The U.S. Commodity Futures Trading Commission (CFTC) released a notice of proposed rulemaking on Monday, aiming to establish a regulatory framework for cryptocurrencies using existing powers under the Commodity Exchange Act, filling the legislative gap left by Congress. Two parallel paths are proposed: Regulation CTX governs the trading itself, while Regulation CAM oversees the companies facilitating the trades, introducing a new category of platform called the crypto asset market.

The jurisdictional hook is retail commodity trading under Section 2(c)(2)(D) of the Act. Crypto activities involving leverage, margin, or financing are included in the regulation; traders using borrowed funds to amplify positions will fall under these rules. The agency does not set a specific leverage cap, but any platform offering leveraged trading must submit products for staff review. New platforms will also be subject to anti-manipulation controls and reserve proof obligations, with customer trades intermediated by registered futures brokers.

This is not a mandatory rebranding for the entire market. Chairman Michael Selig stated at a blockchain regulation seminar at Fordham Law School in New York that the rules provide a pathway for trading platforms to operate under a unified national regulation by the CFTC, using the same statutory powers relied upon by the previous administration for enforcement. He emphasized that the goal is to prevent fraud similar to FTX beforehand, rather than just prosecuting afterward. Exchanges registered as designated contract markets can conduct such trades under customized rules; companies focused solely on crypto can opt for standard registration or pursue the new crypto asset market category.

Spot trading remains outside the jurisdiction. The CFTC does not have comprehensive regulatory authority over trades of Bitcoin, Ethereum, and others at market prices without leverage or margin, and can only continue to combat fraud and manipulation. The rules do not replace state money transmission regulations. Officials indicated that companies wishing to create more complex products should operate on CFTC-regulated platforms; they are unclear about the remaining pure spot market size before the 60-day public comment period ends, but hinted that users may prefer to stay within the federal regulatory space.

This action follows the Senate's failure to advance the CLARITY Act, which could have established new rules for the approximately $2 trillion crypto market. Unlike the bill, CTX and CAM do not require all crypto assets to be traded on CFTC-registered platforms, as this cannot be done without Congressional authorization. Earlier this year, a joint interpretation by the CFTC and the SEC classified a large category of assets, including Bitcoin and Ethereum, as non-securities, falling under CFTC jurisdiction. Comments must be submitted in writing within 60 days after publication in the Federal Register.

This is license-driven rather than price-driven. Buyers are retail users wanting leverage and platforms hoping to replace multiple state licenses with a federal license, while sellers are exchanges relying on state money transmission licenses for pure spot trading. Money will not move due to the notice itself, but the flow of leverage and margin may concentrate on platforms that accept reserve proof and have futures brokers as intermediaries. Beneficiaries will be institutions with designated contract market licenses that can quickly expand crypto margin operations; those under pressure will be offshore high-leverage platforms and state-licensed exchanges that only do spot trading without federal endorsement.

Source: Public Information