On December 13, 2024, John E. Deaton, former candidate for United States Senator, explained through his X account why the SEC (Securities and Exchange Commission) and the CFTC (Commodity Futures Trading Commission) should merge into a single entity. 

Deaton's post confirmed the statements of Perianne Boring, founder of the company The Digital Chamber, who argued that the entity called DOGE (Department of Government Efficiency), led by Elon Musk and Vivek Ramaswamy, could promote such a union.  

DOGE is not yet operational and would begin its work at the time of Donald Trump's inauguration as the new president of the United States. 

What is Deaton's proposal based on?

Both the SEC and the CFTC are independent agencies of the United States federal government. Their primary function is the regulation and supervision of specific financial markets.  

While the SEC regulates markets for securities, including stocks, bonds, and mutual funds, the CFTC regulates derivatives markets, such as futures, options, and swaps , which relate to commodities and other financial products not traditionally considered securities. 

In this sense, the initiative of the former candidate for senator maintains that currently the functions of these two agencies overlap in areas such as the supervision of financial assets that mix characteristics of securities and commodities.  

The merger of these institutions and regulatory unification, according to Deaton, would eliminate this duplication of tasks, optimize resources and time, and offer clarity to investors and regulators.

According to Daeton, the potential merger of the SEC and CFTC could be beneficial for Bitcoin (BTC), simplifying regulation and eliminating current redundancies.

Secondly, Deaton explained that disagreements between the two agencies have led to inefficiencies and a lack of clarity for market participants.  

For example, in March 2024,when the CFTC, challenging the SEC, classified Ethereum (ETH) and Litecoin (LTC) as commodities in a complaint against the KuCoin exchange. 

This “turf war, ” as Deaton called it, is especially problematic in digital assets, where both the SEC and CFTC have attempted to regulate them under different legal frameworks. 

In this regard, Deaton explained that the discrepancies between the two agencies create an unfavorable environment for investors. 

“A merged agency could provide uniform rules and protections for investors and market participants, avoiding confusion caused by differing approaches to enforcement, rules, and market oversight.” 

John E. Deaton, former candidate for United States Senator. 

Ultimately, Deaton referred to the evolution of financial markets and how many products would no longer fit into existing categories (such as derivatives contracts and cryptoassets).

“Financial markets are becoming increasingly complex, and many financial products, such as derivatives and cryptoassets, do not fit neatly into a single category. A unified agency would simplify rules and processes for firms and investors, reducing compliance costs.” 

John E. Deaton, former candidate for United States Senator. 

Additionally, Deaton noted that the DOGE entity could improve the payment system in the United States.  

Currently, according to the former senatorial candidate's post, 14 federal agencies and institutions oversee different aspects of payment systems in the US. These include the US Treasury, the Federal Reserve and its FedNow payment system, which is also being pursued by the SEC. 

This fragmentation would lead to overlapping functions, additional costs and confusion for companies, which must comply with multiple and often contradictory regulations.  

The XRP vs SEC case, the example highlighted by Deaton

Reflecting on the challenges of fragmented cryptocurrency regulation in the US, Deaton recalled the XRP v. SEC case, which dates back to late 2020 and has yet to reach a final decision. 

In 2015, FinCEN ( Financial Crimes Enforcement Network ), a US Treasury agency, classified XRP as a virtual currency and subjected it to banking regulations. However, five years later, the SEC declared it a security, contradicting the previous classification.  

The SEC's intervention resulted in losses to investors exceeding $15 billion, according to Deaton. 

Following several legal battles and having dropped its lawsuits against Ripple executives Brad Garlinghouse and Chris Larsen in October 2023, the SEC appealed a previous ruling in early October 2024, continuing its attack on Ripple Labs. 

These “grey” areas into which cryptoassets fall can generate legal uncertainty and hinder innovation, as well as discourage companies and investors from operating in the market.  

In short, the SEC and CFTC communion could represent a catalyst that further drives the adoption of Bitcoin and other cryptoassets. However, this process is not yet in the debate phase in the United States, and nothing has been officially established.