CFTC Proposes New Rules for Crypto Exchanges Offering Leveraged Trades

The Commodity Futures Trading Commission (CFTC) introduced a proposal on October 6 to regulate digital asset transactions and markets. If approved, this measure would utilize the agency’s existing authority to oversee leveraged crypto trades aimed at retail customers. Additionally, it would create a new registration category for crypto exchanges offering these leveraged trades.

CFTC Chairman Michael Selig emphasized that the proposal aims to provide clarity, certainty, and consumer protections in the crypto asset markets. The agency will accept public comments on the measure for 60 days. Leveraged, financed, or margin trading allows traders to borrow funds, potentially amplifying both gains and losses.

The proposal is part of an effort to address a regulatory gap following the blocking of the Clarity Act by a bipartisan group of senators. This bill would have granted the CFTC authority to regulate trades of digital assets deemed commodities. In the absence of legislation, the CFTC and the Securities and Exchange Commission (SEC) are pushing forward with their own regulatory measures.

Several crypto exchanges, including Coinbase Global Inc and Crypto.com, already offer leveraged or financed trading. Robinhood Markets Inc is also preparing to offer perpetual futures, which have no expiration date, on select cryptocurrencies, with as much as 10 times leverage on some contracts. Exchanges interested in offering crypto perpetuals or crypto-linked prediction markets can still seek registration as standard designated contract markets.