Why Merging the SEC and CFTC is a Bad Idea for Markets and Main Street

By Cantrell Dumas, Director of Derivatives Policy

Recent reports suggest that the Trump Administration and Elon Musk’s misnamed Department of Government Efficiency (DOGE) are considering merging two financial regulators, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

Supporters claim this move would cut red tape and streamline oversight, but that couldn’t be further from the truth. At first glance, it might seem like a sensible way to reduce government waste. But in reality, a merger wouldn’t save money or improve regulation. Instead, it would create a bloated bureaucracy that weakens oversight, putting Main Street Americans, investors, and financial markets at greater risk.

Different Agencies with Different Jobs

To understand why this merger is misguided, we need to look at the distinct missions of these agencies.

The SEC was created in 1934 in response to the 1929 stock market crash, which was fueled by reckless speculation and shady Wall Street practices. When the market collapsed, millions lost their life savings, shaking confidence in the financial system and helping to trigger the Great Depression. To restore trust and prevent future crises, Congress created the SEC to police Wall Street, protect investors, and enforce rules that promote honesty and transparency in financial markets.

The CFTC, on the other hand, was created in 1974 to regulate the fast-growing futures and derivatives markets. Before that, futures trading primarily covered agricultural products like wheat and corn and was overseen by the Department of Agriculture. But by the 1970s, trading expanded to include complex financial contracts tied to everything from interest rates to energy prices. Recognizing the need for an expert agency to oversee these sophisticated markets, Congress established the CFTC to ensure fair trading and protect against fraud and manipulation.

While both regulate financial markets, their missions, markets, and legal frameworks are vastly different. The SEC is all about protecting investors, while the CFTC is more concerned with ensuring fair and transparent trading in complex global derivatives markets. Merging them would create a regulatory Frankenstein that doesn’t serve either mission well.

No Cost Savings, Just More Bureaucracy

One of the main arguments for merging the SEC and CFTC is that it would save money. But in reality, it wouldn’t cut costs. It would only create a more complicated bureaucracy.

That’s because the two agencies regulate entirely different markets. The SEC lacks the expertise to oversee complex derivatives, while the CFTC isn’t built to police securities trading. Even if they were combined, they would still need to maintain specialized staff to do their jobs properly. In other words, merging them wouldn’t eliminate redundancies. It would just add another layer of government without improving efficiency.

The only theoretical way to achieve real cost savings would be to shrink or eliminate parts of the CFTC, but that would gut critical oversight. The CFTC is already underfunded, yet it regulates massive global commodity and derivatives markets that influence everything from grocery prices to gas costs. Reducing its resources or folding it into the SEC wouldn’t make regulation more efficient. It would create blind spots that leave consumers, businesses, and markets more vulnerable to fraud, manipulation, and price volatility.

Bigger Doesn’t Mean Better Regulation

If the CFTC were absorbed into the SEC, its vital focus on derivatives markets would become just one small priority among many. That would weaken oversight in a sector that has a direct impact on food prices, energy costs, and financial stability.

The CFTC has proven itself as one of the most effective regulators despite being significantly smaller than the SEC. It polices hundreds of cases at any given time with a fraction of the SEC’s staff. Yet, because the CFTC relies entirely on annual congressional appropriations, unlike the SEC which has authority to recoup its budget through industry fees, its funding is more directly subject to political whims.

Instead of merging the agencies, a far better solution would be to reform how the CFTC is funded. If it were financed through industry fees, just like the SEC, it would save American taxpayers $411 million annually (the amount currently funded through congressional appropriations) while ensuring the CFTC has the resources needed to oversee the markets properly.

What’s the Real Motivation?

If a merger wouldn’t save money or improve oversight, then why is it being pushed? The answer lies in politics, not policy.

Some politicians and industry insiders see a merger as an opportunity to weaken financial oversight. By combining the SEC and CFTC, they can create a sprawling, less effective regulator—one that is easier to influence and less capable of holding Wall Street and big financial players accountable.

This kind of regulatory rollback benefits those who want fewer rules and less scrutiny, but it comes at a steep cost for everyday Americans, businesses, and markets that rely on fair and transparent financial systems.

The Bottom Line

Merging the SEC and CFTC would create more problems than it solves. It wouldn’t save money, wouldn’t improve oversight, and would dilute the critical role the CFTC plays in policing derivatives markets.

Instead of pushing a misguided merger, policymakers should focus on strengthening the CFTC by fixing its broken funding model. That way, we can maintain strong, separate regulators that serve distinct and essential roles.

---