An official website of the United States government
Here’s how you know
Official websites use .gov
A .gov website belongs to an official government organization in the United States.
Secure .gov websites use HTTPS
A lock
()
or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.
SEC-CFTC Harmonization Initiative Written Input Log
This written input was submitted through the Written Input Form and is posted without modification. Sharing submissions will help encourage productive dialogue and continued engagement. Note that the “Key Points” column is AI-generated. AI can make mistakes, and the Key Points are not a replacement for reading the entire submissions. Staff has not reviewed these AI-generated summaries for accuracy or completeness. If a Key Point is inaccurate, please email Harmonization@sec.gov and Harmonization@cftc.gov. This written input does not necessarily reflect the views of staff at either the Securities and Exchange Commission or the Commodity Futures Trading Commission.
SEC should formally codify its existing No‑Action Relief and align Regulation SBSR permanently with the CFTC’s reporting framework, as the CFTC-aligned model already achieves Congress’s Title VII transparency and oversight objectives efficiently.
Allowing SEC No‑Action Relief to expire would impose significant, unnecessary systems and compliance costs on SBSDRs and market participants, without providing a corresponding regulatory benefit.
The SEC and CFTC should implement a coordinated supervisory and examination framework, as duplicative oversight currently results in materially disproportionate burdens with limited incremental regulatory value.
Guardrail-based vault custody meets functional investor-protection standards by eliminating unilateral withdrawal authority, ensuring cryptographic segregation of assets, and providing insolvency‑remote structures comparable or superior to traditional qualified custodians.
SMA vault architecture should qualify as compliant custody because receipt tokens issued directly to clients create cryptographically enforceable, non‑waivable redemption rights, replicating and strengthening the protections of traditional separately managed account custody.
Privacy‑preserving verification (e.g., zero‑knowledge proofs) should be formally recognized as satisfying independent verification requirements by enabling regulators to validate holdings and solvency without forcing public disclosure of client portfolio data or proprietary trading strategies.
sFOX seeks to participate in the SEC’s “Project Crypto” Innovation Exemption Pilot to enable supervised secondary trading of tokenized real‑world assets (RWAs), including both tokenized commodities and tokenized securities.
The firm commits to compliance with all Pilot‑imposed limits, including adherence to AML/KYC requirements, provision of periodic regulatory reporting, and maintaining market‑integrity monitoring for tokenized securities activity.
sFOX proposes to act solely as an intermediary and trading venue—without originating or tokenizing RWAs—partnering with third‑party tokenization platforms while operating under existing MSB and trust‑company regulatory authorities.
The letter argues that non‑custodial smart‑contract vaults can satisfy SEC qualified custody and CFTC segregation requirements when they eliminate unilateral withdrawal authority, embed programmatic redemption rights, and cryptographically segregate client entitlements.
It proposes that the SEC and CFTC adopt a guardrail‑based compliance pathway under which a vault qualifies only if it meets seven structural conditions, including constrained governance, independent auditability, and the absence of affiliated routing incentives.
It recommends coordinated SEC‑CFTC rulemaking under the 2026 MOU to create a unified vault‑based custody standard, ensuring consistent treatment of customer asset protection across both agencies.
Thomas P. Gallagher, Miami International Holdings, Inc.
Advocates for time‑bound, coordinated SEC–CFTC processes to resolve jurisdictional questions for hybrid products, including escalation mechanisms and the use of targeted exemptive relief to reduce uncertainty and enable innovation
Urges streamlining of SEC SRO rule filings, emphasizing use of existing statutory flexibility to accelerate approvals, particularly for routine and fee filings, and aligning processes more closely with the CFTC’s shorter review timelines.
Calls for expanded cross‑margining arrangements and strengthened inter‑agency staff coordination, highlighting cross‑margining’s risk‑management and capital‑efficiency benefits and supporting regular SEC–CFTC engagement through enhanced MOUs and public roundtables.
Fragmented SEC–CFTC oversight creates duplicative rules, inconsistent definitions, and uncertainty, raising compliance costs and slowing market innovation.
Coordinated regulation provides aligned rulebooks, clearer guardrails for digital‑asset products, and stronger systemic‑risk monitoring through shared data.
Joint action could unlock new market structures and products—such as equity perpetuals, unified margining, and integrated securities/commodities platforms—while keeping innovation in the U.S.
