CFTC Crypto Rules: Agency Moves on Retail Leverage Without Congress

• The CFTC has started rulemaking for retail crypto trading that uses leverage, margin or financing.
• A new exchange category, the Crypto Asset Market, would offer a federal alternative to state licensing.
• Ordinary spot exchanges stay outside the plan because only Congress can require them to register.
• The SEC is taking a parallel route with its own crypto exemptions and custody proposals.

The Commodity Futures Trading Commission has opened a rulemaking process that could produce the first federal regime written specifically for crypto exchanges offering leverage, margin or financing to retail customers. The agency published an Advanced Notice of Proposed Rulemaking covering two initiatives, Regulation Crypto Asset Transactions (CTX) and Regulation Crypto Asset Markets (CAM), and will collect public comment for 60 days. It comes weeks after the Senate failed to advance the CLARITY Act on September 15, and it relies entirely on powers the CFTC already holds under the Commodity Exchange Act.

Spot exchanges stay with the states because the CFTC cannot force them to register

An advance notice is the earliest formal stage of federal rulemaking, so no exchange faces new obligations today. Regulation CTX would set rules for crypto transactions offered to retail customers on a leveraged, margined or financed basis. Regulation CAM would create a crypto-specific subcategory of the Designated Contract Market, the license futures exchanges already hold, giving a qualifying platform one federal regulator instead of a patchwork of state money-transmitter licenses.

Chairman Michael Selig described the market as three rungs. The plan reaches only two.

RUNG 1 Spot trading Buying and selling without leverage. Supervised mainly through state money-transmission regimes.

Outside CTX/CAM

RUNG 2 Retail leverage and margin Leveraged, margined or financed crypto trades, covered by Section 2(c)(2)(D).

Main target

RUNG 3 Futures and perpetuals Derivatives listed on Designated Contract Markets, which could also offer CTXs.

Already CFTC territory

Selig was direct about the first rung. “Only Congress has the authority to mandate that all crypto asset exchanges register with the Commission,” he said.

Altcoins would face an ownership check before exchanges can offer leverage on them

A CAM would inherit many principles that apply to regulated derivatives exchanges, adjusted for crypto. Before listing an asset for leveraged trading, the exchange would have to assess whether it is susceptible to manipulation, and Selig named the factors: token distribution, concentration of ownership, lockups, vesting schedules, programmatic issuance and buybacks. For smaller tokens that is a higher bar than liquidity alone.

The framework also contemplates a formal proof-of-reserves requirement where an exchange holds customer property in omnibus accounts, meaning pooled accounts that do not separate one client’s assets from another’s. Customer-facing activity would run through registered Futures Commission Merchants, intermediaries already bound by CFTC rules on minimum capital, segregation of customer assets and supervision, as well as Bank Secrecy Act duties on money laundering.

The notice sets no leverage cap. According to Reuters, an exchange seeking to offer leveraged products would instead need to clear them with agency staff.

A credited exchange balance may not count as delivery within 28 days

Section 2(c)(2)(D) brings leveraged retail commodity transactions under CFTC oversight unless the commodity is actually delivered within 28 days. The agency’s 2020 guidance, since withdrawn, held that the customer must gain possession and control of the entire asset and be able to use it away from the platform. The new notice proposes a simpler test: delivery to the customer’s own external, non-custodial wallet within 28 days would generally qualify.

Most centralized platforms would not meet that test. Coins bought with borrowed funds usually stay in the exchange’s custody as collateral, so nothing reaches a wallet the customer controls, and the trade falls inside the CFTC’s reach. A joint SEC and CFTC interpretation from earlier this year adds the second legal support by naming BTC, ETH, SOL, XRP, ADA, DOGE and LINK, among others, as digital commodities.

Four Republican votes left regulators working with laws written decades ago

The CLARITY Act won a majority but fell short of the 60 votes needed to advance, with four Republicans joining Democrats in opposition. Reuters reported a 50-49 tally. The bill would have required centralized crypto exchanges and brokerages to register with the CFTC, authority the agency cannot create for itself.

What the CFTC can do under current law ✓ Regulate retail leveraged and margined crypto ✓ Create the CAM exchange category ✓ Require proof of reserves and segregated funds ✓ Police fraud and manipulation in spot markets What still requires Congress ✕ Mandatory registration of spot exchanges ✕ Full authority over the spot market ✕ Rules a future chair cannot rewrite ✕ Protection from court challenges to agency authority

FTX supplies the numbers behind Selig’s case for prevention over enforcement. A federal court ordered FTX and Alameda to pay monetary relief under the CFTC settlement, while customer assets at LedgerX, the group’s CFTC-regulated derivatives unit, were preserved.

$12.7B Total relief ordered $8.7B Restitution $4B Disgorgement

US retail leverage could return onshore, with fewer tokens eligible

For exchanges, the CAM category is a possible route back into US retail leverage, a business that largely moved offshore. The price is a compliance model closer to a futures market than to a typical crypto platform. Retail traders would gain onshore access to margin with protections that are optional today, though tokens with concentrated ownership or heavy unlock schedules may not clear the manipulation review.

The SEC is working along the same lines. It introduced a five-year conditional Innovation Exemption for venues trading tokenized stocks and proposed a crypto custody framework for investment advisers and regulated funds. Together with the CFTC’s 2026 guidance on tokenized collateral and round-the-clock trading, the two agencies are assembling a federal framework in pieces.

A new CFTC chair or a single lawsuit could unwind the rules

The Blockchain Association welcomed the notice, yet chief executive Summer Mersinger also stressed the need for a “durable regulatory framework.” Durability is the weak point. Future leadership can rewrite agency rules and companies can challenge the CFTC’s reading of its authority in court, a vulnerability Selig himself concedes, writing that agency action cannot substitute indefinitely for a statute passed by Congress.

Selig called the notice “just the beginning.” Once the 60-day comment window closes, the CFTC must still publish a proposed rule and take a second round of comment, a sequence that will run past the November midterms. Crypto political groups have spent more than $300 million backing candidates in recent cycles, and Reuters reports that major industry groups retain substantial funds for 2026, so the next Congress may return to market-structure legislation before CTX and CAM are finished.

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