CFTC Moves to Regulate Leveraged Crypto Trading Under New Framework
The Commodity Futures Trading Commission (CFTC) has launched a rulemaking process that could allow cryptocurrency exchanges to offer leveraged, margined, and financed crypto trading to retail customers under federal oversight. This move comes after Congress failed to advance the Digital Asset Market Clarity Act, prompting the CFTC to act within its existing authority. The agency issued an advance notice of proposed rulemaking for two new regulations: Regulation Crypto Asset Transactions (CTX) and Regulation Crypto Asset Markets (CAM). These regulations aim to establish tailored rules for retail crypto commodity transactions already covered under Section 2(c)(2)(D) of the Commodity Exchange Act.
The proposed framework targets leveraged, margined, or financed crypto transactions rather than ordinary spot trading. Existing designated contract markets could offer these transactions under new rules, while platforms focused solely on this category could register as a new type of designated contract market called a crypto asset market (CAM). CFTC Chairman Michael Selig emphasized that this structure provides a federal option rather than a mandatory replacement for state licensing, allowing ordinary spot exchanges to continue operating under state money-transmission frameworks.
The CFTC is seeking public input on how the new regime should address risks such as manipulation, customer protection, custody, and market surveillance. Selig noted that prospective CAMs would remain subject to core principles applicable to designated contract markets, with additional crypto-specific rules. These could include requirements for assessing token distribution, ownership concentration, and proof-of-reserves for platforms holding customer assets. The agency is also considering mandating futures commission merchants to intermediate retail crypto transactions, bringing customer funds under stricter controls.
The initiative follows the Senate's failure to advance the CLARITY Act on September 15, which fell short of the required 60 votes. The CFTC had been preparing for this outcome and is now moving ahead with narrower frameworks while comprehensive legislation remains unresolved. The next steps involve a 60-day public comment period after the notice is published in the Federal Register, followed by the development of proposed rules and another public-comment process before any final requirements take effect.