Make America the Capital of Cryptocurrency: CFTC New Chairman Mike Selig's Regulatory Revolution

Author: 0xLi Daqi

Introduction: From "Regulatory Hell" to "Innovation Paradise"——A Delayed Paradigm Shift

In March 2026, Michael Selig, the 16th Chairman of the U.S. Commodity Futures Trading Commission (CFTC), accepted an exclusive interview with the cryptocurrency podcast Bankless. This is not an ordinary interview with a regulatory official, but a historically significant policy declaration.

Over the past few years, the U.S. crypto industry has experienced a dark period referred to within the industry as "regulatory hell." Former SEC Chairman Gary Gensler employed "enforcement as regulation" as a core strategy, issuing Wells notices to dozens of crypto companies and filing lawsuits that forced many innovators and capital offshore. At the same time, the CFTC attempted, during the Biden administration, to stifle prediction markets in their infancy by regulating political event contracts and sports event contracts through rule-making.

However, everything began to change after the 2024 elections. The Trump administration came to power, bringing a completely different regulatory philosophy. Selig had previously served as a clerk under former CFTC Chairman "Crypto Dad" Christopher Giancarlo, then represented crypto firms in a private law firm for ten years, experiencing the full extent of regulatory repression. In March 2025, he joined the SEC’s crypto task force as Chief Legal Counsel, pushing forward a series of reforms such as the compliance of staking and the end of enforcement regulation. In December of the same year, he was confirmed as the 16th Chairman of the CFTC, officially launching a new era of U.S. crypto regulation.

This interview covered seven core topics: the legal definition of commodities and the regulatory boundaries of the CFTC, the "unbanning" of prediction markets and federal jurisdiction, the definition of insider trading in information markets, the clarification of crypto assets' security/comodity nature, the safe harbor for DeFi developers, the "repatriation" strategy for perpetual contracts to the U.S., and the grand vision of making the U.S. the "crypto capital of the world" in five years.

Selig pointedly stated his core mission at the beginning of the interview: "I want to ensure that we are not only the crypto capital today but will remain so for many years to come. I want to make sure that even if the next Gary Gensler emerges, the rules and regulations will be clear enough to allow these innovations to stay in the U.S. long-term."

This statement is both a promise and a warning——the outcomes of reform need to be institutionalized and cannot rely solely on the political will of any given government.

Chapter 1: Redefining "Commodity——CFTC's Constitutional Power Boundaries

1.1 The Legal Definition of "Commodity": Encompassing Almost Everything

To understand the role of the CFTC in crypto regulation, one must first grasp the legal meaning of the core concept of "commodity."

Selig provided a shocking answer during the interview: according to the 1974 amendment to the Commodity Exchange Act, the definition of a commodity is exceedingly broad, encompassing almost everything that can become an underlying asset for derivative contracts——agricultural products, metals, digital assets, intangible assets, services, rights, interests, political events, sports events, etc.

Ryan followed up: "So what is not a commodity?"

Selig's response was concise and humorous: "Only onions and box office revenues are not commodities."

Onions are excluded because of a serious price manipulation incident in the Chicago onion market in the 1950s, prompting Congress to legislate their exclusion. Box office revenues were excluded due to successful lobbying by the Motion Picture Association of America to prevent the establishment of a futures market for box office receipts. Other than these, almost everything with a market can theoretically be considered a subject of derivative contracts regulated by the CFTC.

This broad definition lays a solid legal foundation for the CFTC's regulatory authority in the realms of crypto assets and prediction markets.

1.2 CFTC’s Regulatory Boundaries: Derivatives, Not Spot Markets

After understanding the broad definition of "commodity," it is also essential to clarify the CFTC's actual regulatory scope. Selig made it clear that the CFTC's core function is to regulate derivative markets rather than all commodities in the spot market.

Specifically, the CFTC’s regulatory authority covers the following types:

Futures Contracts: Standardized contracts traded on regulated exchanges
Swaps: Over-the-counter derivatives included in the regulatory framework under the Dodd-Frank Act
Event Contracts: A regulatory form of prediction markets
Leveraged Spot Trading: Spot commodity trading secured by financing

It is noteworthy that the CFTC does not have comprehensive regulatory authority over spot markets (for example, direct buying and selling of Bitcoin), but does possess powers against fraud and manipulation——if someone manipulates prices in the Bitcoin spot market, affecting futures prices, the CFTC has the authority to intervene.

If the Clarity Act passes, it will further expand the CFTC's regulatory authority over the digital asset spot market, which is one of the legislative goals Selig is actively promoting.

1.3 Three Technological Revolutions: New Territories for CFTC Regulation

Selig likened the current transformation of commodity markets to the electronic revolution of the 1980s——at that time, futures trading shifted from open outcry trading floors to electronic matching systems, radically transforming the entire industry. Today, three major technologies are reshaping the face of commodity markets:

First, blockchain and crypto assets: A decentralized value transfer network is creating a new financial infrastructure.

Second, prediction markets: By aggregating decentralized information into price signals through a "wisdom of the crowd" mechanism, they complement traditional polling and media reporting. During the 2024 election, the predictive accuracy of prediction markets significantly surpassed that of traditional polls, fully demonstrating their informational value.

Third, artificial intelligence: Revolutionizing the underlying logic for information consumption, trading decisions, and working methods.

Selig believes that the previous government's suppression of these three technologies essentially reflects an "anti-future" ideological bias rather than being based on an objective risk assessment. The new CFTC's mission is to provide a clear regulatory framework for the development of these three technologies in the U.S.

Chapter 2: The "Unbanning" of Prediction Markets——From Political Suppression to Federal Protection

2.1 Repeal of the 2024 Rule Proposal: An End to Political Manipulation

One of the most noteworthy policy actions during the interview is Selig's announcement to withdraw the former administration's "2024 Event Contract Rule Proposal."

This proposal, raised by the former CFTC chairman under the Biden administration, aimed to prohibit political event contracts and sports event contracts from being listed on regulated exchanges. Selig did not hold back in his evaluation:

"This is a highly biased rule proposal designed to kill political event contracts on the eve of the 2024 elections…… It is a deliberate effort to ensure channels that spread false news and polling remain open, while the truths revealed by prediction markets are kept from seeing the light of day in the U.S."

It has since been proven that the predictive accuracy of prediction markets during the 2024 election far outperformed traditional polls, with platforms like Polymarket accurately predicting Trump's victory early on. This result not only validates the informational value of prediction markets but also renders the former administration's suppression behavior highly suspicious.

Selig withdrew the proposal, clearly stating that the CFTC will establish a clear regulatory framework for political event contracts and sports event contracts rather than banning them outright.

2.2 Defending Federal Jurisdiction: Responding to 50+ State Lawsuits

The compliance of prediction markets has not been smooth sailing. Currently, over 50 states have filed lawsuits against prediction market platforms like Kalshi, Polymarket, and Crypto.com, with the core dispute being whether prediction markets are derivatives regulated by the CFTC or gambling behaviors under state laws.

Selig has taken proactive legal action by submitting amicus curiae briefs, firmly arguing that the CFTC possesses exclusive federal jurisdiction over prediction markets. His core argument is:

The Commodity Exchange Act explicitly grants the CFTC regulatory authority over derivative contracts
When a derivative contract is listed on a CFTC-registered exchange, federal law takes precedence over state law
The CFTC does not enforce in casinos or Indian reservations, but when derivative contracts are based on sports or political events, it falls under the CFTC’s federal regulatory scope

Regarding the ambiguous concept of "gambling," Selig indicated that he would clarify its definition through rule-making and await the court's final ruling.

2.3 New Boundaries for Insider Trading: From Mr. Beast to Political Candidates

The rapid development of prediction markets has also brought new regulatory challenges for insider trading. Selig cited two typical cases during the interview:

Case 1: An employee of Mr. Beast (a well-known YouTube blogger) engaged in insider trading on related prediction markets by taking advantage of prior knowledge of video releases, leading to a civil lawsuit from Kalshi and a penalty.

Case 2: A political candidate traded in prediction markets based on insider election information about their own electoral outcome, also leading to a lawsuit from Kalshi.

Selig pointed out that the determination of insider trading in prediction markets applies the "misappropriation theory," similar to that in securities markets: If someone obtains information based on a confidentiality obligation to an employer or others and trades in violation of that obligation, it constitutes insider trading. This standard is relatively clear and has ample judicial precedent to support it.

He also emphasized that the CFTC welcomes participants trading based on genuine informational advantages——this is precisely the core mechanism through which prediction markets discover prices and aggregate information. The regulatory goal is to combat misappropriation rather than suppress legitimate information trading.

Chapter 3: The "Identity Card" of Crypto Assets——Securities or Commodities?

3.1 Limitations of the Howey Test and the Digital Commodity Clarity Act

The dispute over the regulatory nature of crypto assets has been the greatest source of legal uncertainty in the U.S. crypto industry in recent years. The SEC has insisted on using the Howey Test established in 1946 to determine whether crypto assets constitute securities, resulting in many projects falling into legal gray areas.

Selig has a clear understanding of this issue. He pointed out that the Howey Test is not inherently inapplicable to crypto assets, but the problem is that regulatory agencies have used it for enforcement rather than rule-making, leading to the industry being unable to obtain clear compliance guidance in advance.

He, along with SEC Chairman Paul Atkins, has promoted "Project Crypto," which has provided a preliminary classification framework through regulatory interpretation without relying on legislation:

Digital Commodities: Network tokens, such as Ethereum (ETH), Solana (SOL), etc.——not securities
Digital Collectibles: Non-fungible assets like NFTs——not securities (and may not even be commodities)
Digital Tools: Functional receipt tokens on blockchain, etc.——not securities

However, Selig also admitted that regulatory interpretations cannot fully replace legislation. The value of the Digital Commodity Clarity Act lies in codifying these classifications into law, preventing them from being overturned by the next administration. Data from Polymarket indicates that the probability of this act passing in 2026 is about 70%.

3.2 The Vision of "Super Apps": A Historic Reconciliation between the SEC and CFTC

One of the most exciting moments in the interview was when Ryan directly asked, "Is the turf war between the CFTC and the SEC over?"

Selig's answer was succinct: "Yes, rest in peace." (Yes, rest in peace.)

This brief response reveals a rare depth of collaboration between the two regulatory agencies in history. Selig and Atkins are jointly promoting "Project Crypto," aiming to establish a unified, cross-agency regulatory framework for crypto assets. The core vision includes:

Tokenization: Allowing securities and derivative collateral to be tokenized on-chain, standardizing technical standards
On-chain Financial Applications: Providing compliant pathways for DeFi protocols and bringing offshore activities back to the U.S.
Single Regulatory Entity: Allowing a single company to offer securities and commodity services under one regulatory body ("super app" model)
Interoperability: Ensuring that SEC-regulated securities chains and CFTC-regulated derivative chains can interoperate

If this vision is realized, it will completely change the landscape of U.S. financial regulation and create a truly unified compliant market for the crypto industry.

Chapter 4: Safe Harbor for DeFi Developers——From "Potential Criminals" to "Protected Innovators"

4.1 The Spectrum of Intermediaries: From Full Centralization to Full Decentralization

In recent years, U.S. regulatory agencies have grossly misunderstood DeFi by categorizing all on-chain software developers as "intermediaries" and thus requiring them to register as exchanges or brokers. This misperception has forced many DeFi projects to relocate offshore or operate under legal shadows.

Selig clearly proposed an analytical framework for an intermediary spectrum:

Left end of the spectrum (Highly Centralized): Traditional exchanges that hold user assets, match trades, and bear full regulatory responsibility
Middle of the spectrum: L2 networks and other infrastructures with partial control but highly automated
Right end of the spectrum (Highly Decentralized): Pure code pushers and non-custodial wallet providers, which should not be considered intermediaries

He explicitly stated, "Software developers who merely push code to the blockchain or provide non-custodial digital wallet programs are fundamentally different from exchanges that hold user assets," and should not be subject to the same regulatory requirements.

4.2 Safe Harbor and Innovation Exemption: Thomas Edison Didn't Need a License to Innovate

Selig proposed two specific policy tools to protect DeFi developers and early innovators:

First, Safe Harbor: Defining a clear regulatory exemption zone for fully decentralized on-chain activities, ensuring that "permissionless innovation" can be conducted legally in the U.S. He cited a powerful historical analogy: "Thomas Edison was able to innovate without needing to apply for a license. We must reserve this framework for those who just want to push boundaries and test new technologies."

Second, Innovation Exemption: Providing a time-limited or scale-limited regulatory exemption window for projects in the early stages, allowing them to quickly market test products without fully registering as an exchange or broker. The logic behind this exemption design is that projects seeking product-market fit should not be bound by full registration requirements; once they scale, they can gradually fall under the full regulatory framework.

Selig indicated that these two policy tools are actively being promoted, with implementation expected in the "very near future."

4.3 The Regulatory Dilemma of L2 Networks: Control Yet Not Wanting Control

During the interview, David raised a rather tricky regulatory question: Ethereum L2 networks (like Arbitrum, Optimism, etc.) technically have some control over transaction ordering, but these networks do not wish to exercise such control nor bear exchange-level regulatory responsibility.

Selig's response reflected the new CFTC's "principles-based" regulatory philosophy: "We need to develop rules that are purpose-adapted for all these technologies, rather than trying to fit everything into the old 'intermediary' framework." He stated that the CFTC’s regulatory framework is flexible enough to create differentiated compliance standards for different technological architectures, rather than applying a one-size-fits-all requirement that all software with some control vector register as exchanges.

Chapter 5: The "Repatriation" of Perpetual Contracts to the U.S.——The Largest Liquidation Gap in Crypto

5.1 The Offshore Dilemma of Perpetual Contracts: The Largest Source of Liquidity Forced to Leave

Perpetual contracts (Perpetual Futures, or "Perps") are the most traded product type in the crypto derivatives market, and one of the most important sources of liquidity in the entire crypto market. However, due to regulatory uncertainties in the U.S., this market has long been forced to operate on offshore exchanges like Binance, OKX, and Bybit, with U.S. users and institutions unable to participate legally.

Selig was frank about this: "Perpetual contracts have been flowing offshore for years; in my view, they are the largest source of liquidity in our crypto market."

Currently, the "quasi-perpetual contract" products existing in the U.S. market are actually 50-year long-term futures contracts——products of regulatory arbitrage that use an extremely long maturity to simulate the economic effect of perpetual contracts. Selig believes that this workaround poses no essential difference in risk management from real perpetual contracts but creates unnecessary legal uncertainties.

5.2 Technical Barriers: Futures or Swaps?

The main technical barrier to repatriating perpetual contracts to the U.S. is the uncertainty about their regulatory classification: Are they futures contracts or swaps?

This distinction is crucial because, under the Dodd-Frank Act, swaps are subject to far heavier regulatory requirements than futures contracts. Selig criticizes the "sledgehammer" regulatory approach of the Dodd-Frank Act, arguing that treating high-risk products like credit default swaps (CDS) the same as low-risk products like agricultural swaps and Bitcoin swaps is excessive regulation.

His proposed solutions include:

Clarifying the regulatory classification of perpetual contracts: Providing rules that clarify which perpetual contracts can be recognized as futures contracts (rather than swaps)
Providing no-action letters or exemptions: Reducing unnecessary regulatory burdens for perpetual products that genuinely qualify as swaps
Prompt action: Selig committed during the interview to complete the regulatory framework for perpetual contracts "within the next month or so"

Fulfilling this commitment will mark a historic turning point in the U.S. crypto derivatives market.

5.3 Market Impact of the Repatriation of Perpetual Contracts

The repatriation of perpetual contracts to the U.S. will have profound effects on the entire crypto market:

Liquidity Concentration: A large amount of offshore liquidity will flow back to the regulated U.S. market, enhancing market depth and price discovery efficiency
Institutional Participation: U.S. institutional investors will be able to participate legally in the perpetual contract market, bringing in larger capital inflows
Disappearance of Regulatory Arbitrage: The competitive advantage of offshore exchanges will be weakened, and U.S. exchanges will regain competitiveness
Tax Compliance: U.S. users' trading of perpetual contracts will fall under a compliant tax reporting framework, eliminating legal risks

Chapter 6: Five-Year Vision——Making the U.S. the True "Crypto Capital of the World"

6.1 Completed Foundation Work

Selig reviewed the regulatory reforms that have been accomplished since the new administration took office during the interview:

The Genius Act was passed: Establishing a federal regulatory framework for stablecoins
Ending enforcement regulation: Ceasing to issue Wells notices to innovators, replacing litigation with rule-making
The Digital Commodity Clarity Act is set to be signed: Under presidential leadership, market structure legislation is nearing completion

6.2 Five-Year Goal: A U.S. of Permissionless Innovation

Selig painted a picture of the U.S. crypto ecosystem five years from now:

A permissionless innovation environment: Innovators will not need to apply for permits each time they want to do something new. The innovation exemption is the first step toward this goal, but the ultimate aim is to establish a systematic "default allow" framework.

Mainstreaming on-chain markets: Traditional exchanges like the New York Stock Exchange, Nasdaq, CME will be able to build and operate on blockchain with the same certainty and clarity as traditional database systems. Selig believes that there are no technological or regulatory reasons preventing this transformation.

Regulatory super apps: Allowing a single company to offer a full range of financial services, including securities, commodities, derivatives, under a unified regulatory framework, eliminating the current regulatory fragmentation issue.

The fusion of AI and crypto: Providing a compliance framework for AI agents to participate in financial markets, ensuring that regulatory rules for algorithmic trading and autonomous agents are established in the U.S. rather than flowing to China or other competitors.

6.3 Preventing the "Next Gary Gensler": The Need for Institutional Reform

One of the most strategic insights during the interview came from Selig's opening remarks: "I want to ensure that even if the next Gary Gensler appears, the rules and regulations will be clear enough to keep these innovations in the U.S. long-term."

This statement reveals a profound institutional logic: The achievements of regulatory reform cannot rely solely on the political will of any government, but must be solidified through legislation and rule-making. This is also the fundamental reason why Selig is so actively pushing the Digital Commodity Clarity Act's legislation——only rules codified into law can withstand the counterattacks of the next administration.

Chapter 7: Deepening the Underlying Logic of Regulatory Philosophy

7.1 "Principles-Based" vs. "Rules-Based": The CFTC's Regulatory Advantage

Selig emphasized multiple times that the CFTC employs a principles-based regulatory framework rather than the SEC’s rules-based framework. This distinction holds significant importance in crypto regulation.

The rules-based regulatory framework tends to establish detailed specific regulations; its advantage is strong certainty, while its disadvantage is a lack of flexibility in the face of new technologies, often leading to overregulation or regulatory gaps through a one-size-fits-all approach.

The principles-based regulatory framework sets high-level principles and goals, allowing regulatory agencies to flexibly apply them according to specific circumstances, making it more suitable for a rapidly evolving technology environment. Selig stated that this characteristic gives the CFTC a natural regulatory advantage when addressing new technologies like blockchain, prediction markets, and AI.

7.2 AI as a Regulatory Tool: A Regulatory Efficiency Revolution for a $500 Trillion Market

Facing a $500 trillion derivatives market and tens of thousands of emerging prediction market contracts, how can the CFTC achieve effective regulation with limited human resources? Selig's answer is: AI.

He revealed that the CFTC has extensively adopted AI and automated tools for market monitoring, with many systems no longer relying on manual review. AI can identify abnormal patterns within vast trading data, flagging potential insider trading and market manipulation behaviors with far greater efficiency than traditional manual monitoring systems.

This statement carries deep policy implications: Regulatory agencies themselves are undergoing an efficiency revolution driven by AI, signifying that future regulatory costs will drastically decrease, the scope of regulatory coverage will significantly expand, and reliance on human labor will be markedly reduced.

7.3 Conflicts of Interest in the Trump Family: A Test of Regulatory Independence

During the interview, David raised a sensitive question: The Trump family has apparent conflicts of interest in the prediction market realm——Eric Trump is both an advisor to Polymarket and an investor in Kalshi, while Selig is the CFTC chairman appointed by Trump.

Selig's response was concise and formal: He is bound by strict government ethics protocols and does not treat anyone differently, believing that the entire government upholds the same standards.

Although this response is politically impeccable, it also exposes a deep institutional challenge: When the appointers of regulatory agencies have direct interests in the markets being regulated, how can regulatory independence and fairness be ensured? This question has no simple answer, but Selig's stance at least indicates his personal professional position.

7.4 "Welcoming Guests" vs. "Enforcement Traps": A Fundamental Cultural Shift in Regulation

Selig described a remarkable cultural shift during the interview: In the previous administration, crypto firms were invited to "come into the office for a talk," but the outcome was often receiving Wells notices or facing lawsuits. This "enforcement trap" culture led to profound distrust of regulatory agencies within the entire industry, causing many firms to operate offshore or in the shadows of the law.

The culture of the new CFTC is fundamentally different: "We no longer issue Wells notices simply because they come into the building. We welcome firms to communicate with us, and we will work with them to find paths for registration, licensing, or other compliance, rather than treating them as criminals."

This cultural transformation is one of the most important soft conditions for attracting innovators back to the U.S.

Conclusion: The Historical Significance and Future Challenges of the Regulatory Revolution

This interview with Michael Selig is not just a policy declaration, but also a profound statement of regulatory philosophy. From the reinterpretation of the definition of "commodity," to the federal protection of prediction markets, the establishment of a safe harbor for DeFi, the repatriation of perpetual contracts to the U.S., and the grand vision of becoming the "crypto capital of the world" in five years——Selig has painted a complete picture of the U.S. re-embracing financial innovation.

However, the challenges that this regulatory revolution faces are equally undeniable:

First, legislative uncertainty: Although the Digital Commodity Clarity Act has a high probability of passing, the political contests in Congress are full of variables. Regulatory reforms without legislative support always face the risk of being overturned by the next government.

Second, pressure from global competition: The EU's MiCA regulations have established a relatively clear framework for the European crypto market, while jurisdictions such as Singapore and Dubai are actively vying for the position of crypto innovation center. U.S. regulatory reforms need to be swift enough to gain a competitive edge in the global arena.

Third, potential conflicts of interest: The Trump family's direct interests in the prediction market, as well as the possible implications of the political appointment system on regulatory independence, are institutional risks for this reform.

Fourth, the speed of technological evolution: The pace of advancements in AI, quantum computing, on-chain finance, and other technologies may again outstrip the adaptive capacity of regulatory frameworks. Establishing a truly forward-looking regulatory system is a long-term challenge that Selig faces.

Nevertheless, Selig's clarity of thought, pragmatic attitude, and historical sense of mission displayed during the interview inspire great expectations for the future of U.S. crypto regulation. As he said, "This country has always been great because builders and innovators create new things, and the country benefits from them. We have witnessed railroads, telegraphs, and the internet. These have opened up countless new possibilities for our country and people. We cannot push these offshore and then say 'we are satisfied with the status quo, and no new things are allowed to emerge'."

This statement may be the best summary of the entire interview——and the best footnote for a new era of U.S. crypto regulation.

References

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Make America the Capital of Cryptocurrency: CFTC New Chairman Mike Selig's Regulatory Revolution

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