Social media platforms are replete with memes of a person sitting behind a folding table in a public setting like a park with a sign that states a controversial (or humorous) position and asks passersby to convince the person behind the table to change their mind.

Here’s my sign, change my mind:

 

In an age of pronounced government efficiency and the Trump Administration’s public repudiation of the recent digital asset pogrom by enforcement, the first cut should be the sibling rivals, the SEC and CFTC.

 

 

To be clear, I am not arguing for anarchy with no regulators overseeing critical financial markets. Rather, I envision a unified agency that meets the primary purpose of both current agencies — protection of investors from fraud, manipulation and abusive practices — thereby ensuring market integrity.

While others have cried out for better coordination between agencies to address modern financial complexities, in this current political and regulatory environment I think we can do better.

The overlap between the two regulatory agencies has grown since 1974 when the CFTC first emerged from earlier agencies focused on agricultural commodity markets. Beginning with the expansion of the derivatives market into financial products and extending to the current tug of war over digital assets, the tension between the two agencies has led to reduced clarity and ultimately led to a naked power grab by the recent SEC Chairman Gary Gensler.

These self-serving political efforts of the past regime led to a new asset class being stifled domestically solely so that it could be controlled by one agency over the other. The use of ill-fitting and ever-changing legal theories and punitive enforcement actions to exert control over digital assets and ultimately wrest funding and primacy from its sibling did not serve the public good. However, it did manage to accomplish its primary goal: gather power for the SEC and its Chairman without regard for the collateral damage of suppressing a new asset class domestically.

So, let’s remove the perverse incentives and finally merge these two agencies together.

Vestigial organ(ization)s that are adjacent to the SEC and CFTC, the NFA and FINRA, would logically be folded into the new combined market regulator, driving greater coordination, cost savings and efficiencies.

Why have multiple separate divisions responsible for the examination of registrants when you can have one? Won’t that lead to better information exchange and narrow the gaps in which bad actors dwell? Why have different enforcement divisions across four regulatory organizations when having just one will ensure better coordination and use of taxpayer resources? The chronically understaffed commodities regulator would gain access to an enforcement staff that has been bulked up for windmill tiling at crypto and can be repurposed and properly utilized to identify and convict fraudulent market actors instead of trying to punish computer code.

From my perspective there is no better way to kick off the final term of our most transactional President than to merge these two different sides of the same coin.

Market participants would no longer have to raise major questions (doctrine) about which agency should be the proper regulator, the new “Commodities and Securities Commission” (commodities come first because from a futures perspective everything is a commodity except for onions and box office receipts, hence the primacy) would have the proper and updated mandate to address financial markets as they exist in the 21st century (and beyond) vs. the current regime which was adopted before the advent of the personal computer.

New rules for digital assets could be written with the primary purpose of just writing the best, most applicable rules for an emerging asset class instead of serving multiple masters, each trying to grab power and prestige from an agency rival.

Of course, this would be a massive and lengthy undertaking to not only reconcile existing rules, processes, staff and facilities, but jurisdictional oversight by different congressional committees would have to be ironed out as well. Resolving these longstanding issues would require bipartisan cooperation, industry buy-in, and significant changes to existing laws and structures — making it a difficult task in practice, but imagine the clarity it would evoke.

Go ahead, change my mind.

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