Michael S. Selig, Chairman: 9th Annual DC Blockchain Summit

WASHINGTON - Good afternoon.

Before I begin, I must note that the views I share today are my own as Chairman and do not necessarily reflect those of the Commission.

It is an honor to be here and to speak with the builders, developers, and entrepreneurs who are helping to shape the next frontier of finance.

Today, I want to talk about the profound shift we all see underway in our world, one that I hope can rebuild the trust that has been lost in recent years in two foundational pillars of American society: our financial systems and our information systems.

Trust in Decentralization

Let me begin with the idea of trust in decentralization.

For centuries, financial markets have required agreed-upon methods or rules to establish confidence and trust among market participants.

A farmer selling wheat futures must trust that the contract will settle, and a trader entering a derivatives position must trust that the counterparty will perform.

Historically, these assurances were provided by requirements set by regulatory agencies and centralized "trusted" institutions like exchanges and clearinghouses.[1]

While those institutions remain essential, in recent years, an increasing number of people have started to question many of the practices and assurances made by those gatekeepers.

Indeed, in recent years, much has been revealed.

We have seen a combination of new technology, poor foresight, and an undemocratic need for control undermine the stewardship placed in the establishment's care for decades.

We have seen regulatory agencies weaponized against innovative sectors like crypto, regulating through enforcement and driving American builders overseas.

And we have seen major financial institutions debank companies and individuals who did nothing more than operate within a politically disfavored industry.[2]

The formerly trusted guardians of financial prudence have lost face and lost the confidence of a broad swath of the American population.

And they know it.

Clearly, something needs to be done to rebuild our faith in the system and in our future as a nation.

In response to this crisis, we must not be afraid to look forward to new technologies, and new thinking, because new technologies, when combined with the power of open markets and systems, have often been the catalysts that push institutions and regulators to modernize systems built for an earlier era.

Breakthroughs in emerging technologies are enabling entirely new methods by which people can own and transfer assets and discover truth.

Distributed ledgers allow transactions to be recorded on a transparent, shared infrastructure. Smart contracts allow obligations to be executed programmatically according to predefined rules. Open-source code allows market participants to inspect the architecture that governs how these transactions occur.

It is an American value to own your own property, and protocols developed for decentralized finance, or DeFi, are a prime example of a way Americans can own property and access the financial system without a middleman.

Anyone with an internet connection can access lending, borrowing, or trading protocols that are transparent, auditable, and resistant to single points of failure.

This isn't just efficiency; it's democratization of finance, where trust emerges from verifiable code and consensus, rather than opaque institutions.

This shift is profound.

And, if history is any guide, it is consistent with the long evolution of American commodity markets.

Our markets have always evolved with technology-from open pit trading to electronic platforms, to algorithmic execution.[3]

Today, permissionless blockchain networks represent the next chapter in this story.

Trust in Markets

In parallel, we see a similar revolution for trust within information systems.

Prediction markets allow market participants to trade on the probability of future events.

These markets aggregate information from many participants and harness collective intelligence to forecast outcomes, from elections to economic trends.

Accuracy is rewarded, and misinformation is penalized through economic incentives.

Markets serve as powerful tools for information discovery, as participants reveal their beliefs through the action of economic risk-taking.

As new information enters the system, prices adjust. And, over time, the market aggregates dispersed knowledge into a tangible signal of probability, usually in the form of a number or a percentage.

In an efficient market, asset prices react and reflect publicly available information about the asset.[4]

And in the same way that we understand the value of market price signals, prediction markets can make clear the critical information influencing what later will be deemed to be true or false.

In this sense, predication markets function as a forum for decentralized truth.

Prices, not political biases, signal the likelihood of a future outcome, and establish trust in the wisdom of the market.

At the same time, social media platforms are fostering a form of decentralized trust via user-driven content, where real-time verification by millions of participants uproots the dominance of traditional news outlets.

No longer do we wait for news corporations and their army of editors, anointed in the dark and pushing slanted viewpoints, to dictate the narrative. Instead, truth bubbles up from diverse, decentralized voices, often faster and more reliably than legacy reporting.

Yet, this progress in decentralized truth hasn't come without challenges, particularly from politicians and even us regulators.

For example, we saw the prior administration attempt to ban political prediction markets ahead of the 2024 elections.[5] With President Trump's landslide victory, it is no surprise that they tried to do so.

We have also seen government regimes suppress particular viewpoints across news outlets and push what we now know as disinformation or "fake news".

Protecting the freedom to transact in prediction markets should not be a controversial or partisan issue, it is essential.

Americans should have the freedom to transact in lawful derivatives markets and should trust in the reliability of their signals.

Instead of establishing rules to protect consumers and prevent manipulation, the prior administration tried to outlaw these markets and went so far as to raid the home of a founder in the weeks leading up to the 2024 election.[6]

This only served to further stifle the technology's potential and undermine the dependability of the information that we consume each day.

And after the courts rejected the prior administration's attempts to ban these markets,[7] it was caught flat-footed, without rules in place for the broad range of new contracts that were trading across the country.

Thankfully, we live in a new reality where much more is possible.

Last week, the CFTC and the SEC announced a Memorandum of Understanding that solidifies our agencies' efforts to harmonize our regulatory initiatives and help unlock the full promise of these innovations.[8]

Jurisdictional clarity is essential if innovators are going to build compliant products in the United States.

For crypto, that means practical steps like a commonsense taxonomy to classify crypto assets sensibly and put the prior administration's "ecosystem" theory of security status to bed, once and for all.

This means directing staff to engage with market participants, including developers of onchain software systems, such as digital wallets and DeFi protocols, to better understand how existing regulatory requirements apply, if at all, to the emerging technologies they build.

As financial markets move onchain, I believe the United States should serve as the base layer where builders choose to deploy the systems powering this new frontier of finance.

We must also recognize that these systems are designed along a spectrum of decentralization. At one end of the spectrum, we see onchain systems that are centrally controlled and administered by a central actor or group of actors.

At the other end, we see onchain systems that are not controlled or administered by a central actor or group of actors acting in concert.

It is long overdue for the Commission to clarify which onchain software systems are subject to registration and which are not.

Restoring Trust

Let me close by returning to where I began.

The United States has long been the global leader in financial innovation.

Our derivatives markets are among the most sophisticated and liquid in the world.

They serve farmers managing crop risk, energy companies hedging price swings, manufacturers managing supply chains, and investors allocating capital.

That leadership did not happen by accident; it emerged from a regulatory philosophy that allowed markets to innovate while maintaining strong protections.

Fortunately, the United States-under President Trump's leadership-has an opportunity to lead this transformation as the new frontier of finance rises towards us from below the horizon.

In financial markets, permissionless public blockchains and DeFi protocols are introducing new ways to generate trust through transparent, open-source infrastructure.

In information systems, prediction markets are serving as a new tool for discovering truth, using price signals and economic incentives to aggregate dispersed knowledge.

These developments reflect a broader shift towards trust in decentralized and market-based systems.

Leadership matters, and our role as regulators is not to resist that shift or try to reorient activity to achieve some predetermined outcome-it is to provide a balanced framework for this shift to flourish.

If we get the balance right, decentralized and market-based systems will prosper, and we, as a nation, can then embrace this new re-establishment of trust in our financial and information systems.

And with that, let me hand it over to my friend, SEC Chairman Paul Atkins.