CFTC Unveils Plan to Bring Crypto Exchanges Under Federal Oversight

The Commodity Futures Trading Commission has released an advance notice of proposed rulemaking setting out two interlocking frameworks that would allow crypto trading platforms to register as a federally regulated "crypto asset market." The notice, an early step in rulemaking that solicits public input before formal rules are drafted, describes Regulation CTX (Crypto Asset Transactions) and Regulation CAM (Crypto Asset Markets) and gives the public 60 days to comment once the notice is published in the Federal Register. Under the CFTC's preliminary interpretation of a 2010 Dodd-Frank provision, retail commodity trades made with leverage, margin, or financing must occur on a CFTC-registered exchange much like futures. The agency reads that requirement broadly: merely offering leverage—whether through onboarding terms, account arrangements, or other means—could subject otherwise fully paid crypto trades to federal oversight if the purchased tokens remain on the exchange's internal books instead of being moved to the customer's own wallet. The agency said trades would avoid CFTC jurisdiction through "actual delivery," which it indicated could mean customers retain private keys. By contrast, on-chain trading protocols that transfer tokens directly to user wallets typically would meet that standard, the CFTC noted. Regulation CAM would establish a new "crypto asset market" license modeled on designated contract market status for futures exchanges, with trades cleared through futures commission merchants and brokers that are subject to anti-money laundering rules. Leverage, under the proposal, could be provided only by those brokers or sponsored banks, although an exchange could register as its own broker and clearinghouse. The notice also signals the CFTC is considering additional controls for registered platforms, including proof-of-reserves requirements and listing standards to limit tokens susceptible to manipulation. The agency framed the package as preventative, citing a goal of stopping fraudulent schemes before they occur; Chairman Michael Selig specifically referenced protections intended to prevent failures like FTX. The release repudiates past "regulation by enforcement" language and follows the agency's move to draft its own crypto rules after the Clarity Act failed to pass Congress.