CFTC gains cryptocurrency regulatory authority! Senate draft grants new powers, but hides a potential conflict of interest involving Trump

The U.S. Senate Agriculture Committee has released a draft legislation on cryptocurrency industry regulation, granting new powers to the CFTC. The draft defines digital commodities as “any interchangeable digital asset that can be directly owned and transferred by individuals without relying on intermediaries,” and establishes a regulatory framework for these assets under the CFTC. However, the draft contains multiple brackets indicating “unresolved issues,” with the most significant obstacles being the CFTC’s resource limitations and conflicts of interest involving the Trump family.

155-Page Draft Redefines CFTC Jurisdiction

(Source: Senate Gov)

This 155-page discussion draft defines digital commodities as “any interchangeable digital asset that can be directly owned and transferred by individuals without relying on intermediaries, recorded on a cryptographically secure public decentralized ledger.” The draft also sets up a regulatory mechanism for these assets under the CFTC. This marks a major shift in the U.S. regulatory framework, as it explicitly clarifies which cryptocurrencies fall under the jurisdiction of the CFTC rather than the SEC at the legislative level.

Given that the Senate Agriculture Committee holds jurisdiction over the CFTC, its version is particularly significant. In July, the House passed its own version of a cryptocurrency industry regulation bill called the Digital Asset Market Clarity Act. Since then, the Senate has been working on drafting its legislation. The Senate Banking Committee, led by Republicans, drafted a bill aiming to delineate SEC and CFTC jurisdiction and introduced the term “auxiliary assets” to clarify which cryptocurrencies are not securities.

The key innovation in the Agriculture Committee’s version is providing a clear legal framework for the CFTC to regulate decentralized exchanges (DEXs), DeFi protocols, and other spot cryptocurrency markets. Previously, the CFTC’s jurisdiction was mainly limited to futures and derivatives markets, with regulatory authority over spot crypto trading remaining contentious. If passed, this draft would enable the CFTC to register and regulate decentralized platforms like Uniswap and dYdX.

Senator Booker stated in a release: “More Americans are participating in new financial markets and payment systems, and Congress must take steps to strengthen and expand the regulatory framework to protect consumers from predatory practices, ensure market safety, and prevent bad actors from exploiting regulatory gaps.” This reflects the Democratic Party’s core concern regarding crypto regulation: fostering innovation while ensuring sufficient consumer protections.

CFTC’s Resource Limitations Are Major Implementation Barriers

Booker expressed that there is still much work to be done, highlighting concerns about the CFTC’s resources. The CFTC currently has only 543 full-time employees, compared to the SEC’s 4,200. Whether the CFTC has enough funding to handle the new scope of digital asset regulation has been raised in congressional hearings. The resource gap is striking: the CFTC’s staff is less than 13% of the SEC’s, yet it is expected to oversee the entire spot crypto market.

In a statement, Booker said: “I am particularly worried about the CFTC’s limited resources, the lack of bipartisan cooperation leading to regulatory arbitrage, and ongoing corruption among public officials, as well as whether Congress has established proper safeguards to prevent these issues.” This suggests that even if the bill passes, the CFTC may struggle to effectively enforce the new regulatory responsibilities due to resource constraints.

A source revealed that the Agriculture Committee’s draft includes a “new funding source” for the CFTC. Part of the draft states that the CFTC should collect fees from unspecified crypto entities. User-funded models are common in U.S. regulation; the SEC, for example, funds some operations through registration fees from listed companies and exchanges. However, for decentralized protocols, how to determine fee payers and standards remains unresolved.

Comparison of CFTC and SEC Resources

CFTC Staff: 543 full-time employees

SEC Staff: 4,200 employees (approximately 7.7 times more)

New Regulatory Scope: Spot crypto markets, DEXs, DeFi protocols

Funding: Draft proposes collecting fees from crypto entities, specifics TBD

This resource disparity raises industry concerns. If the CFTC cannot process registration applications or handle market manipulation complaints promptly due to staffing shortages, it could create regulatory gaps and increase market risks. Some industry voices suggest Congress should significantly increase the CFTC’s budget alongside granting new powers to ensure regulatory capacity matches responsibilities.

Unresolved Issues Marked by Brackets as Negotiation Foci

The statement also notes that many brackets in the draft indicate “unresolved issues.” An insider told The Block that these brackets highlight issues still to be negotiated. Using brackets in legislative drafts is common practice to mark provisions where consensus has not yet been reached, and final language will be determined through subsequent negotiations.

These brackets likely cover several sensitive areas. First, the boundary between CFTC and SEC jurisdiction. While the draft defines digital commodities, the classification of hybrid tokens—those with both commodity and security features—remains unclear. Second, standards for regulating DeFi protocols, especially fully decentralized ones with no identifiable operators, are uncertain under existing laws. Third, the regulation of stablecoins—assets that could be viewed as payment tools, securities, or commodities—remains unresolved.

Booker’s concerns about bipartisan cooperation are also reflected in these brackets. In the current highly polarized political environment, legislation involving expanded regulation faces negotiation hurdles. Republicans generally favor lighter regulation and more market freedom, while Democrats emphasize consumer protections and market stability. These ideological differences could delay key provisions or prevent consensus altogether.

On Monday, Jin Kim, CEO of the Cryptocurrency Innovation Committee, called the draft “a meaningful and positive step.” In a statement, Kim said: “The momentum to develop clear, risk-based rules that promote innovation, protect consumers, and enhance U.S. competitiveness continues to grow.” However, industry optimism must contend with the reality of bracketed unresolved issues: these questions could be significantly altered or removed during negotiations.

Trump Family Conflicts of Interest as a Political Minefield

A major obstacle for Democrats is Donald Trump’s conflicts of interest. Bloomberg estimated in July that the current President has profited approximately $620 million from his family’s crypto projects, including World Liberty Financial’s DeFi and stablecoin initiatives, which list Trump and his three sons as co-founders. The family also holds a 20% stake in the mining company American Bitcoin. Additionally, lawmakers have repeatedly expressed concern over Trump-themed tokens “TRUMP” and “MELANIA” launched just before his inauguration.

The Senate agriculture bill includes provisions addressing conflicts of interest. While details are not yet public, these clauses are expected to aim at preventing public officials from leveraging regulatory authority for personal crypto investments. How to craft effective conflict-of-interest rules without explicitly naming Trump remains a political challenge.

Trump’s crypto empire influences legislation in two ways. On one hand, his support for the industry could motivate Republicans to push pro-industry legislation more aggressively. On the other hand, Democrats may leverage conflicts of interest to oppose or amend the bill, demanding stricter disclosures and restrictions. This political tug-of-war could prolong negotiations or even derail the bill altogether.