U.S. CFTC, SEC Enter Into Historic Memorandum of Understanding, Joint Harmonization Initiative to Enhance Regulatory Coordination

After years of regulatory fragmentation and interagency turf wars, the U.S. Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC, and together with the CFTC, the Commissions) recently entered into a memorandum of understanding (MOU) and launched a Joint Harmonization Initiative (Initiative) to advance its objectives.¹ Although the MOU and Initiative do not amend existing regulations or impose new regulatory obligations, they signal a new era of cooperation between the Commissions that are materially reshaping how U.S. financial markets are regulated. For example, the U.S. SEC has since issued an interpretive release on the application of the federal securities laws to the crypto industry (see earlier Sidley Update here).The CFTC joined in that interpretive release, showing a level of coordination and cooperation that has been unusual to date.

Regulatory Background

The SEC and CFTC regulate distinct but closely interconnected segments of the U.S. financial markets. The SEC oversees securities markets and intermediaries, including broker-dealers, investment advisers, and clearing agencies, and regulates certain derivatives, including security-based swaps and securities options. The CFTC regulates derivatives markets under the Commodity Exchange Act, including futures, options on futures, and swaps, along with related intermediaries and clearing infrastructure.

Many market participants — including banks, broker-dealers, investment managers, trading venues, clearinghouses, data repositories, and digital asset market participants — operate in what the Commissions describe as an “increasingly convergent financial ecosystem,” where activities span securities and derivatives markets. Financial markets have become increasingly interconnected, and continued advances in global technologies, new trading models, digital infrastructure, and automated, on-chain systems are further blurring traditional jurisdictional lines. As a result, SEC and CFTC jurisdictions frequently overlap, requiring firms to navigate at times redundant, at times conflicting regulatory requirements. Market participants also expend significant time and resources determining where one regulator’s jurisdiction ends and the other’s begins.

As CFTC Chairman Michael Selig noted in his March 9, 2026, speech, this dynamic has resulted in a “patchwork of no-action letters” serving as “band-aids” for well-known and pervasive regulatory gaps.²

The Objectives of the MOU and the Initiative

The MOU and Initiative do not create new regulatory requirements. Instead, they establish a framework for coordination across areas of shared jurisdiction. The MOU emphasizes a principles-based approach grounded in technology-neutral regulation and frameworks that account for emerging technologies.

Specific objectives outlined by the MOU include

• clarifying product definitions through joint interpretations and coordinated rulemakings
• modernizing clearing, margin, and collateral frameworks
• reducing frictions for dually registered exchanges, trading venues, and intermediaries
• developing a “fit-for-purpose” regulatory framework for cryptoassets and other emerging technologies
• streamlining regulatory reporting
• coordinating cross-market examinations, economic analyses, risk monitoring, surveillance, and enforcement

The MOU also contemplates regular interagency consultation, advance notice of regulatory developments, expanded data sharing, and cross-training of staff, all aimed at reducing duplicative oversight and improving regulatory consistency.

Even prior to entering into the MOU, the Commissions had begun taking steps to reduce regulatory overlap. In September 2025, the SEC and CFTC issued a joint statement identifying areas for potential harmonization³ and subsequently held a joint public roundtable focused on aligning regulatory approaches.⁴ More recently, the CFTC staff used the no-action process to restore the so-called “QEP Exemption” from commodity pool operator registration for certain SEC-registered investment advisers.⁵ Chairman Selig has indicated that the CFTC intends to pursue rulemaking to codify this relief as part of the broader CFTC–SEC harmonization effort.⁶ Additional detail regarding these no-action letters is available in Sidley Updates available here (CFTC Letter 25-50) and here (CFTC Letter 26-06).⁷

The Commissions have already begun implementing the Initiative. On March 17, 2026, they jointly issued an interagency interpretation establishing a taxonomy for cryptoassets and addressing the application of federal securities laws to a range of common cryptoasset activities.⁸ This release represents the first concrete application of the Initiative and signals the Commissions’ intent to move quickly to provide substantive regulatory guidance under the MOU’s framework.

Implications for Market Participants

Although procedural, the MOU and Initiative are likely to have practical implications as they are implemented.

Greater coordination in supervision and enforcement

Firms subject to oversight by both Commissions may see increased coordination in reporting, examinations, and enforcement. Those accustomed to engaging with both agencies on parallel, and often uncoordinated, tracks may now find that the regulators take a more unified approach to oversight. This may reduce duplicative engagement while enabling more unified, and potentially more efficient, regulatory scrutiny.

Reduced regulatory fragmentation

Enhanced coordination between the Commissions may, over time, reduce regulatory fragmentation and provide greater clarity regarding overlapping regulatory requirements. Many market participants have long sought clearer delineation between securities and commodities regulatory regimes, particularly for activities involving digital assets, derivatives, and other complex financial instruments.

Streamlined compliance frameworks

The Commissions’ focus on eliminating duplicative requirements and facilitating more tailored compliance approaches, particularly for dually registered entities, may lower compliance costs and simplify regulatory structures as these efforts are implemented.

Evolving market structure and emerging technologies

The MOU and Initiative signal that the Commissions are likely to take a more coordinated approach to regulating emerging products and market structures, including digital assets and other technology-driven innovations. As financial markets continue to evolve and become more interconnected, market participants may benefit from efforts to remove unnecessary obstacles to the lawful introduction of novel derivative products, cryptoasset products, and other innovations. At the same time, firms should expect increased coordination between the agencies in overseeing products and activities that do not fit neatly within traditional regulatory frameworks.

Enhanced data sharing and market surveillance

The MOU contemplates greater interoperability between the Commissions’ data and analytical systems, including more consistent data standards and shared surveillance tools. Market participants may see increased coordination in risk monitoring and market surveillance, potentially resulting in more comprehensive oversight of cross-market activity and faster identification of potential market abuse or operational risks.

No immediate changes to existing obligations

The MOU signals a clear policy direction but does not itself alter existing regulatory requirements. Its impact will depend on how the Commissions translate coordination into rulemaking, guidance, and supervisory practice.

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Sidley regularly advises clients on SEC and CFTC regulatory matters. Our team is available to assess the implications of these developments for your business.

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