Regulators Plot Path to Bring Global Crypto Innovation Home

The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have announced plans to explore the introduction of perpetual contracts into the U.S. domestic market as part of a broader effort to harmonize regulatory frameworks and foster innovation. Perpetual contracts, which are derivatives without a defined expiry date, are currently prevalent in offshore crypto markets but face jurisdictional and definitional hurdles in the United States. The agencies are considering concurrent steps to establish these products in compliance with investor and customer-protection standards, potentially allowing them to trade across both SEC- and CFTC-regulated platforms [1]. This initiative aims to capture economic activity currently flowing to foreign platforms and bring U.S. traders access to products with transparent leverage limits and robust risk management [1]. The move aligns with a broader push to reverse the trend of novel financial products being driven overseas due to fragmented oversight and legal uncertainty [1].

As part of this regulatory recalibration, the SEC and CFTC are also exploring the possibility of introducing DeFi Innovation Waivers, which would create safe harbors or exemptions for market participants engaging in peer-to-peer trading of spot crypto assets, including derivatives such as perpetual contracts, over decentralized finance (DeFi) protocols. These innovations exemptions would allow market participants to build commercially viable models while the agencies work on longer-term rulemaking [1]. The agencies have emphasized that the right to self-custody assets is a core American value and that peer-to-peer trading of spot crypto remains permissible under current laws [1]. By leveraging exemptive authorities and fostering innovation exemptions, the agencies aim to support the development of decentralized trading infrastructure while ensuring compliance with investor protection and market integrity standards [1].

The collaborative effort between the SEC and CFTC extends beyond perpetual contracts and DeFi innovation to include a joint roundtable on regulatory harmonization, scheduled for September 29, 2025. This roundtable will explore additional areas of coordination, such as portfolio margining, which could reduce capital inefficiencies by allowing market participants to net exposures across product classes. Current regulatory structures often force participants to post collateral separately at SEC- and CFTC-regulated entities, even when positions hedge each other economically. A unified approach to margining could lower costs, free up balance sheet capacity, and reduce barriers for both institutional and retail participation in cross-market strategies [1]. The agencies are also examining the feasibility of expanding trading hours to better align with the global, always-on economy, particularly for markets such as foreign exchange, gold, and crypto assets [1].

The regulatory developments have also drawn attention from market participants and industry stakeholders. For instance, Coinbase recently launched a hybrid futures product combining exposure to traditional equities and crypto assets, marking a significant step in the integration of these markets. The product, known as the Mag7 + Crypto Equity Index Futures, tracks 10 equally weighted components, including the seven largest U.S. technology companies, Coinbase’s own stock, and BlackRock’s Bitcoin and Ethereum ETFs [2]. This innovation reflects the growing demand for dual exposure to traditional financial instruments and digital assets. The launch builds on Coinbase’s previous expansion into CFTC-regulated perpetual contracts for U.S. customers in July 2024, further signaling the potential for multi-asset derivatives to broaden access and efficiency for investors [2].

The regulatory clarity provided by the CFTC and the SEC is expected to catalyze further innovation and institutional participation in prediction markets and other derivative products. Prediction markets, which have historically demonstrated strong forecasting capabilities for major events, are gaining traction as a legitimate financial instrument. Recent regulatory developments, including the CFTC’s withdrawal of its appeal in the Kalshi election contract case, have paved the way for regulated political markets in the United States. With Polymarket’s reentry into the U.S. market and the influx of specialized capital and trading teams, prediction markets are increasingly viewed as a mainstream financial tool rather than a gambling-related activity. The market’s potential is underscored by growing institutional interest and the inclusion of prediction market data in major news reporting and financial terminals [3].

In conclusion, the SEC and CFTC are taking a proactive approach to regulatory harmonization, focusing on introducing perpetual contracts, facilitating DeFi innovation, and expanding market access. These steps are expected to strengthen U.S. competitiveness in the global financial landscape and support the development of innovative financial products. By fostering a regulatory environment that encourages innovation while maintaining robust investor protections, the agencies aim to ensure that the United States remains at the forefront of financial technology and market evolution [1].

Source:

[1] Joint Statement from the Chairman of the SEC and Acting Chairman of the CFTC (https://www.sec.gov/newsroom/speeches-statements/joint-statement-atkins-pham-090525?utm_medium=email&utm_source=govdelivery)

[2] Coinbase Launches Futures Product Combining Tech Stocks with Crypto Exposure (https://cryptoslate.com/coinbase-launches-futures-product-combining-tech-stocks-with-crypto-exposure/)

[3] A Trillion-Dollar Prediction Market: Why Does Everyone Want In? (https://www.bitget.com/news/detail/12560604948752)