecoin yields.

Banks Still Dissatisfied With Clarity Act Stablecoin Yield Compromise

The saga of the Digital Asset Market Clarity Act continues, as banks and crypto companies have not reached a compromise on stablecoin yields, which banks argue could upset the financial system and affect their business model.

Even after it was reported that Senators Thom Tillis and Angela Alsobrooks had reached an agreement on the language defining stablecoin yields, reports indicate that banks are still not entirely in agreement with it.

According to crypto journalist Eleanor Terrett, a divide is forming among banks, with big banks serving customers still not being fully 100% with the draft as redacted. Other financial institutions, including some community banks, would support the current wording, though.

Terret states that the issue is connected to the narrow language dealing with stablecoin rewards, which “still leaves room for crypto firms to work around the restriction.”

On social media, she declared that, in their view, “it’s not a true compromise because it doesn’t eliminate yield completely, it just changes how it’s offered.” Terrett added that banks might take this to other Senate Banking Committee members before markup.

In a joint statement issued on May 4, the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America stressed that the proposed language “falls short” of “prohibiting the payment of yield and interest on stablecoins.”

The statement indicates that the language allows rewards to be calculated by reference to duration, balance, and tenure, which could incentivize idle holding of stablecoins for extended periods, negating the ultimate objective of avoiding deposit flight.

“This is a significant loophole that must be addressed,” the banks concluded.

Key Takeaways:

The DOJ charged Army Sgt. Van Dyke for using classified data to net over $400,000 on Polymarket. Stefan Muehlbauer notes that the case subjects decentralized platforms to the Commodity Exchange Act. A June 8, 2026, hearing will clarify legal standards for prediction market participants and operators.

The End of the ‘Safe Zone’

An expert said recent indictments by the Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) signal an end to the “insider trading safe zone” in prediction markets. Stefan Muehlbauer, head of U.S. government affairs at Certik, argued the case establishes a precedent: Misappropriating nonpublic information — whether military or corporate — now carries the “same legal weight as traditional securities fraud.”

Muehlbauer’s comments came days after the U.S. granted bail to Gannon Ken Van Dyke, who made more than $400,000 in profit by betting on Polymarket that Venezuelan leader Nicolás Maduro would be ousted earlier this year. U.S. authorities assert Van Dyke opened the contract using privileged information in violation of the Commodity Exchange Act, which bars government employees from using nonpublic information in markets under CFTC jurisdiction.

As reported by Bitcoin.com News, Van Dyke’s lawyer has vowed to challenge the indictments. However, Muehlbauer, whose firm recently published a report on the growth of prediction markets, argues that subjecting decentralized platforms to the Commodity Exchange Act significantly boosts regulatory reach.

“By applying the Commodity Exchange Act and wire fraud statutes to these decentralized platforms, federal regulators have categorized event contracts as regulated swaps, effectively extending the fiduciary duty of confidentiality into the borderless crypto ecosystem,” Muehlbauer said.

The application of these laws suggests that prediction markets are being stripped of their “Wild West” reputation and subjected to stringent anti-manipulation rules. In other words, insider information in crypto now carries the same criminal liability as a Wall Street leak.

With the next court hearing in the case involving the Army sergeant set for June 8, operators and participants are watching closely to see how the outcome will impact the industry.

Cracking Down on Wash Trading

Meanwhile, Muehlbauer said the recent DOJ and Securities and Exchange Commission crackdown on market makers like Gotbit and ZM Quant proves that regulators view automated volume inflation as a criminal offense, regardless of a platform’s decentralized nature. To combat this, Muehlbauer urged market makers to follow standards for order book attribution and “proof of humanity,” ensuring that open interest reflects genuine human conviction rather than bot activity designed to simulate liquidity.

To mitigate cost-to-corrupt risks in the multi-billion-dollar prediction markets, the Certik executive called for a shift toward adversarial economic architectures where the cost of an attack is geometrically higher than the potential profit. For vulnerabilities like the oracle manipulation seen in the Mango Markets case, Muehlbauer said this entails replacing spot price oracles with multi-source, time-weighted averages that filter out wash trading and artificial spikes.

Addressing offline risks, such as the physical tampering of weather sensors, requires decentralized redundancy and cryptographic attestation. This ensures no single sensor or news desk can trigger a payout without consensus from independent, verified sources.

Key Takeaways:

Stand With Crypto delivered a petition urging Senate action on the CLARITY Act. Supporters say regulatory delays leave users, developers, and companies in gray areas. Committee markup remains the next step in the group’s legislative pressure campaign.

Crypto Owners Press Senate for CLARITY Act Markup

Stand With Crypto, America’s leading crypto advocacy organization, escalated its Senate pressure campaign on April 30 by taking a petition directly to Washington. The group said more than 28,000 Americans signed the petition this week, asking lawmakers to mark up the CLARITY Act. The delivery turns the group’s regulatory message into a voter-focused demand from crypto owners seeking federal action.

The campaign centers on the Senate Banking Committee, where supporters want the Digital Asset Market Clarity Act (CLARITY Act) scheduled for markup. Stand With Crypto’s message is clear: crypto owners want lawmakers to act, and they are presenting themselves as organized voters. On social media platform X, the group wrote:

“Today, we hand-delivered a message to Washington. Over 28,000 Americans signed our petition this week, asking the Senate one thing: mark up the CLARITY Act. We’re watching. We’re organized. And we’re voting.”

Mason Lynaugh, Executive Director of Stand With Crypto, said it was an honor to bring the community’s voice to Washington. He added that Stand With Crypto is working to empower crypto owners nationwide. The group later said the petition was delivered so signers could be heard, while urging lawmakers to deliver for Americans relying on them.

Senate Banking Committee Faces Crypto Regulation Pressure

Stand With Crypto began as the Stand With Crypto Alliance, launched on Aug. 14, 2023, with Coinbase (Nasdaq: COIN) introducing it as an advocacy organization. Its petition asks Senate Banking Committee members to schedule a markup and advance a clear framework for digital assets. The group argues that delays leave crypto users, developers, and companies operating in gray areas. It says the CLARITY Act would protect consumers from fraud and abuse, support broader technology adoption, and strengthen national security. The petition also ties the bill to U.S. leadership in digital asset technology. Its core case is that developers need certainty, consumers need confidence, and everyday crypto owners benefit from more options and competition.

The CLARITY Act remains central to the group’s legislative push after earlier progress in Congress. The bill passed the House with bipartisan support in 2025, while related market structure legislation moved through the Senate Agriculture Committee in January 2026. The Senate Banking Committee remains the key focus because supporters view markup as the next needed step. The wider debate includes stablecoin rewards, ethics language for government officials, decentralized finance provisions, and oversight lines between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Stand With Crypto’s second message on X said:

It’s time to mark up the CLARITY Act and deliver for the millions of Americans who are relying on their lawmakers to stand with them.”