• Key insight: Although Democrats may increase scrutiny of the Securities and Exchange Commission and Commodity Futures Trading Commission and the industries they oversee, the agencies are still expected to move forward with their regulatory agendas.
  • What's at stake: In the absence of congressional action on a market structure bill, the CFTC and SEC have begun developing their own cryptocurrency regulations. But because those rules could be reversed by a future administration, some industry stakeholders believe some version of the CLARITY Act could still be passed.

WASHINGTON — The Securities and Exchange Commission and the Commodity Futures Trading Commission are expected to proceed with setting rules for the crypto and predictions markets, even in the face of new Democratic majorities that will take office early next year.

Both agencies have said they will move independently to enact regulations under existing authorities for the cryptocurrency and prediction markets after the failure of the CLARITY market structure bill in September, and industry stakeholders expect that to continue, even as Democrats use their new majorities in Congress to scrutinize the agencies and those nascent markets. 

That oversight could include calls for SEC Chairman Paul Atkins and CFTC Chairman Mike Selig to testify before congressional committees. Democrats could also seek testimony from cryptocurrency and prediction market executives, Ian Katz, a managing director at Capital Alpha, wrote in a note published after the midterm elections.

"They will be aggressive in investigating a broad range of issues. The chairs would also call up regulators and executives to testify – among those, [Federal Housing Finance Agency Director Bill] Pulte (probably even if he leaves), the SEC's Paul Atkins and the CFTC's Mike Selig," Katz wrote. "The Democrats are far more unhappy with crypto than they are with banks. In addition to questioning crypto executives, the committees will call prediction markets executives to testify."

Congress-free crypto rules

In the absence of congressional action on the CLARITY Act, the SEC and CFTC are developing rules and guidance to address gaps in the existing regulatory framework, creating a patchwork of policies that could shape the industry's future. 

The SEC has proposed rules aimed at streamlining how cryptocurrency companies raise capital. Dubbed "Regulation Crypto Assets," the proposal includes two exemptions that would allow certain crypto companies to raise capital without going through the traditional securities registration process. Meanwhile, the CFTC is seeking public input on a potential federal regulatory framework for leveraged cryptocurrency trading, following through on a plan previously outlined by Selig.

Given the amount of time left in his administration, some of these regulatory changes could be finalized before the end of President Donald Trump's term. But their long-term prospects remain uncertain, as a future administration could seek to reverse or revise anything this administration completes.

"I think people in the industry really appreciate what the SEC and the CFTC are doing, but they want to future-proof this," said Gary Dewaal, industry consultant and former CFTC attorney. "They don't want folks coming in later that might reverse all this stuff."

That uncertainty is one reason Dewaal believes there is still some hope, however slim, for Congress to pass a version of the crypto market structure legislation despite the anticipated shift in control of the two chambers. 

"I wouldn't be surprised if sometime in the next two years we see some sort of version of CLARITY emerge," he said. "It probably would have enhanced customer protection provisions and maybe some enhanced conflict provisions, but my guess is folks want to demonstrate bipartisanship by working together and this is something that can be done."

For banks, one of the central issues in the debate was whether stablecoin companies should be allowed to offer yield-bearing products. Banking groups have warned that such offerings could draw deposits away from traditional banks, particularly smaller institutions

Prediction markets in the spotlight

Prediction markets, another area overseen by the CFTC, are also likely to draw attention from Democrats. Industry observers expect lawmakers to scrutinize the growing market, though new legislation could be difficult to advance.

Sam Henry Lazarus, an analyst at the Council on Foreign Relations, said the furthest a Democrat-controlled Congress could go in overseeing prediction markets would likely be advancing relatively narrow legislation addressing issues such as insider trading and disclosure requirements.

"I suspect the Democrats will flex most of their muscle using oversight power in both the House and the Senate to make inquiries, particularly regarding Polymarket's relationship with Donald Trump Jr.," he said.

Trump Jr. invested an undisclosed amount in Polymarket in August 2025 through his venture capital firm, 1789 Capital, and serves on the prediction market's advisory board. He also became a strategic adviser to Kalshi in January 2026. 

Lazarus also expects Democrats to use congressional hearings to bring greater public attention to prediction markets.

"I would absolutely expect at some point over the next two years the CEOs of exchanges to be invited to speak before the Congress," he said.