CFTC Crypto Regulation Without the CLARITY Act: What the Agency Can and Cannot Do in 2026

CFTC Chairman Michael Selig has signaled that the Commodity Futures Trading Commission is prepared to pursue its own crypto market structure rulemaking — including protections for software developers — if the CLARITY Act does not clear Congress. For anyone building, listing, or trading digital assets in the United States, that changes the planning assumption. The industry has spent two years treating comprehensive market structure legislation as the finish line. The signal now is that the perimeter may instead be drawn by notice-and-comment rulemaking, on the agency’s timeline rather than the Senate’s.

The question practitioners should be asking is not whether the CFTC will act, but what it can actually deliver acting alone. The answer is narrower than the announcement suggests — and the gap between agency-made and statute-made protection is exactly where compliance planning should concentrate.

Key Takeaways

• Agency action is now the base case, not the fallback. Planning that assumes a legislative safe harbor arrives before any binding obligation is no longer prudent.
• The CFTC’s spot-market authority is narrow. Under the Commodity Exchange Act, direct cash-market jurisdiction runs primarily to fraud and manipulation (7 U.S.C. § 9(1); 17 C.F.R. § 180.1) and to leveraged retail transactions (7 U.S.C. § 2(c)(2)(D)) — not to comprehensive registration of spot crypto exchanges.
• The likely vehicle, CEA § 4(c), carries a retail problem. Exemptive relief under 7 U.S.C. § 6(c) is conditioned on transactions being between “appropriate persons” — a statutory list that does not naturally include retail traders.
• Agency-created developer protections cannot bind other enforcers. The CFTC can decline to assert its own jurisdiction; it cannot foreclose the SEC, DOJ, FinCEN, or state regulators, and a later Commission can rescind.
• Judicial review is materially harder than it was five years ago. Courts no longer defer to an agency’s reading of its statute (Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024)), and an expansive rule invites a major-questions challenge.

What was actually said, and what weight does it carry?

Chairman Selig is reported to have told a CFTC advisory committee that staff have been directed to explore crypto policy — including developer protections — independent of pending legislation, and that the agency would move on market structure unilaterally if the CLARITY Act does not become law. Editorial note: these remarks are drawn from secondary reporting; the committee transcript should be consulted before relying on any specific characterization.

Two things deserve separating. First, remarks to an advisory committee are not a rule. Federal advisory committees operate under the Federal Advisory Committee Act (5 U.S.C. §§ 1001–1014) and produce recommendations, not binding action. No regulated entity’s obligations changed. Second, and more consequentially, this is credible agenda-setting. Rulemaking under the Administrative Procedure Act (5 U.S.C. § 553) requires a proposed rule, a comment period, and a reasoned final rule — realistically twelve to twenty-four months even on an expedited schedule. Firms that wait for a Federal Register notice will be reacting to a comment deadline rather than shaping the proposal that precedes it.

Does the CFTC have authority to regulate spot crypto without the CLARITY Act?

Partially — and the limits matter more than the grants.

Courts have consistently held that virtual currencies fall within the broad definition of “commodity” at 7 U.S.C. § 1a(9). See CFTC v. McDonnell, 287 F. Supp. 3d 213 (E.D.N.Y. 2018); CFTC v. My Big Coin Pay, Inc., 334 F. Supp. 3d 492 (D. Mass. 2018). But commodity status is not market authority. The CFTC’s comprehensive registration architecture — designated contract markets (7 U.S.C. § 7), swap execution facilities (7 U.S.C. § 7b-3), derivatives clearing organizations (7 U.S.C. § 7a-1), and futures commission merchants (7 U.S.C. § 6d) — attaches to derivatives, not to cash-market sales of the underlying commodity.

In the spot market the Commission has three hooks: anti-fraud and anti-manipulation enforcement under 7 U.S.C. § 9(1) and Rule 180.1 (17 C.F.R. § 180.1); jurisdiction over retail commodity transactions entered into on margin, leverage, or credit that do not result in actual delivery within 28 days (7 U.S.C. § 2(c)(2)(D)), as elaborated in the Commission’s 2020 actual-delivery interpretive guidance for digital assets; and exemptive authority under CEA § 4(c), 7 U.S.C. § 6(c), paired with general rulemaking power under CEA § 8a(5), 7 U.S.C. § 12a(5).

Why CEA § 4(c) is a narrower tool than it appears

Section 4(c) is the most-discussed vehicle for unilateral CFTC action, and it is genuinely powerful for relieving burdens. But it is conditioned, and the conditions are frequently overlooked.

Under 7 U.S.C. § 6(c)(2), the Commission may not grant an exemption unless it determines that the requirement should not apply and the exemption is consistent with the public interest and the purposes of the Act; that the transactions will be entered into solely between “appropriate persons”; and that the exemption will not materially impair the Commission’s or a contract market’s ability to discharge regulatory duties. “Appropriate persons” is defined at § 6(c)(3) and enumerates institutional categories — banks, broker-dealers, futures commission merchants, insurance companies, governmental entities, and business entities meeting net-worth or asset thresholds. Retail participants are not on that list.

There is a catch-all: § 6(c)(3)(K) permits the Commission to designate “such other persons” as appropriate in light of their financial or other qualifications, or the applicability of appropriate regulatory protections. That is a real path, and the Commission has used it. But stretching it to cover the retail crypto market — the very population a market structure regime is meant to protect — is precisely the kind of move that draws a challenge under the standards discussed below.

The structural asymmetry is therefore sharper than “the CFTC can act”: its unilateral authority is strong for granting conditioned, largely institution-facing relief, and weak for building a retail-facing spot licensing regime that Congress never authorized.

What would developer protections cover — and what would they leave exposed?

The developer-liability problem is concrete. In CFTC v. Ooki DAO, No. 3:22-cv-05416 (N.D. Cal.), the Commission advanced and prevailed on the theory that a decentralized autonomous organization is a “person” under the CEA and liable as an unincorporated association, obtaining a default judgment in 2023. That exposure, combined with criminal risk under the unlicensed money transmitting statute (18 U.S.C. § 1960) and FinCEN’s money services business framework (31 U.S.C. § 5330; FinCEN Guidance FIN-2019-G001 (May 9, 2019)), is why non-custodial developers have sought a statutory safe harbor rather than an agency accommodation.

A CFTC rule can address the first exposure. It could formalize that publishing non-custodial, non-controlling software is not itself operating a facility requiring registration, and condition relief on absence of custody and of unilateral upgrade control. What it cannot do is bind anyone else. CFTC relief does not foreclose an SEC theory that a token is an investment contract under Securities Act § 2(a)(1), 15 U.S.C. § 77b(a)(1), and SEC v. W.J. Howey Co., 328 U.S. 293 (1946). It does not foreclose a DOJ prosecution under § 1960. CEA preemption is narrow (see 7 U.S.C. § 16(e)) and does not displace state money transmitter licensing. And it is reversible — by a later Commission through the same notice-and-comment process, or by Congress under the Congressional Review Act (5 U.S.C. §§ 801–808).

How does this interact with the SEC’s Regulation Crypto Assets proposal?

The SEC’s proposed Regulation Crypto Assets, announced in August 2026, would establish a purpose-built framework for crypto assets treated as investment contracts rather than forcing them into legacy registration and disclosure regimes. A CFTC market structure rule would therefore arrive alongside an SEC framework, not instead of one.

The CLARITY Act’s central function was to draw the SEC/CFTC jurisdictional line by statute. Absent that, each agency defines its own perimeter and the overlap gets resolved through guidance, interagency memoranda, or litigation — a slower and less reliable process than legislation. For issuers and venues the conservative posture is dual-track compliance: assume both frameworks may apply until an authoritative source says otherwise.

What could stop a CFTC crypto rulemaking?

Commission mechanics. The CFTC is a five-member Commission (7 U.S.C. § 2(a)(2)(A)), and substantive rulemaking requires Commission action, not chairman action. A Commission operating below full strength is a practical constraint on the pace and ambition of any major rule — worth checking against the current lineup before modeling a timeline.

Procedural adequacy. Under 5 U.S.C. § 553 and Motor Vehicle Manufacturers Ass’n v. State Farm, 463 U.S. 29 (1983), a rule needs a reasoned explanation and genuine engagement with significant comments. Rushed rulemakings lose on this ground routinely.

Statutory authority. After Loper Bright, 603 U.S. 369 (2024), courts exercise independent judgment on the best reading of the statute rather than deferring. A claim that the CEA authorizes comprehensive spot-market regulation would be reviewed de novo.

Major questions. Under West Virginia v. EPA, 597 U.S. 697 (2022), an agency asserting power of vast economic and political significance needs clear congressional authorization. That Congress has been actively legislating on crypto market structure without finishing is itself evidence the question belongs to Congress. This is the most serious vulnerability in any expansive rule.

Timing. The CRA lookback matters in a midterm year. A rule submitted to Congress late in the current session can fall within the window that gives the next Congress a fresh review period — meaning a rule finalized in late 2026 could face disapproval by a Congress seated in 2027.

Practical Implications

For token issuers, the securities analysis does not pause pending legislation: Howey remains the operative test, and the SEC’s proposed framework may impose disclosure obligations regardless of CFTC activity. For DeFi developers, Ooki DAO remains good law, and any CFTC relief would leave DOJ and FinCEN exposure intact. For exchanges, leveraged retail products under 7 U.S.C. § 2(c)(2)(D) are the most commonly underestimated category already within CEA jurisdiction, and state licensing — including the NYDFS BitLicense (23 NYCRR Part 200) — continues to apply irrespective of federal developments.

What to Do Now

1. Document decentralization contemporaneously. Governance distribution, custody relinquishment, and upgrade-key destruction are the facts every proposed framework conditions relief on. They must be provable later, with dates.
2. Structure for the protections you may receive. Non-custodial architecture, no unilateral upgrade authority, no fee capture tied to order execution, and no operation of matching infrastructure are the recurring conditions across every proposal in circulation.
3. Inventory products already inside CEA jurisdiction. Run margin, leverage, and credit arrangements against the 28-day actual-delivery standard before a rulemaking makes that inventory urgent.
4. Build comment-period readiness before the notice drops. Comment windows run 30 to 90 days. Firms with a standing position — economic impact data, specific alternative conditions, documented operational constraints — influence final rules; firms starting on day one generally do not.
5. Do not retire dual-track compliance. Maintain SEC and CFTC analyses in parallel until a statute or authoritative interagency position draws the line.

Conclusion

The signal from the CFTC is that crypto market structure will be addressed one way or another. But CFTC crypto regulation delivered by rulemaking is a different instrument than authority delivered by statute: narrower in reach, conditioned by § 4(c)’s appropriate-persons limitation, unable to bind other enforcers, exposed to de novo review after Loper Bright, and reversible by a future Commission or by Congress. Treat agency action as the near-term planning assumption, keep tracking CLARITY, and build to satisfy both federal perimeters until one authoritative source draws the line between them.

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This article is for informational and educational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations in the cryptocurrency space change rapidly — consult a qualified attorney for advice specific to your situation and jurisdiction. Seth Goettelman is licensed to practice law in Wisconsin and Florida.