Turf battles are nothing new in Washington, but the one currently raging over which federal agency has authority to regulate the trading of digital assets reveals deep dysfunction in the modern administrative state. The battle goes far beyond which agency gets more power; the future of the internet may be at stake.

The United States is somewhat unusual in having different agencies to regulate securities, like stocks and bonds, and derivatives, like options, swaps, and commodity futures. The Securities and Exchange Commission (SEC) is the regulator of the former, while the Commodity Futures Trading Commission (CFTC) regulates the latter. But the jurisdictional borders are sometimes murky, thanks to overlapping mandates between the agencies, as well as with other state and federal financial regulators.  

Division of labor and competition may offer some benefits, but in this case, the lack of a clear regulator has meant that digital assets have fallen into some jurisdictional cracks. The 60 million Americans who trade crypto assets do so either overseas, at the mercy of foreign law, or under state money-transfer laws designed for payday lending, not financial markets.

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