Decreasing the Costs of Jurisdictional Gridlock: Merger of the Securities and Exchange Commission and the Commodity Futures Trading Commission

Jurisdictional conflict exists between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), primarily due to the language of the 1974 CFTC Act. This Act grants the CFTC exclusive jurisdiction to regulate certain financial instruments which, given the increasing complexity and “hybrid” nature of such instruments, might simultaneously be subject to SEC regulation. This Note first explores the history of the two agencies and the statutory language giving rise to the jurisdictional conflict. This Note then examines several instances of jurisdictional conflict that resulted in extensive costs for the respective agencies and the United States’ financial markets. Specifically, this Note addresses the impact of jurisdictional conflict in terms of litigation costs, lost financial innovation, offshore migration of financial instruments, and the corresponding decrease of the United States’ share in the global financial marketplace. This Note further examines several other issues posed by interagency conflict and suggests that the solution to these real and potential costs is a merger of the CFTC into the larger, more experienced SEC. Finally, this Note suggests that the current political atmosphere presents the most favorable opportunity to merge the agencies that has existed since the creation of the CFTC. While a merger of the two agencies may not eliminate all of the inefficiencies of the current system, a single regulator could provide a lower-cost alternative to the present, anachronistic, dual regulatory system which is faced with problems of increasingly complex financial instruments and expanding global competition.