Trump filling Democratic seats at SEC, CFTC could advance crypto bill talks, TD Cowen says

Filling Democratic vacancies at the Securities and Exchange Commission and the Commodity Futures Trading Commission could help move negotiations on a U.S. crypto market structure bill forward, according to TD Cowen.

The investment bank said the biggest obstacle to passing the legislation is not the bill’s core framework — which focuses on whether digital assets should be regulated as securities by the SEC or as commodities by the CFTC — but a political dispute over conflict-of-interest rules.

Democrats are pushing for a ban that would prevent senior government officials and their families from making certain financial transactions involving digital assets. TD Cowen said this proposal would include President Donald Trump and his family, given his involvement with the crypto project World Liberty Financial. Trump has raked in about $1.4 billion from his crypto ventures, including World Liberty Financial, Bloomberg estimated last month. The Trump family also holds a 20% stake in the mining firm American Bitcoin.

According to TD Cowen, Democrats are unlikely to abandon the demand because the party has made the President’s crypto holdings part of its messaging ahead of the midterm elections.

Last month, no Democrats voted in favor of a bill in the Senate Agriculture Committee, citing concerns about Trump’s crypto ventures. It remains unclear whether Democrats will support a bill in the Senate Banking Committee.

Republicans, meanwhile, oppose the proposal because they believe Trump would veto legislation requiring his family to divest its crypto holdings, TD Cowen said. It added that the disagreement has created a political deadlock even as industry groups continue to negotiate the broader structure of crypto regulation.

'One way to unstick the negotiations'

TD Cowen said one potential path forward would involve a compromise between the parties. Under this scenario, Trump would agree to fill empty Democratic seats at the SEC and the CFTC. In return, Democrats would accept conflict-of-interest provisions that would take effect only after the next presidential inauguration.

"Why would this appeal to Democrats? It would permit a Democratic president — if one is elected in 2028 — to immediately take control of both agencies without the need for the Senate to confirm new chairs," Jaret Seiberg, managing director at TD Cowen’s Washington Research Group, wrote in a note. "This matters as we expect crypto rulemakings will still be underway in 2029. Having Democratic chairs lets the Democrats freeze those rules on Jan. 20, 2029, if they want to reshape them."

While Democrats would still have to accept that Trump could retain his crypto holdings, Seiberg said the proposed trade-off could provide enough incentives for both sides to reach a deal. As a result, he believes the CLARITY Act could still become law despite the difficult political path ahead.

In December, Trump reportedly said for the first time that he is open to nominating Democratic commissioners to fill vacancies at the SEC and CFTC. By law, five-member commissions like the SEC and CFTC must include at least two commissioners from the minority party, yet both agencies currently have no Democratic commissioners. There are currently four vacancies at the CFTC and two vacancies at the SEC.

Earlier this month, Seiberg said Trump's "personal intervention" is likely needed to force compromises between banks and crypto firms for crypto market structure legislation to move forward.

Beyond the conflict-of-interest debate, how to treat stablecoin yield remains another major sticking point for crypto market structure legislation, as The Block reported last week. "The clock is ticking," a source familiar with the matter said at the time, estimating a 60% chance the bill becomes law in 2026.