SEC and CFTC Push for Regulatory Clarity on DeFi and On-Chain Finance: A New Era of Regulatory Harmonization

In a landmark development for the cryptocurrency and decentralized finance (DeFi) sectors, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have issued a joint statement signaling a dramatic shift toward regulatory collaboration and innovation-friendly policies. The work of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) has never been more intertwined—and the wave of innovation before us has never been more dependent on the depth of our cooperation.

Joint statement from @SECPaulSAtkins and @CFTC Acting Chairman Caroline Pham (@CFTCpham):

The work of the SEC and the CFTC has never been more intertwined—and the wave of innovation before us never more dependent on the depth of our cooperation.

Thread 🧵⬇️

— U.S. Securities and Exchange Commission (@SECGov) September 5, 2025

The September 5, 2025, joint statement, signed by SEC Chairman Paul S. Atkins and CFTC Acting Chairman Caroline D. Pham, marks what the regulators describe as "a new day at the SEC and the CFTC, and today we begin a long-awaited journey to provide markets the clarity they deserve."

The End of Regulatory Fragmentation

For years, the cryptocurrency industry has grappled with regulatory uncertainty stemming from the overlapping jurisdictions of the SEC and CFTC. The SEC and CFTC must coordinate to ensure there is not a regulatory "no man's land" due to inaction by one or both agencies. Failure to coordinate and the resulting regulatory uncertainty have chilled productive economic activity even when the products would otherwise be allowable under federal law.

This regulatory fragmentation has had real economic consequences. The United States has long been the home of financial innovation, but recently, novel products have been driven overseas by fragmented oversight and legal uncertainty. The joint statement represents a clear acknowledgment of this problem and a commitment to reversing the trend.

The agencies explicitly state their intention to move beyond the current paradigm, declaring that "That chapter belongs to history." This represents a fundamental philosophical shift from previous approaches that often created uncertainty rather than clarity for market participants.

Innovation Exemptions: A Pathway for DeFi Development

Perhaps the most significant aspect of the joint statement is the agencies' commitment to considering "innovation exemptions" for DeFi protocols. Both agencies are prepared to consider "innovation exemptions" to create safe harbors or exemptions that allow market participants to engage in peer-to-peer trading of spot, leveraged, margined, or other transactions in spot crypto assets, including derivatives such as perpetual contracts, over DeFi protocols.

These innovation exemptions would serve as regulatory safe harbors, allowing DeFi platforms to operate while regulators develop longer-term frameworks. These safe harbors and exemptions would allow market participants to build commercially viable models while the agencies advance longer-term rulemaking.

The statement emphasizes a core American principle underlying this approach: "The right to self-custody one's assets is a core American value." This recognition of self-custody rights signals a regulatory framework that respects the fundamental principles underlying blockchain technology and cryptocurrency adoption.

Key Areas of Regulatory Coordination

The joint statement outlines several specific areas where the agencies plan to harmonize their approaches:

24/7 Trading Markets

For on-chain finance to scale, the SEC and the CFTC should collaborate to consider the possibility of further expanding trading hours, where appropriate. The agencies acknowledge that Certain markets, including foreign exchange, gold, and crypto assets, already trade continuously. Expanding trading hours could better align U.S. markets with the global, always-on nature of cryptocurrency markets.

Event Contracts and Prediction Markets

Prediction markets, while they have existed around the world for decades, are undergoing rapid growth with growing demand from both market operators and the public. The agencies plan to work together to provide clarity for prediction market operators, including those offering contracts based on securities.

Perpetual Contracts

Perpetual contracts, or derivatives without a defined expiry date, are common in offshore crypto markets. Jurisdictional and definitional constraints have limited their use in the United States. The agencies propose taking concurrent steps to onshore perpetual contracts that meet investor protection standards, potentially allowing these products to trade across both SEC- and CFTC-regulated platforms.

Portfolio Margining

A coordinated SEC-CFTC framework for portfolio margining could potentially reduce capital inefficiencies by recognizing offsetting positions across product classes. Currently, unharmonized requirements often force market participants to post collateral separately at different types of regulated entities, even when their positions economically hedge each other.

The September 29 Roundtable: A Forum for Industry Input

Today, we are announcing a joint SEC-CFTC roundtable on regulatory harmonization, which will be held on September 29, 2025. This roundtable will serve as a crucial forum for industry participants to engage with regulators on the implementation of these harmonization efforts.

The roundtable represents a significant departure from previous regulatory approaches, emphasizing collaboration and industry input rather than top-down rulemaking. The SEC and CFTC will co-host the roundtable from 1 p.m. to 5 p.m.

Building on Previous Coordination Efforts

The joint statement builds on earlier collaborative work between the agencies. Tuesday's joint staff statement on spot crypto asset products is only a first step. This refers to Project Crypto-Crypto Sprint SEC-CFTC Joint Staff Statement, September 2, 2025, which preceded the broader policy statement.

The agencies outline specific areas for continued harmonization: To the extent possible and appropriate in the public interest under existing statutes, our respective agencies should consider harmonizing product and venue definitions; streamlining reporting and data standards; aligning capital and margin frameworks; and standing up coordinated innovation exemptions using each agency's existing exemptive authority.

Implications for U.S. Market Competitiveness

The regulatory harmonization effort explicitly aims to restore U.S. competitiveness in digital asset markets. By harmonizing our regulatory frameworks, leveraging exemptive authorities, and collaborating on innovative products and trading platforms, the two agencies could unlock new opportunities for market participants, foster innovation, and solidify the United States as the global leader in crypto and blockchain technology.

This competitive focus reflects growing recognition that regulatory clarity is essential for the United States to maintain its position as a global financial leader in the digital age. By working in lockstep, our two agencies can harness our nation's unique regulatory structure into a source of strength for market participants, investors, and all Americans.

Self-Custody and Peer-to-Peer Trading

The statement makes clear that the agencies recognize legitimate pathways for peer-to-peer trading and self-custody of digital assets. While market participants have paths under current law to trade spot crypto on federally regulated venues, the path remains open for peer-to-peer spot crypto trading as well.

This recognition is particularly significant for DeFi protocols, which typically operate on a peer-to-peer basis without traditional intermediaries. The agencies actively encourage market participants to engage with their staff: "We encourage market participants to meet with our respective staff as entrepreneurs in onshore trading activity and innovate."

Industry Response and Market Impact

The regulatory alignment also extends to DeFi platforms, where the SEC and CFTC are exploring "innovation exemptions" to facilitate peer-to-peer trading of spot crypto assets and derivatives over decentralized protocols. These exemptions could create safe harbors for developers while providing the regulatory certainty needed for institutional adoption and investment.

Both have reaffirmed that they are prepared to consider "innovation exemptions" to create safe harbors or exemptions that allow market participants to engage in peer-to-peer trading of spot, leveraged, margin, or other transactions in spot crypto assets. This includes derivatives such as perpetual contracts, which have been largely absent from U.S. markets.

Looking Forward: A New Chapter for Financial Innovation

The joint statement concludes with an ambitious vision for American leadership in financial technology. Building on the PWG Report's recommendations, we can work to create a regulatory environment that allows American businesses to flourish, innovate, and lead in global markets. Working together, we can ensure that the next chapter of financial innovation is written right here in America, and that the United States remains the premier place in the world to start a business, develop breakthrough technologies, and participate in capital markets.

This coordinated approach represents a fundamental shift in how U.S. regulators approach emerging financial technologies. Rather than viewing innovation as a challenge to be contained, the agencies are positioning themselves as facilitators of responsible innovation within appropriate guardrails.

Conclusion: A Watershed Moment for Crypto Regulation

The September 5 joint statement represents more than just regulatory coordination—it signals a fundamental reimagining of how the United States approaches financial innovation in the digital age. By committing to innovation exemptions, regulatory harmonization, and explicit recognition of self-custody rights, the SEC and CFTC are laying the groundwork for a regulatory framework that could restore U.S. leadership in blockchain technology and decentralized finance.

The upcoming September 29 roundtable will be crucial for translating these policy commitments into practical regulatory frameworks. For an industry that has long sought regulatory clarity, this joint statement offers the most promising pathway forward in years, potentially ending the era of regulatory fragmentation that has driven innovation overseas and opening a new chapter of American leadership in digital finance.

They want to reduce regulatory gaps, expand trading hours, and use innovation exemptions to keep US markets competitive. If successfully implemented, these initiatives could fundamentally transform the landscape for cryptocurrency and DeFi development in the United States, making it once again the preferred destination for financial innovation.