A look at the increasing complexity of the operating environment for crypto companies in the US, as a regulatory turf war between the SEC and the CFTC escalates
Joel Khalili / Wired :
Context & Ripple Effects
This piece closes a loop that opened years ago, when the WSJ documented how limited both agencies' powers over crypto actually were — an ambiguity regulators patched with ad-hoc moves rather than legislation. The SEC chose enforcement as its instrument: by early 2023 it had issued dozens of enforcement actions against crypto companies, letting it shape the market rule-by-case without a formal framework.
What changed by April 2023 was the counter-move: the CFTC — the smaller futures-focused agency industry figures like FTX's Sam Bankman-Fried had spent 2022 lobbying to be regulated by instead — began contesting that ground directly. The turf war turns each company's product classification into a strategic decision about which regulator it answers to.
First-order effects
- US crypto companies now face overlapping claims on the same products — tokens can be read as securities by the SEC or commodities under CFTC reach — so compliance teams must satisfy two agencies whose definitions conflict.
- The SEC's enforcement-first approach means firms learn their legal exposure case by case, after capital has already been deployed, rather than through published rules they could design against.
Second-order effects
- Industry lobbying consolidates around the CFTC as the preferred regulator, pressuring the SEC either to concede jurisdiction or escalate enforcement to defend its claim — the dynamic this turf war represents.
- Jurisdictional uncertainty raises the cost of operating onshore relative to offshore venues, giving exchanges and issuers a concrete financial reason to structure around US oversight.
Third-order effects
- If neither agency wins cleanly, the likely endpoint is congressional legislation redrawing the securities/commodities boundary — meaning the agencies' rivalry itself becomes the forcing function for a crypto market-structure bill.
- A bifurcated regime risks fragmenting regulated liquidity between SEC-supervised and CFTC-supervised venues, with product design migrating toward whichever classification offers lighter obligations.
The trend: US crypto regulation is being set by inter-agency jurisdiction competition and enforcement precedent rather than by legislation, leaving market structure to be negotiated case by case.