CFTC Seeks Comments on Leveraged Crypto Trading Rules

The Commodity Futures Trading Commission (CFTC) has initiated a 60-day comment period on two proposed crypto rules aimed at regulating leveraged trading. The advance notice of proposed rulemaking covers Regulation CTX and Regulation CAM, focusing on trades involving leverage, margin, or financing. Exchanges offering these services to retail customers could register as a new type of federally supervised venue, known as a crypto asset market. This registration would be voluntary but would bring anti-manipulation controls and a proof-of-reserves obligation.

CFTC Chairman Michael Selig presented the plan in a speech at Fordham University's law school and defended it in a newspaper op-ed. The notice sets no binding requirements yet, but written comments are due 60 days after its publication in the Federal Register. The framework would allow venues to follow one federal rulebook instead of a patchwork of state money-transmitter licenses, with registered futures commission merchants handling customer trades.

The proposed rules do not extend to the spot market, where direct buying and selling of assets like Bitcoin (BTC) and Ether (ETH) without leverage remain under state money-transmission law. Selig acknowledged that the CFTC lacks authority to force crypto assets onto registered platforms without congressional action. He noted that the agency's actions cannot replace a law indefinitely, and analysts have cautioned that rules without statutory backing could face legal challenges or changes in political leadership.

The Digital Asset Market Clarity Act, which would have given the CFTC explicit authority over spot crypto markets, stalled in the Senate weeks ago. In its absence, the Securities and Exchange Commission (SEC) has moved faster, proposing custody rules for investment firms after jointly classifying Bitcoin and Ether as non-securities earlier this year.