Crypto's Big Rulebook Is Stuck, and the Delay Now Costs Money

So a framework is being assembled regardless, through regulatory action rather than legislation. That produces rules that are quicker to write and considerably easier to reverse when an administration changes. A tracker maintained by Latham and Watkins follows the legislative side.

Why the SEC and CFTC split matters so much

The jurisdictional question sounds procedural and is not. The two agencies regulate on different philosophies, and which one owns an asset determines nearly everything about how it can be sold.

Securities regulation is built around disclosure and investor protection, with registration requirements and liability attached. Commodity regulation is built around market integrity and manipulation in trading venues. An asset classed as a security faces obligations that a commodity does not, and firms structure themselves entirely differently depending on the answer.

For a decade that answer has come from enforcement actions and court rulings rather than statute, which means it has been determined case by case, retrospectively, and with limited consistency.

The cost of regulating by agency instead

A framework built through rulemaking rather than legislation has one obvious advantage and one serious weakness. It is faster, because it does not need sixty Senate votes.

It is also reversible. A rule written by one commission can be rewritten by the next, and firms making multi year infrastructure decisions know it. That uncertainty gets priced in, and some of it gets priced by relocating to jurisdictions that have already legislated.

Which is the argument the industry has been making for years, and the reason a stalled bill is a more expensive outcome than a bill that passes in a form nobody entirely likes.

What happens to firms in the meantime

Businesses cannot pause operations until legislators agree. They make a determination about their own regulatory status, build compliance around it, and carry the risk that a future statute contradicts them.

That risk is expensive to hold. It affects what auditors will sign, which banks will provide services, and which institutional counterparties will trade with them. Several of the practical barriers the sector complains about are downstream of that uncertainty rather than of any specific rule.

It also advantages the largest firms, which can afford to staff for several possible outcomes at once. Regulatory ambiguity is usually a tax on smaller competitors.

The precedent problem

There is a broader constitutional point buried in this. When a legislature cannot act, regulators fill the space, and the resulting rules carry less democratic weight and far less permanence.

Courts have grown more sceptical of agencies claiming broad authority over major economic questions without explicit legislative instruction. A digital asset framework assembled largely from rulemaking is therefore vulnerable on two fronts at once: politically to the next administration, and legally to a challenge arguing the agency exceeded what Congress actually authorised.

That is the strongest argument for passing something imperfect rather than waiting for something ideal. A statute settles the authority question in a way no rule can.

What to watch next

Watch for a cloture motion, because nothing else counts as progress. And watch how much of the market structure gets settled by agency rulemaking in the meantime, since every piece decided that way is a piece decided provisionally.