The Senate Agriculture, Nutrition, and Forestry Committee held a hearing on oversight of digital commodities in which senators and witnesses pressed Congress to close what lawmakers described as a regulatory gap that leaves millions of retail investors exposed and encourages overseas migration of U.S. crypto firms.

"The CFTC and only the CFTC should regulate the spot trading of digital commodities," Chairman Boseman said in opening remarks, calling for a legislative framework that preserves the existing division of securities and commodities oversight.

Why it matters: Committee members and witnesses repeatedly cited large-scale retail participation and market size as the reason for urgency. Witnesses and senators gave multiple estimates during the hearing: the digital asset market cap was described at more than $3.5 trillion; speakers said roughly 55 million to 65 million Americans own digital assets; and committee members pointed to rising theft and fraud figures and high-profile failures such as FTX to illustrate consumer risk.

Industry witnesses and former regulators framed a core legislative choice: give the Commodity Futures Trading Commission (CFTC) explicit, exclusive authority over spot trading of digital commodities, and pair that authority with funding, self‑regulatory organization (SRO) roles, and rulemaking that adopts time‑tested customer protections. G. Kim, identified in testimony as president and acting chief executive officer of the Crypto Council for Innovation, urged Congress to "urgently pass legislation providing the CFTC with oversight over the trading of digital commodities." Mr. Kim said federal clarity will protect consumers and keep innovation in the United States.

Former CFTC officials said the agency already has relevant experience. Mr. Benham, introduced as a former CFTC chairman, told senators the agency has built enforcement and surveillance expertise across derivatives and spot markets since 2015 and that "filling the regulatory gap will provide the needed customer protections that American investors have become accustomed to in traditional financial markets." Several witnesses argued any legislative design must include anti‑money‑laundering (AML) and know‑your‑customer (KYC) authority for spot intermediaries.

Witnesses representing market infrastructure urged statutory roles for an SRO. Tom Sexton of the National Futures Association (NFA) said the NFA's public‑private oversight partnership with the CFTC has "resulted in a strong track record of protecting retail customers" and recommended that Congress preserve a significant role for an RFA/SRO in any new market structure law. Walt Lukin, president and CEO of the Futures Industry Association, described five CFTC strengths—principles‑based regulation, innovation support, customer protections, enforcement, and cross‑border tools—and urged clear jurisdictional lines between the CFTC and the Securities and Exchange Commission (SEC).

Several senators pressed witnesses on draft legislative proposals. Witnesses criticized provisions that would broadly exempt certain decentralized finance (DeFi) activity or create large "collectible" carve‑outs. Timothy Massad, who testified as a research fellow at Harvard Kennedy School, called the DeFi carve‑outs in one bill “one of its worst features,” arguing that many DeFi arrangements have centralized touchpoints and therefore should not receive a regulatory pass.

The hearing also featured repeated and pointed discussion of potential corruption and conflicts of interest when public officials issue or endorse digital assets. Senator Durbin and others raised the example of a presidential meme coin and a stablecoin tied to a private company. Massad responded that those actions are "more than a black eye" and said, "I think it's evidence of corruption." Multiple senators—including Schiff, Booker and Bennett—asked whether elected officials should be prohibited from issuing or endorsing digital assets while in office; several witnesses said such a prohibition should be considered.

Lawmakers returned throughout the hearing to two implementation issues: agency capacity and cross‑agency coordination. Former CFTC leaders said new statutory authority will be ineffective without appropriated funding and staff. Mr. Benham referenced prior testimony estimating added CFTC resources on the order of $120 million to $130 million over early years to staff technology, surveillance, and enforcement. Senators warned that recent hiring freezes and proposed budget cuts at financial agencies would undermine any new mandate unless Congress appropriates funds.

Other topics discussed included custody and segregation of customer funds (witnesses cited MF Global and FTX as precedents for why segregation matters), the risk that vertically integrated centralized trading platforms can engage in proprietary trading or list tokens with conflicts of interest, best‑execution and broker duties for crypto intermediaries, and the international competition for blockchain industry activity (witnesses cited regulatory developments in the EU, UK, Japan and Singapore).

No formal legislative action or votes occurred at the hearing. Chairman Boseman closed the session by noting the record would remain open for five business days.

Looking ahead: Senators and witnesses urged rapid but careful legislative work: a framework that assigns jurisdiction, funds the CFTC to carry out new authorities, includes AML/KYC and custody rules, preserves customer protections associated with traditional commodity and futures markets, and prevents exemptions or loopholes that would encourage regulatory arbitrage or create opportunities for fraud.