The CFTC has asked the public how it should write rules for retail crypto trading on leverage. On October 5 the agency published an advance notice of proposed rulemaking, RIN 3038-AF80, titled “Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets.” An advance notice comes before any proposed rule, and the comment window is 60 days.
What the CFTC published
According to the CFTC’s release, the Commission published the notice to “provide notice of, and seek public comment regarding, its intent to establish a comprehensive regulatory framework” under section 2(c)(2)(D) of the Commodity Exchange Act. That section covers retail commodity transactions involving crypto assets, which the notice abbreviates as CTXs. Comments must arrive within 60 days of publication in the Federal Register and will be posted on Regulations.gov. The Commission says it will use them to inform potential future action, such as a rulemaking.
CFTC Chairman Michael S. Selig framed the action in terms of consumer protection. “The American people deserve clarity, certainty, and consumer protections in the crypto asset markets and the agency is committed to delivering this by incorporating crypto asset transactions into its uniform national market regulatory framework,” Selig said in the release.
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Three topics the notice puts to comment
The release lists three areas where the Commission wants input. The first is how it can prevent abusive practices in crypto asset markets and CTXs under a uniform national regime. The second is how it can give market participants crypto-specific context on requirements and practices that are commonly accepted in the industry. The third is whether to codify, through rulemaking, a subcategory of designated contract market registration known as a crypto asset market, built specifically for CTXs.
The full notice splits the work in two. Regulation CTX is the Commission’s preliminary reading of terms in section 2(c)(2)(D). Regulation CAM, short for crypto asset market, is a purpose-built framework for exchanges and the intermediaries around them.
Regulation CTX: when an offer counts
The statute reaches transactions “offered (even if not entered into)” on a leveraged, margined or financed basis. The notice says the Commission has never clarified when an offer triggers that reach, and it sets out a preliminary view. A covered offer may be established by documentation that sets the terms on which a customer may execute a CTX, such as onboarding documents, exchange terms and conditions, or credit and margin documentation. It can also attach to every transaction on an exchange, in a customer account or in a product class, rather than to one trade.
The notice also looks at financing that comes from a third party. The statutory phrase “acting in concert” may, in the Commission’s preliminary understanding, capture financing arrangements that the offeror or counterparty facilitates, arranges or endorses. Its examples include financing introduced through marketing or advertising, financing subject to revenue-sharing agreements, and financing accessed through a platform the offeror operates.
One question asks whether a covered offer could include access to onchain “vaults” through the same exchange interface where retail customers buy crypto assets. The notice takes no position on that question and asks for comment.
Actual delivery and onchain protocols
A transaction that ends in “actual delivery” falls outside section 2(c)(2)(D)(i). The notice describes the law on that exception as derived mainly from court cases and points to the Monex decision, which held that actual delivery requires the transfer of some meaningful degree of possession or control. The Commission preliminarily understands that many onchain trading protocols settle in a way that gives the purchaser possession and control of the asset, and it asks for comment on that understanding. It also says that certain onchain transactions may still amount to actual delivery while a lien or security interest remains, for example where protocol rules let the buyer use the asset freely and liquidate or burn it if margin collateral falls below a threshold.
A footnote sets the outer boundary. A payment stablecoin issued by a permitted payment stablecoin issuer under the GENIUS Act is carved out of the definition of “commodity,” so it is outside this notice. The Fed’s separate stablecoin proposals, covered in our opinion on the Q4 comment calendar, run on their own track.
Regulation CAM: a registration category for exchanges
Regulation CAM is where the notice gets structural. The Commission preliminarily believes an exchange could obtain designation as a crypto asset market, solely for dealings in CTXs, by meeting obligations tailored to those products. Unlike traditional futures venues, crypto platforms typically run integrated infrastructure for listing, trading, settlement and custody. The notice contemplates letting a crypto asset market also register as a futures commission merchant or derivatives clearing organization, or affiliate with one. It says the Commission preliminarily believes integrated models may deliver better outcomes for retail customers through greater transparency, capital efficiency, lower fees and market resiliency.
A separate question in the comment section asks whether the proposed reading of “offer” would give an exchange “a commercially viable avenue” to choose not to offer CTXs and stay under the state-level framework. That question matters for state-regulated platforms, because it asks whether federal registration is a choice or a consequence.
What it means for the finance leader
This is our read, not the CFTC’s. The documentation point is the one most likely to reach firms that do not think of themselves as crypto exchanges. If a bank, broker or fintech gives retail customers access to crypto assets and any customer paper describes margin or financing, including financing a partner arranges, the notice’s preliminary view is that the paper itself can be the covered offer. Compliance teams should find out which documents set those terms before the comment window opens, because the Commission is asking about exactly that.
The timing sits next to other open items. The SEC’s custody proposals and the UK’s crypto authorisation gateway, both covered in our earlier article, are moving on their own schedules, and our feature on custody rules traces how US and UK regulators have converged on similar building blocks.
Three steps follow. Inventory customer documents that mention margin, leverage or financing for crypto products. Map any third-party financing partner against the “acting in concert” examples. Decide whether to comment on the actual-delivery and opt-out questions, which the notice poses directly. The Federal Register date starts the 60-day clock, and the Regulations.gov docket is where comments go.
Source: CFTC
