CFTC Chair Selig warns regulators will end up ‘writing all the rules’ for crypto if Clarity Act stalls

The Cost of Inaction

We’ve been living in a state of regulatory purgatory for years. For those of us building in crypto and AI, the lack of a clear framework isn’t just an annoyance; it’s a tax on innovation. CFTC Chair Michael Selig recently pointed out the obvious, though he did it with the tone of someone who sees the train wreck coming. The message is simple: if Congress doesn't pass the Clarity Act, the regulators will take the wheel and drive it wherever they want.

This isn't just about red tape. It’s about who gets to decide what a utility token is, what a security is, and how code is treated under federal law. When Congress stalls, federal agencies don't just stop working. They fill the vacuum. They use enforcement actions, interpretive guidance, and old laws meant for a different era to squeeze modern technology into legacy boxes. If you're a founder, that means the rules could change based on who is sitting in an office in D.C. on any given Tuesday.

The Clarity Act as a Lifeline

The Clarity Act was supposed to be the fix. It’s a piece of legislation designed to give builders some modicum of certainty. It aims to define jurisdictions—specifically drawing lines between the SEC and the CFTC—so teams know which boss they report to. For a long time, the strategy for many projects has been to keep their heads down and hope they don't get a Wells notice. The Clarity Act was meant to replace that hope with a checklist.

Selig’s warning is a reality check for the industry. He knows that regulators aren't necessarily the villains here, even if they often play the part. They are tasked with protecting markets, and in the absence of a modern rulebook, they will use a hammer because that's the only tool they were given in the 1930s. If the Clarity Act dies or stalls in committee, we are going back to a world where progress is dictated by litigation rather than innovation.

Regulation by Enforcement

We’ve seen this play out before. When there is no clear law, the SEC and CFTC are forced to litigate their way into a regulatory framework. This is "regulation by enforcement." It’s expensive, it’s slow, and it only benefits the lawyers. For a startup with a limited runway, a single inquiry from a regulator can be a death sentence, even if the team did nothing wrong. The ambiguity is the weapon.

If Selig is right and the regulators end up writing all the rules, we should expect a fragmented landscape. Each agency has its own culture and its own way of viewing risk. Without a unifying bill from Congress, you could easily find yourself compliant with the CFTC while simultaneously being sued by the SEC for the exact same activity. That’s not a functioning market; that’s a minefield.

What This Means for Builders

For founders, the takeaway is that you cannot wait for the government to get its act together. You have to build with the assumption that the rules will be messy and reactive for the foreseeable future. This means over-indexing on compliance early, even if it hurts your speed. It means having a legal strategy that is as robust as your technical roadmap.

• Focus on decentralization: The more control you have over a protocol, the more you look like a centralized entity that regulators can target.
• Jurisdictional awareness: If the U.S. remains a mess, look at regions that have already passed their own versions of the Clarity Act.
• Advocacy: Silence is interpreted as consent. Founders need to be vocal about how these delays impact their ability to hire and scale.

The biggest risk isn't necessarily bad rules; it’s the uncertainty of having no rules at all. When rules are codified in law, you can at least plan around them. When they are decided through lawsuits and backroom meetings at regulatory agencies, you are essentially flying blind. Selig is telling us that the window for a clean, legislative solution is closing.

The Long Game

We have to look at the motivations here. Congress moves slowly because crypto is politically divisive. Regulators move because they have mandates to fulfill. If the Clarity Act remains stuck, the “rules” will be a patchwork of court rulings and administrative decrees. This is the worst-case scenario for someone trying to build a global product.

The tech moves faster than the law, but the law always catches up. Selig’s warning is a call to action for the industry to put pressure on the legislative process. We are tired of the back and forth. We are tired of the ambiguity. Builders just want to know what the rules are so they can get back to building. If we don't get the Clarity Act, the regulators will write the rules, and we probably won't like what they have to say.

The biggest threat to crypto innovation isn't a strict rulebook—it's the absence of one that allows agencies to move the goalposts mid-game.

Ultimately, the burden falls on us to navigate this mess. Whether the Clarity Act passes or not, the underlying technology isn't going away. AI and blockchain are converging, creating new types of assets and interactions that the current system isn't prepared for. If Congress stays on the sidelines, don't be surprised when the regulators step onto the field and start calling fouls on everyone.

The Takeaway

Stop waiting for a perfect regulatory environment. Selig has made it clear that the alternative to a legislative framework is a regulatory free-for-all. If you're a founder, your priority should be resilience. Build systems that can adapt to changing rules, because the people writing them don't seem to have a consensus yet.

Read the original at The Block →