WASHINGTON (Reuters) - The Commodity Futures Trading Commission would have stronger policing powers over the derivatives market, along with a boosted budget, under legislation introduced in the U.S. Congress on Wednesday.

The bill, introduced by Democrats Elizabeth Warren and Mark Warner in the Senate and Elijah Cummings in the House of Representatives, also would add new tasks to the regulator's rulemaking agenda.

"The only way to make sure that derivatives can never lead to a financial crisis and taxpayer bailouts again is to put in place clearer rules and stronger oversight," Warren said in a statement.

The bill likely will fizzle in the Republican-led Congress. It could also become part of this year's election fights, as the relationship between Wall Street and Washington frequently moves to center stage in presidential and congressional campaigns.

Democrats such as Warren, who is campaigning for her party's presumptive nominee, Hillary Clinton, regard the Dodd-Frank Wall Street reform law passed after the 2007-09 financial crisis as crucial for preventing another massive meltdown. That law greatly expanded the CFTC's reach, as swaps and derivatives had played a key role in the breakdown of banks and other firms.

They also seek further regulation, saying vulnerabilities persist in the financial system.

The presumptive nominee for the Republican Party, real estate developer and television star Donald Trump wants to repeal Dodd-Frank. Many in the party say the law has gone too far, drying up liquidity and freezing capital.

The proposed legislation "gives the CFTC a stable funding stream and the tools necessary to help deter future illegal acts by permitting penalties large enough to impact the bottom lines of even the largest financial firms," Cummings said.

The CFTC currently is funded through annual appropriations from Congress, unlike the Securities and Exchange Commission, which is backed by user fees and fines.

CFTC Chair Timothy Massad has sought a change, saying millions of dollars more in funds would help the agency keep up with technology advancements in the markets it oversees and with "high-powered defense teams" in its enforcement cases.

Republicans in Congress say the funding process keeps the agency accountable to elected leaders.

The Democrats' bill would move the CFTC to the same model as the SEC. It would also put certain foreign exchange swaps under CFTC jurisdiction, change how derivatives are treated in bankruptcy, require posting initial margin in inter-affiliate swaps, and require regulators to review derivatives clearinghouses.

(Reporting by Lisa Lambert; Editing by Bill Trott)