Rewriting the Rules: The SEC & CFTC on Crypto, IPOs & the Future of American Markets

For three decades, the SEC and CFTC operated as rival fortresses with a demilitarized zone between them. The casualties were innovation: single stock futures, portfolio margining, blockchain products, and prediction markets all withered under crossfire from competing regulators. Chairman Atkins described the no man's land as «littered with the bodies of would-be products» that never reached market because issuers couldn't determine jurisdiction.

Both agencies are now negotiating a memorandum of understanding to share information, coordinate policy, and establish substituted compliance regimes. The goal is a single primary regulator per product, eliminating duplicative registration and conflicting rule sets. For cross-jurisdictional offerings — prediction markets involving securities, blockchain networks with both commodity and security tokens — the agencies will set consistent standards so developers don't need separate blockchains for each asset class.

Chairman Atkins envisions a «super app» future: blurred regulatory lines, coordinated exemptions, and frictionless treatment for dually registered firms. Both chairs emphasized this requires not just top-level alignment but cultural change at the staff level, where much of the historical sniping originated.

The accredited investor standard dates to 1940 and turns almost exclusively on wealth: a million dollars in assets or $200,000 in annual income. This locks 95% of Americans out of private markets where value is created — venture capital, private equity, pre-IPO opportunities in companies like Uber or Airbnb. Chairman Atkins recalled a comment letter from his prior tenure: «Today I can invest in a hedge fund. Tomorrow, once you raise the threshold, I cannot. What changed?»

The statute actually includes the word «knowledge,» not just net worth. Both chairs support a knowledge-based test analogous to a driver's license: pass an exam, demonstrate sophistication, gain access. A finance professor earning $100,000 would qualify; an heiress who inherited $10 million but knows nothing about markets would not — unless she hires advisors, who themselves may be «dummies.» The SEC will propose rule changes this year, potentially recognizing CPA or CFA credentials or creating a new certification.

Opening private markets also means reconsidering fund formation limits. Venture funds are capped at 100 investors under the Investment Company Act of 1940. Jason Calacanis noted he had over $100 million in demand from accredited investors for his last fund but could only accept $10 million due to the cap. Lifting or modernizing these statutory limits — potentially with percentage-of-income or net-worth caps per investor — would democratize venture capital and increase startup funding.

Prediction markets have existed since the 1990s, starting with the Iowa Electronic Markets for election forecasting. They are not unregulated gambling: the CFTC requires exchanges to certify that each contract is not readily susceptible to manipulation or insider trading. Contracts on events like «what color Gatorade gets dumped on the coach» raise obvious manipulation risk if team insiders can trade. Exchanges must police this as self-regulatory organizations, and the CFTC surveils for fraud.

Insider trading rules apply in commodities markets just as in securities. Kalshi recently brought enforcement actions against participants who traded on non-public information — one involving a Mr. Beast YouTube video release, where an employee exploited insider knowledge. The CFTC has a duty-of-care standard similar to the SEC's, and violators face consequences. Chairman Selig emphasized that markets are «truth machines» that surfaced accurate information during the 2024 election when polls were manipulated, but the prior administration tried to ban them. Allowing prediction markets to flourish offshore in Russia or elsewhere would turn them into disinformation vectors.

Gray areas remain: is a contract on whether a dictator is deposed versus executed manipulable? Exchanges are learning to craft fungible, standardized contracts with integrity. The agencies want to foster innovation and transparency without allowing markets to become tools for fraud or foreign influence.