SEC vs. CFTC: Who Regulates Cryptocurrency??

SEC vs. CFTC: Who Regulates Cryptocurrency?

The SEC and the CFTC are separate federal agencies. While they both maintain regulatory authority over various types of crypto offerings and cryptocurrency intermediaries, neither agency supervises the other. Instead, the scope of the SEC’s authority is determined by whether the transaction or intermediary in question is subject to federal securities laws, while the CFTC’s authority to participate in cryptocurrency regulation and enforcement is derived from federal commodity laws (see 7 U.S.C. § 1, et seq.). Many cryptocurrencies qualify as either securities or commodities (or as both). For example, the legal classification of a cryptocurrency token may differ depending on how that token is offered and traded, and the classification of a cryptocurrency offering may differ from the classification of subsequent secondary transactions involving a cryptocurrency asset. Among other federal authorities that exercise regulatory and enforcement authority affecting cryptocurrency businesses are FINRA, FinCEN, and OFAC. The latter is a department of the United States Treasury. Spodek Law Group provides legal representation to cryptocurrency companies and other entities in matters involving the Blockchain, a distributed-ledger technology that supports the majority of virtual currencies currently in circulation. Virtual currencies are forms of digital currencies that can function as exchange media, accounting units, and stores of value. If you are involved in a federal cryptocurrency investigation, our attorneys and consultants can promptly identify any relevant federal laws that impact your business or transaction, and we can then work to develop an appropriate response strategy as soon as possible. Contact a Spodek Law Group lawyer today to discuss your concerns in the strictest confidence.

When Does the SEC Treat a Crypto Transaction as a Security?

The U.S. Supreme Court established the “investment-contract test” in SEC v. W. J. Howey Co., 328 U.S. 293 (1946). In Howey, the Court held that an investment contract is “a contract, or scheme or transaction, whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.” This four-prong test, now known as the Howey test, provides a framework for determining whether particular types of investment schemes (and other transactions) constitute securities under federal law.

The Howey test applies to cryptocurrency transactions as well. When determining whether a cryptocurrency token, other crypto-asset, or transaction qualifies as a security under Howey, the SEC examines the specific economic circumstances of the transaction, regardless of how the parties label the token. The Howey test includes a “common enterprise” prong; in its guidance, the SEC explains that an investor and another party (or parties) are involved in a “common enterprise” if “the investors’ profits are expected to come from the efforts of a third party that also will benefit from the investors’ contributions.” The Howey test also considers whether an investor expects profits “solely from the efforts of others.” The SEC generally allows for an expansive interpretation of the phrase “solely from the efforts of others,” and this phrase has been interpreted in similar contexts to include transactions in which profits are derived “primarily from the efforts of others.”

If the SEC determines that a cryptocurrency token, other crypto-asset, or transaction is a security under the Howey test, it will typically require that the parties involved comply with federal securities laws. In general, this means:

• When the SEC views a cryptocurrency offering as an offering of securities, it requires that the offering be registered with the SEC or that an applicable exemption be available
• When the SEC views a cryptocurrency trading platform as a securities exchange, it requires that the platform register as a securities exchange or alternative trading system
• When the SEC views the buying and selling of a cryptocurrency token as a securities transaction, it requires that parties engage in transactions through a registered securities broker-dealer or otherwise comply with applicable requirements

The SEC has been heavily scrutinizing “staking” and “yield” products and services, and it appears to view investors’ staking funds (or yield) as being subject to the investment-contract doctrine under Howey. This raises an interesting question: how literally does the SEC, and the federal courts, apply the word “solely” in the Howey test? The Supreme Court and the U.S. Court of Appeals for the Fifth Circuit have both spoken to this issue, with both courts allowing for a relatively flexible interpretation. In the context of cryptocurrency, it is very likely that “solely” will not be interpreted literally. The federal appellate courts’ interpretation of the Howey test has left the door wide open for the SEC to pursue regulatory and enforcement actions against a broad range of cryptocurrency companies and individuals. As a result, this has become a high-risk area of practice for legal professionals, and if you are involved in the cryptocurrency industry, you need to be aware of the legal implications for your particular transaction, offering, or business. If your cryptocurrency business or transaction is under scrutiny, or if you have concerns about Howey’s applicability to your activities, Spodek Law Group’s cryptocurrency lawyers and consultants are available to help.

What Crypto Activity Falls Under the CFTC’s Authority?

The Commodity Exchange Act (CEA) is the primary federal statute the Commodity Futures Trading Commission (CFTC) uses to exercise its regulatory and enforcement authority. The CEA establishes comprehensive federal regulation over transactions and intermediaries involving commodities, primarily focusing on commodity derivatives. Cryptocurrency-related derivatives generally fall under the CFTC’s authority if they qualify as “covered cryptocurrency contracts,” which include:

• Crypto-asset futures;
• Crypto-asset options;
• Crypto-asset swaps; and
• Other commodity-derivative contracts The CEA does not establish a comprehensive CFTC registration regime for “ordinary” spot commodity exchanges. Ordinary spot commodity exchanges facilitate trades involving cryptocurrencies and other commodities but do not facilitate trading in futures, swaps, options, or other commodity derivatives. However, the CFTC still maintains regulatory and enforcement authority over cryptocurrency-related transactions and intermediaries, even in these cases. Specifically, CEA Section 6(c)(1) grants the CFTC authority to enforce federal antifraud and antimanipulation provisions. Rule 180.1 allows for securities-like enforcement actions in these matters as well. The CFTC also has authority over cryptocurrency-related transactions with leverage. Section 2(c)(2)(D) covers leveraged retail commodity transactions involving cryptocurrencies. These are transactions where the amount owed to the trading platform is less than the amount of the cryptocurrency being traded and where actual delivery does not occur within 28 days. Other types of cryptocurrency-related activity that generally fall under the CFTC’s authority include: - Cryptocurrency futures contracts;
• Cryptocurrency swaps and other derivatives; Along with other commodities-related derivatives, many types of cryptocurrency transactions fall under the CFTC’s authority. Cryptocurrency futures platforms are generally required to register as “designated contract markets” (DCMs). Swap execution facilities (SEFs) that facilitate covered cryptocurrency swaps must register with the CFTC as well. The term “covered cryptocurrency swap” generally excludes swap transactions where the delivery date is more than two business days from the date of the transaction and one party has a right to delivery of a commodity. The CFTC also exercises regulatory and enforcement authority over intermediaries that facilitate cryptocurrency transactions. Those intermediaries may be required to register with the CFTC, and the type of registration required will depend on the nature of the entity’s cryptocurrency-related activities. These include registering as a:
• Futures commission merchant (FCM);
• Introducing broker (IB);
• Commodity pool operator (CPO); or
• Commodity trading adviser (CTA) Intermediaries that offer transactions to exchange participants on behalf of cryptocurrency clients must typically register with the CFTC as a commodity broker-dealer or financial intermediary. Finally, the CFTC possesses authority over certain cryptocurrency-based prediction-market contracts. These contracts involve bets on future events and generally qualify as “event contracts” under the CEA. Intermediaries that facilitate these transactions can also fall under the CFTC’s regulatory and enforcement authority.

  Which Registrations Apply to Crypto Platforms and Service Providers?

  Cryptocurrency companies can face SEC registration duties and CFTC derivatives regulation simultaneously. For example, many crypto broker-dealers and trading platforms function as intermediaries for both cryptocurrency tokens that are securities and cryptocurrency derivatives (such as futures, swaps, and options). These intermediaries must consider registration under both the SEC and CFTC regulatory frameworks.

  The SEC and Cryptocurrency-Related Registration Obligations Cryptocurrency

  broker-dealers and crypto exchanges that handle cryptocurrency tokens that are securities must generally register as broker-dealers and join FINRA. Cryptocurrency-related custodians may need to register as transfer agents. Cryptocurrency-related advisory firms (including those providing investment advice through cryptocurrency, token, or other asset-backed products) need to register with the SEC if they qualify as investment advisers under the Investment Advisers Act. Under the Advisers Act, registered advisers may need to meet the Act’s custody requirements if they hold client funds, cryptocurrency tokens, other crypto-assets, or security-related cryptocurrency token or crypto-asset holdings. Cryptocurrency-related custodians that serve as broker-dealers handling cryptocurrency security tokens or other securities-related holdings may need to address custody requirements under the Exchange Act’s customer-protection requirements as well.

• Crypto Broker-Dealers Handling Cryptocurrency Securities
• Registered Crypto Advisers Holding Clients’ Cryptocurrency or Crypto Securities
• Crypto Custodians Handling Cryptocurrency Securities as Broker-Dealers

  FINRA, FinCEN, OFAC, and State and Local Authorities Registration

  duties at the state and local levels can apply simultaneously with duties imposed at the federal level. For example, if a cryptocurrency business or transaction is subject to state-level money-transmitter registration requirements, it may also be subject to federal registration requirements with FinCEN. Cryptocurrency-related businesses involved in activities subject to money-transmission laws at the state, local, or federal levels may also need to consider compliance with other applicable state, local, or federal laws and regulations.

• State Money Transmitter License
• State/Local Authority Approval
• Federal Registration (FinCEN)
• Anti-Money Laundering (AML) Compliance

  Stablecoin Issuers and Cryptocurrency-Related Payment Companies

  Many stablecoin issuers and cryptocurrency-related payment companies are also subject to state-level money-transmission laws and federal anti-money laundering laws. These companies may need to consider state-level money-transmitter registration requirements and need to determine if they are subject to Bank Secrecy Act (BSA) registration requirements with FinCEN as well.

  What Happens When Several Agencies Investigate the Same Crypto Conduct?

  The SEC is a civil enforcement agency. While the SEC possesses the authority to seek substantial penalties, the forfeiture or disgorgement of illicit gains, and various industry bans and other sanctions, it does not possess the authority to prosecute crimes or to impose penalties of imprisonment. Criminal prosecution in the cryptocurrency industry is the area of federal jurisdiction reserved for the Justice Department, and it is the Justice Department that is responsible for pursuing criminal enforcement action in accordance with the requirements of the U.S. Constitution. Because cryptocurrency regulation falls under the jurisdiction of multiple federal agencies as well as state authorities, conduct that triggers scrutiny is liable to trigger multiple parallel proceedings. This includes federal investigations, state-level investigations, civil proceedings, and criminal proceedings, often involving numerous different agencies, including the SEC, the CFTC, and the DOJ, at the same time. The SEC and the CFTC both have the authority to investigate potential violations of federal law through the issuance of administrative subpoenas. Administrative subpoenas are similar to those issued in federal district court under the Federal Rules of Civil Procedure (FRCP); however, their specific scope and procedure for issuance can differ. These subpoenas can be issued in “informal” or “formal” investigations, and they allow the agencies to compel testimony from witnesses as well as the production of records, including those from third parties. The SEC and the CFTC also both have the authority to pursue enforcement action in both federal district court and administrative proceedings. While many administrative orders from the SEC and CFTC are reviewable directly in the federal courts of appeals, enforcement actions can also be reviewable after a hearing before a federal district court or other appropriate administrative authority.

Along with other remedies and penalties that are available under federal law, both the SEC and the CFTC have the authority to seek injunctions, civil penalties, disgorgement of “ill-gotten gains,” and industry-specific restrictions, such as restrictions on registration and broker-dealer activities. The SEC is also authorized to conduct administrative proceedings and to adopt rules under the various federal statutes that govern cryptocurrency conduct, including the Securities Act and Securities Exchange Act. Like other federal executive-branch agencies, the SEC’s rule adoption process is subject to a statutory process, and the SEC generally follows the requirements of the Administrative Procedure Act (APA).

Do Newer SEC-CFTC Agreements Change Today’s Compliance Duties?

In early 2025, the SEC and CFTC issued a joint statement announcing their intentions to further integrate the regulation and supervision of “spot” crypto products in federal markets. Although this agreement signaled a commitment to cooperation, the announcement did not change the agencies’ respective authority, and the agencies continued to express opposing views regarding the role of stablecoin tokens in cryptocurrency and digital asset markets. Later in 2025 and into early 2026, reports of apparent cooperation increased. This trend is expected to continue throughout 2026 and beyond.

Several specific new developments between the SEC and CFTC underscore this ongoing trend. Specifically:

• Joint SEC-CFTC Pacts: A joint interagency pact, dated March 13, 2026, was publicized in the press. This pact reportedly addressed interagency data sharing in crypto-asset investigations, and both agencies announced a new joint crypto interpretation of their respective statutory mandates in early March 2026.
• Congressional Action on Crypto Market-Structure Legislation: Congress has continued to review and debate several pending bills that would amend federal securities and commodity law in light of cryptocurrency transactions and the various types of cryptocurrencies in circulation. Although it was widely anticipated that one or more of these bills would be enacted by the start of 2026, congressional delays have left the cryptocurrency market with continued compliance uncertainty. Until any federal cryptocurrency market-structure legislation is enacted and takes effect, companies should continue to comply with their respective current federal registration and regulatory duties.
• Expansion of Enforcement Efforts at the SEC and CFTC: In January 2025, the SEC established a new Cryptocurrency Compliance Enforcement Task Force to focus on combating fraud, facilitating enforcement efforts, and enhancing interagency coordination. The CFTC has focused on increasing its resources for regulatory oversight and enforcement efforts; in early 2026, it appointed former federal prosecutor David Miller to lead enforcement. This highlights the CFTC’s commitment to targeting violations involving cryptocurrency fraud and scams, unregistered offerings, market manipulation, and other fraudulent conduct.

  What Should Cryptocurrency Companies and Intermediaries do to Ensure Compliance?

  Cryptocurrency companies and intermediaries must stay abreast of the latest developments in the regulatory and enforcement environment to mitigate the risk of liability under federal law. Companies must also engage in proactive compliance efforts with the assistance of an outside counsel to help mitigate the risk of enforcement actions. At Spodek Law Group, our attorneys, consultants, and forensic accountants work together to help our clients achieve compliance with federal cryptocurrency law; and we work aggressively to protect our clients in the event of an SEC, CFTC, or other federal agency enforcement action.

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 212-300-5196 to speak with our team.