SEC-CFTC Merger Debate Revived as DOGE Looks to Trim Agencies

A proposal to combine decades-old Wall Street regulatory agencies is on the table again as President Donald Trump and GOP lawmakers try to slash the federal bureaucracy.

Trump is tapping billionaire Elon Musk, who says “there are too many duplicative regulatory agencies,” to head a new Department of Government Efficiency, with office space in the White House and backing from mostly Republican congressional caucuses.

As Trump, Musk, and their allies look for ways to streamline government actions—and to come up with a framework for regulating cryptocurrency trading—some industry watchers say the time is right to consolidate the Securities and Exchange Commission and its fellow regulator, the Commodity Futures Trading Commission.

“This is now the time to finally merge the SEC and CFTC,” Lee Reiners, a Duke University economics lecturing fellow, said in an interview with Bloomberg Law. He wrote a Wall Street Journal op-ed last month urging Musk to start with the overhaul as “low-hanging fruit.”

Some crypto industry advocates are echoing the call for Trump’s team to push for a merger. A representative for the US DOGE Service, created Jan. 20 by executive order, didn’t respond to a request for comment.

The SEC and CFTC, established to regulate distinct financial markets, must often reckon with jurisdictional questions about which assets fall under their purview. That includes cryptocurrency and other asset classes that don’t fit into a binary of securities or commodities.

Lawmakers for decades failed to advance legislative proposals to harmonize or merge the agencies, in part due to wrangling among the various committees overseeing them. But the Trump administration’s stated goals of increasing government efficiency and providing clear rules of the road for crypto players offer a new chance for the regulatory tie-up to gain traction.

“If it doesn’t happen now, it’s fair to assume it’ll never happen,” Reiners said.

Now or Never

The SEC—with a budget over $2 billion funded by fees on securities transactions—enforces Depression-era investor-protection laws, and it oversees a wide array of stock exchanges, broker-dealers, investment advisers, and mutual funds. The CFTC, with a budget under $400 million, is tasked with monitoring trillions in swaps and futures trading.

“The CFTC was set up to trade pork bellies, and nobody trades pork bellies anymore, they trade paper,” said former Rep. Michael Capuano (D-Mass.), who first championed a merger proposal in Congress with Dodd-Frank architect Rep. Barney Frank (D-Mass.) more than a decade ago. “Other than that, the concept and the terms are the same, the approach is the same, so it makes no sense to have two regulators anymore.”

Each agency’s handling of cryptocurrency highlights how much they overlap—and occasionally clash—today.

Biden-era SEC Chair Gary Gensler took an aggressive stance, treating most crypto assets as traditional securities that require registration and disclosure by trading intermediaries, and suing industry giants such as Coinbase Global Inc.

Many industry advocates are pinning their hopes on the CFTC regulating crypto as a commodity, with a lighter touch.

“Culturally, the CFTC and the SEC are so different, it’s like mixing oil and water,” said K. Braeden Anderson, founding attorney at Anderson PC who specializes in securities enforcement. “A lot of people in the crypto community want CFTC jurisdiction over the majority of crypto assets and believe that crypto should be assumed to be a commodity.”

The SEC’s enforcement of digital assets under Biden prompted backlash from industry groups, including a lawsuit from Coinbase. A federal appeals court this month ordered the agency to justify its lack of crypto-related rulemaking in response to the crypto exchange’s petition.

Bringing the two agencies together may provide more clarity around crypto jurisdiction, but it could also irk some digital asset groups that would prefer the CFTC as their sole regulator due to its relative small size and budget, according to Reiners.

“The community has not been happy with the SEC’s jurisdictional oversight,” Anderson said.

Acting SEC Chairman Mark Uyeda launched a crypto task force following Trump’s inauguration, tapping Commissioner Hester Peirce to lead the effort to develop “a comprehensive and clear regulatory framework for crypto assets,” according to a press release.

Practical Concerns

Lawmakers’ turf wars and logistical hurdles ultimately stymied previous legislative proposals to merge the agencies.

Oversight of the CFTC, for instance, is split among various lawmakers and appropriators handling agricultural and financial issues.

But aligning the SEC and CFTC to recognize current financial realities shouldn’t be politically divisive, Capuano said.

“I’m a progressive Democrat, and I do firmly believe in thoughtful regulation, particularly in the complicated financial services world,” he said. “I just never saw this as a very complicated, or controversial, or aggressive type of proposal.”

Combining the two entities wouldn’t necessitate slashing their respective workforces or drastically reorganizing them, at least under Frank and Capuano’s plan, though it could have other drawbacks.

A report from the Treasury Department during Trump’s first term found that “merging the SEC and the CFTC would not appreciably improve on the current system.” There are key differences between the securities and derivatives markets, and each regulator carries out distinct functions that would still need to be performed by a combined agency, Treasury said.

“But if someone wants it to happen bad enough and there’s enough political demand for it, it could happen,” Anderson said.

Trump’s pick to lead the SEC, Paul Atkins, told the House Financial Services Committee in 2015 that the authors of the 2010 Dodd-Frank Act blew a “once-in-a-lifetime opportunity to streamline our crazy quilt of financial services regulators” by failing to merge the SEC and CFTC.

Crypto industry watchers and merger proponents are hoping Musk, with Trump’s blessing, will give new life to the idea.

“This is the reason for DOGE’s being,” Reiners said. “Elon can use his megaphone to call this out so we can have an honest debate about the merits without it being killed in a backroom deal.”