CFTC's Historical Turning Point: From Confrontation to Dialogue, a New Chapter in U.S. Cryptocurrency Regulation

A Quietly Reshaping Power Structure

In December 2025, a remarkable shift occurred within the U.S. financial regulatory system. Carolyn Pam, the acting chair of the Commodity Futures Trading Commission (CFTC), announced in November the establishment of a high-level advisory body—the “Digital Asset Advisory Committee Innovation CEO Working Group.” This 12-member team’s composition is a carefully designed balance of power, reflecting a deep evolution in regulatory thinking.

Rather than simply being a committee, it represents a systematic response to the past decade’s struggles with crypto regulation in the U.S. When traditional financial giants and crypto natives sit at the same table, everyone realizes—the era of rule-making has arrived.

The Power Dynamics Behind 12 Identities

The team’s structure is meticulously crafted into three tiers.

First layer: Traditional financial influence. Leaders like CME Group CEO Terry Duffy and Nasdaq CEO Adena Friedman ensure the voices of the century-old financial system are not marginalized. They embody experience in liquidity, risk management, and market infrastructure.

Second layer: Practitioners from the crypto ecosystem. Executives from exchanges like Kraken, Gemini, Crypto.com bring innovative business models such as 24/7 trading, perpetual contracts, and decentralized settlement. The transaction data, risk scenarios, and technical solutions they handle daily are beyond the scope of any traditional regulatory framework.

**Third layer: The most symbolic—**founders of prediction markets like Polymarket and Kalshi. These companies have long operated in regulatory gray areas. Their inclusion signals a strategic shift for the CFTC—rather than suppressing boundary-pushing innovators, it invites them to participate in rule design.

This mixture is no coincidence but a strategic declaration: U.S. regulation no longer chooses sides but aims to create a comprehensive framework accommodating all participants.

The Regulatory Philosophy Shift from “Building Walls” to “Laying Roads”

Over the past decade, U.S. financial regulation’s relationship with the crypto industry has been characterized as a “cat-and-mouse game”—one side imposing restrictions, the other seeking loopholes. This move by the CFTC marks a completely different stance: inviting all “road builders” to jointly set traffic rules.

This shift is not driven by goodwill but by immense practical pressure.

The global crypto derivatives market is growing rapidly, yet U.S. regulatory fragmentation is worsening. The unclear boundaries between SEC and CFTC authority lead many innovative projects to leave the U.S. market. Consequently, the U.S. faces a decline in global crypto financial competition—capital, talent, and liquidity flow steadily toward jurisdictions with friendlier legal environments.

Both parties in Congress are pushing to expand the CFTC’s authority over spot digital asset markets. Against this backdrop, the establishment of the Innovation Committee can be seen as a form of “capacity building” and “consensus gathering”—paving the way for upcoming new legal frameworks.

By integrating the most influential and controversial market participants into the formal advisory structure, the CFTC achieves three goals: first, gaining cutting-edge market insights to prevent regulation from falling out of touch with reality; second, resolving potential disagreements before rules are finalized to improve future policy implementation; third, demonstrating America’s openness and innovation capacity in international regulatory competition.

The Subtle Moment of Power Transition

The timing of this decision is highly sensitive. Carolyn Pam is widely recognized as an advocate for regulatory innovation, emphasizing that financial regulators must proactively understand technology rather than passively respond. This committee can be seen as a condensed embodiment of her regulatory philosophy.

However, Pam’s term is ending. The new chair, Mike Selig, has been approved by the Senate Agriculture Committee and is awaiting full Senate confirmation. Selig has participated in crypto-related work during his SEC tenure and is considered a pragmatist.

Launching this committee just before her departure is widely interpreted as Pam’s “political legacy”—she established an institutionalized high-level dialogue mechanism that will be difficult for successors to bypass or dismantle, as its members are industry giants.

This also raises a question: will the new chair continue this direction, or shift the agenda and even sideline the committee? The power transfer within the regulatory agencies forms an important political backdrop for assessing whether the committee can produce tangible results.

Six Fundamental Challenges

The committee’s work is not superficial but confronts six deep and complex issues, each posing a fundamental challenge to the existing regulatory framework:

Asset Tokenization: How to regulate blockchain tokens backed by real assets (government bonds, real estate, etc.)? This involves opening legal channels for trillions of dollars’ worth of traditional assets.

Classification of Digital Assets: When the SEC insists on a “security” framework, how does the CFTC define “commodity” within its jurisdiction? Clarifying this is key to delineating regulatory authority.

Infrastructure for 24/7 Trading: Traditional finance relies on “business days,” but crypto markets operate 24/7. How do risk monitoring, back-office operations, and staffing adapt to an always-open market? This poses fundamental infrastructure requirements.

Perpetual Contract Mechanisms: These crypto-specific derivatives settle via funding rates rather than expiration dates, creating risk structures vastly different from traditional futures, requiring new regulatory tools.

Legality of Prediction Markets: This is the most groundbreaking issue. Can prediction markets on political or sporting events be legalized as financial derivatives? It involves intersections of finance, law, and social policy.

On-Chain Clearing and Custody Standards: From clearing to counterparty risk management, all “pipelines” need redefined safety standards. This is fundamental to market stability.

Proposing these six issues indicates that the CFTC is not merely drafting scattered rules but undertaking a systemic overhaul of the regulatory framework.

From Promise to Reality: The Long Road Ahead

Establishing the committee is just the beginning. Moving from dialogue to consensus, and then to legally binding regulatory frameworks, is a long and unpredictable journey.

When will the first meeting be held? Will discussions be transparent? These basic details remain undisclosed. The bigger question is the form of output: will it be an non-binding industry white paper, specific legislative proposals submitted to Congress, or direct rulemaking by the CFTC?

Market participants hold complex expectations. On one hand, this is a positive signal of a regulatory attitude shift, opening channels for direct high-level communication. On the other hand, fundamental disagreements persist—traditional exchanges seek fair competition, crypto platforms want regulatory recognition, prediction markets seek legitimacy. Can the committee find a balance acceptable to all, or will it become a “talking club”? This question has already surfaced at its inception.

A Signal of the New Regulatory Era

The emergence of the Innovation CEO Working Group has rewritten the narrative of crypto regulation in the U.S. It is no longer a simple opposition of “regulators versus innovators,” but a more complex and constructive phase: in the regulatory vacuum, authorities and market participants are jointly building the first secure fence.

Whether this experiment succeeds will directly impact the competitiveness of the U.S. financial markets. More importantly, it could become a key model for global financial regulation in the digital age—where rulemakers and innovators are no longer adversaries but co-architects.

This shift in the U.S. regulatory framework signifies that crypto assets have moved from “forbidden zones” to “new fields requiring understanding.” From a rule-making perspective, it lays the foundation for a brand-new set of traffic rules—the only question is whether all parties have the patience and wisdom to collaboratively complete this rulebook.