Summary

Situation Overview: On January 29, Commodity Futures Trading Commission Chair Michael Selig made his first public remarks at the CFTC-SEC harmonization event. Among other things, Chairman Selig laid out the agency’s priorities, which included the creation of a federal framework for regulating prediction markets, the establishment of standards governing the use of tokenized assets as collateral instruments, and onshoring the overseas perpetual futures contracts market.

What: The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) held their first joint meeting to discuss harmonization, where CFTC Chairman Michael Selig outlined a forward-looking agenda to modernize derivatives market structure for digital assets. His remarks highlighted regulatory priorities related to the use of tokenized assets as collateral and the development of regulatory pathways to onshore perpetual futures trading, emphasizing the need for clear, workable frameworks that support innovation while maintaining market integrity.

Who: The CFTC, SEC, and participants across the digital asset and prediction markets spaces, including exchanges, trading platforms, intermediaries, clearing organizations, and institutional market participants.

In Depth

Prediction Markets

Chairman Selig stated that event contracts have operated within the CFTC’s regulatory perimeter for more than two decades, rebutting claims that these products are novel. He announced the withdrawal of the 2024 proposed rule that would have prohibited political and sports-related event contracts and the 2025 staff advisory, which, citing on-going litigation, “cautioned registrants about offering access to sports-related event contracts.” He stated that he has directed staff to advance a new event-contracts rulemaking to establish clear standards and committed the agency to defending its exclusive jurisdiction over commodity derivatives in ongoing litigation. He also noted that CFTC staff will be working with the SEC on a joint interpretation of Title VII definitions to reduce regulatory ambiguity.

Use of Tokenized Assets as Collateral

Chairman Selig highlighted the potential for “high-quality tokenized collateral that can move seamlessly across venues” to improve market functioning and noted that on-chain capabilities enable programmatic, real-time monitoring of risk within established guardrails. In doing so, Chairman Selig, that tokenization “can begin to fulfill the original promise of [the] blockchain.” Specifically, he noted that tokenization of collateral would allow for enhanced liquidity and operational resilience in markets, particularly with the market trend toward 24/7 trading.

On-Shoring Perpetual Futures Market

Looking forward, Chairman Selig emphasized the need for “transparent and workable frameworks that [would] allow true perpetual derivative products to be offered in the” United States. While he did not outline specific mechanisms, the remarks suggest an intent to explore regulatory approaches that could reduce the current market bifurcation and allow firms to better align or connect U.S. and non-U.S. liquidity pools, subject to appropriate safeguards and market-integrity protections.

Looking Forward

Chairman Selig’s remarks mark a clear effort by the CFTC to modernize its approach to digital asset markets while reinforcing its regulatory role. By reopening the door to prediction markets, promoting tokenization as a tool for liquidity and risk management, and exploring a path to bring perpetual futures trading onshore, the agency and its new leadership have set forth an ambitious agenda to pursue over the coming years. Market participants will want to follow these developments closely as the CFTC moves from vision to implementation.

Put Patomak’s Expertise to Work

Our team brings extensive regulatory experience and a deep understanding of the intersection between traditional financial institutions and crypto-native platforms. We engage with clients across the continuum of preparedness to undertake novel activities, from partnering on strategy development to implementing safe and sound risk management practices. Our strategy and advisory work include exploring crypto-related business options in the fast-evolving regulatory environment, weighing various regulatory and licensing frameworks, and performing enhanced due diligence for strategic partnerships and acquisitions. Additionally, Patomak has guided firms in building internal capabilities to align with regulatory expectations, from compliance infrastructure to obtaining regulatory charters and licenses and enhancing governance frameworks.

If Patomak can support your firm in navigating the evolving regulatory environment and achieving your strategic and compliance objectives, please reach out to Sudhir Jain at sjain@patomak.com, Sam Canavos at scanavos@patomak.com, or Andrew Grub at agrub@patomak.com.