SEC vs CFTC: Who Really Controls Crypto Regulation in the U.S.?

The U.S. crypto market is stuck in a regulatory tug-of-war between two federal agencies that can’t agree on who’s in charge. The SEC says most cryptocurrencies are securities. The CFTC says they’re commodities. And businesses, investors, and developers are caught in the middle.

How It All Started

The split began in 2015, when the CFTC ruled that Bitcoin was a commodity under the Commodity Exchange Act. That meant they had authority over futures, options, and fraud in crypto markets. Just months later, the SEC started applying the 1946 Howey Test - a legal standard from a citrus grove case - to decide if a digital asset was a security. The test asks: Is someone investing money in a project expecting profits from others’ work? If yes, it’s a security. That’s where the fight started.

By 2018, a federal court backed the CFTC’s position in CFTC v. McDonnell, calling Bitcoin and Ethereum "goods" traded like commodities. But the SEC didn’t back down. They kept filing lawsuits against ICOs, exchanges, and token issuers, claiming their tokens were unregistered securities. The problem? There’s no clear line. Some tokens look like stocks. Others behave like digital gold. And regulators aren’t telling you which is which until after you get sued.

What Each Agency Actually Controls

The SEC’s power comes from the Securities Act of 1933 and the Exchange Act of 1934. They regulate stock exchanges, brokers, mutual funds, and anything that looks like an investment contract. That’s why they went after Coinbase in 2023, saying the exchange was operating as an unregistered securities exchange by listing tokens like Solana and Cardano. The SEC argues these tokens are sold with promises of future value - classic security behavior.

The CFTC, on the other hand, regulates derivatives markets. They oversee futures, swaps, and options. They don’t police every crypto trade - only those involving contracts that bet on price changes. But they also have anti-fraud powers over spot markets for commodities. That’s why they went after the founders of Terraform Labs and BitMEX for market manipulation. Their jurisdiction is narrower, but they’ve been more open to innovation. They approved Bitcoin futures in 2017. They approved Ether futures in 2023. And in April 2025, they approved spot Ethereum ETFs - something the SEC still hasn’t done.

Here’s the catch: the SEC doesn’t regulate spot markets for commodities. The CFTC doesn’t regulate securities. But crypto assets? They’re both. That’s why you get two agencies chasing the same company with different rules.

Who’s Winning? The Enforcement Numbers Tell the Story

Between 2017 and 2022, the SEC filed 32 enforcement actions against crypto firms. The CFTC filed 15. In 2023 alone, the SEC launched 23 cases - more than any year before. Most were for unregistered securities offerings or unregistered exchanges. The CFTC’s cases were mostly about fraud and manipulation in derivatives trading.

But enforcement doesn’t mean clarity. It means fear. Companies don’t know if they’re breaking the law until the SEC shows up with a subpoena. That’s why 81% of U.S. crypto firms delayed product launches in 2023, according to the Blockchain Association. The average cost to determine if a token is a security? $185,000 and six months of legal work. That’s not innovation - that’s insurance.

Even big players are stuck. Kraken and Gemini now follow both SEC and CFTC rules for every token they list. That doubles their compliance costs. One exchange executive told me they spend $2.7 million a year just to avoid getting sued - and half of that is because they’re trying to satisfy two conflicting regulators.

The Big Shift in Early 2025

Everything changed in January 2025. Judge Katherine Polk Failla, who had previously ruled the SEC had a strong case against Coinbase, suddenly allowed Coinbase to appeal the case. Then, on February 27, the SEC dropped the lawsuit entirely. No explanation. No admission of error. Just a joint filing to dismiss.

It wasn’t random. Gary Gensler, the SEC chair who had been the most aggressive regulator in crypto history, was quietly sidelined. New leadership was taking over. And the CFTC? They moved fast. Within weeks, they approved the first spot Ethereum ETFs - a move the SEC had blocked for months. Meanwhile, the SEC delayed decisions on Bitcoin ETFs until August 2025.

This wasn’t just a legal twist. It was a signal. The SEC might be retreating from its all-out war on crypto. Or at least, they’re realizing that suing every project isn’t working. The market is moving. Institutional money is waiting. And the CFTC is offering a path forward - if you’re a commodity, not a security.

What’s Coming Next? The CLARITY Act and the Senate’s Response

In April 2024, the House passed the CLARITY Act - a bill that would finally draw a line. Under this law:

• Digital assets that are decentralized, mature, and don’t give ownership rights (like Bitcoin and Ether) become "digital commodities" - regulated by the CFTC.
• Everything else - tokens sold with promises of profit, especially new ones - stay under the SEC’s control as securities.

The Senate hasn’t passed anything yet. But their draft proposal, released in March 2024, suggests a similar split. The big difference? The Senate wants a formal "digital asset determination" process before any token launches. That means projects would have to get approval from either the SEC or CFTC before going live.

Both sides are working on legislation. But the CFTC, backed by the Senate Agriculture Committee, has more political momentum. The SEC, tied to the Senate Banking Committee, is losing ground. Experts at the Bipartisan Policy Center give a 68% chance that a compromise bill passes by the end of 2025.

Why This Matters for You

If you’re an investor: You’re not just betting on price. You’re betting on regulation. Bitcoin and Ether are safer bets now because they’re likely to stay under CFTC oversight. Newer tokens? They’re still in the SEC’s crosshairs.

If you’re a developer: Don’t launch a token without legal advice. The difference between a commodity and a security isn’t about technology - it’s about how you market it. If you say "investors will profit," you’re probably a security. If you say "this is digital cash," you’re probably a commodity.

If you’re a business: You can’t afford to wait. The cost of compliance is rising. The risk of enforcement is real. And the U.S. is losing ground. While the EU launched MiCA - a single, clear crypto rulebook - in June 2024, the U.S. is still arguing over who gets to write the rules. The Boston Consulting Group says U.S. crypto firms captured just 14% of global crypto volume in 2024 - down from 32% in 2020. That’s not because the tech is worse. It’s because the rules are a mess.

The Global Picture

The U.S. isn’t the only player. The EU has MiCA. Singapore has clear licensing. Japan has a crypto licensing system. Even Switzerland has a crypto-friendly legal framework. But the U.S. - the birthplace of Bitcoin and home to most of the world’s top crypto firms - is paralyzed by internal conflict.

And it’s costing billions. The Center for Strategic and International Studies estimates that if the U.S. doesn’t fix this by 2027, it could lose $500 billion in potential investment. That’s not just about Coinbase or Binance. It’s about venture capital, pension funds, banks, and everyday people who want to invest in the next generation of finance.

Right now, the CFTC is offering stability. The SEC is offering uncertainty. The market is voting with its feet - and it’s choosing clarity over control.

What You Should Do Now

If you’re holding crypto: Don’t panic. Bitcoin and Ethereum are safe. Avoid tokens that promise returns, staking rewards, or profit-sharing - those are the ones the SEC is targeting.

If you’re building a crypto project: Get legal advice early. Don’t wait for a lawsuit. Use the CLARITY Act criteria as a guide: Is it decentralized? Is it used as a medium of exchange? Does it give ownership rights? If yes to the first two, it’s likely a commodity.

If you’re an investor or trader: Stick to platforms that clearly label which assets are commodities and which are securities. Avoid exchanges that list hundreds of unknown tokens. The safer ones are already adapting to the coming rules.

The war between the SEC and CFTC isn’t over. But the tide is turning. Clarity is coming. And the winners won’t be the ones who fought the hardest - they’ll be the ones who waited for the rules to be written.