While the legislative progress on the structure of the US crypto market remains stalled during the congressional recess, SEC and CFTC have already taken the lead in formulating rules, focusing on the definition of derivatives, regulatory boundaries, and digital asset custody arrangements. Several former officials from SEC and CFTC have recently stated that if the regulatory division is not properly managed, the US may continue to cede the highly liquid crypto perpetual contract market to overseas platforms.

Former officials jointly discuss the boundaries of regulation

This letter of opinion is jointly signed by the former Chairman CFTC Chris Giancarlo, the former Committee Members CFTC Brian Quintenz and Sharon Brown to Hruska, the former Committee Member SEC Steven Wallman, and the former Chief Economist SEC Chester Spatt.

They argue that similar risks should be subject to similar regulation, and that the compliance costs should not be unnecessarily increased due to the overlap between the rules of SEC and CFTC. The signatories also pointed out that such issues are not necessarily partisan in nature; the focus should still be on investor protection and the competitiveness of the U.S. market.

In June this year, SEC and CFTC solicited public opinions on the definitions of swaps, securities-based swaps, and new types of derivatives, while also discussing the respective regulatory starting points and boundaries of both institutions.

The scale of the perpetual contract market attracts attention.

This discussion is directly related to encrypted perpetual contracts. Some of the co-signers believe that the current regulatory environment in the United States has pushed a large number of such transactions overseas over the past few years.

The forecasting platform Kalshi estimates that the trading volume of over-the-counter perpetual contracts exceeded $90 trillion in 2025, compared to about $28 trillion just two years ago. The company began offering crypto-perpetual products earlier this year and commissioned a law firm to assist in drafting this letter of opinion. The signatories stated that they did not receive any compensation for this, and Kalshi was not involved in deciding the content of the letter either.

Earlier this month, Trump stated that the chairman of CFTC was pushing to bring the popular offshore sustainable platform Hyperliquid into the US market. A key judgment in a letter from a former official was that strict regulation could drive transactions out of the US, but it would not eliminate the demand nor the risks.

• Kalshi It is estimated that offshore sustainable transactions will exceed $90 trillion by 2025
• Two years ago, the corresponding scale was approximately $28 trillion.
• SEC and CFTC have launched a public consultation in June.

SEC Simultaneously advancing the revision of custody rules

In addition to derivatives, SEC is also separately advancing adjustments to crypto custody rules. Last week, SEC submitted a revised version of the custody rules for investment advisors and investment companies to the White House Office of Information and Regulatory Affairs for review.

The long-term focus of the market has been on how investment institutions regulated by SEC can provide custody services for digital assets while complying with federal securities laws. This issue is particularly crucial for investment advisors, as they usually need to use "qualified custodians" that meet strict storage and accounting standards.

The revised text has not yet been made public, therefore it is still unknown which institutions can be recognized as crypto custodians and what conditions need to be met. The signal sent by SEC is a desire to clarify the crypto custody rules, as well as to remove those provisions that have been deemed outdated.

This is significantly different from the direction taken three years ago. At that time, Chairman Gary Gensler proposed broader "protection" rules, attempting to extend the custody requirements for investment advisors from funds and securities to almost all customer assets, including crypto assets. That proposal was withdrawn last year.

Another proposal is now open for comments.

Meanwhile, the "_Reg Crypto_" proposal from SEC has been officially published in the Federal Register, and public comments are open until October 20th. This proposal aims to establish new regulatory rules for the issuance of certain crypto assets.

Based on the current progress, before the legislation regarding the market structure of Congress is finalized, U.S. regulatory authorities are addressing the two main areas of derivatives and custody through rule-making. This will also affect whether more crypto transactions and institutional services will return to the U.S. domestic market.