CFTC Proposes New Framework for Leveraged Retail Crypto Trading

The Commodity Futures Trading Commission (CFTC) has proposed a new framework for regulating leveraged retail crypto trading under Section 2(c)(2)(D) of the Commodity Exchange Act. The agency published an advance notice of proposed rulemaking on October 5, seeking public comment on how the rules should apply to crypto asset transactions. The notice outlines two proposed frameworks: Regulation CTX for key definitions and Regulation CAM for a new category of crypto asset market registration.

Under the proposed rules, retail leverage could only be offered through a futures commission merchant (FCM) or a bank sponsored by an FCM. The CFTC also raised questions about platforms that combine trading, clearing, and custody, including potential conflicts of interest. The notice narrows the definition of "actual delivery," suggesting that crypto assets recorded only on an exchange’s internal books would not qualify. CFTC Chairman Michael Selig linked the proposal to the agency’s work on digital-asset market structure, aiming to provide clarity and consumer protections.

The notice includes a broad set of questions for public comment, covering custody, customer protection, and market operations. It also discusses the CFTC’s approach to crypto enforcement between 2021 and 2024, citing cases involving Kraken, Ooki DAO, and Uniswap Labs. The agency said its latest notice is intended to complement the SEC’s work by establishing federal rules for crypto assets that trade in secondary markets on the commodities side.

Comments are due within 60 days after the notice is published in the Federal Register and will be posted on Regulations.gov. The CFTC’s proposal follows other recent actions involving crypto markets and products, including expanded no-action relief for crypto trading software providers and proposed event-contract swap rules.