Morning Minute: The CFTC Reveals Plan to Regulate Crypto Exchanges

The CFTC has unveiled an early regulatory framework intended to create a federal licensing pathway for crypto exchanges. The agency framed the proposal as two complementary rules, Regulation CTX and Regulation CAM, and opened a 60-day public comment window once the plan is published in the Federal Register. The document is a request for input rather than a finalized rulebook, giving market participants and other stakeholders a chance to shape any eventual regulations. A central feature of the CFTC’s approach is its emphasis on leveraged activity. The agency says the proposal would mainly cover trades that use borrowed funds or where leverage is offered, and it reads an existing Dodd-Frank provision broadly enough that even fully paid trades could fall under the rules if an exchange advertises leverage or holds customers’ crypto on its books. Licensed entities would be authorized to match buyers and sellers, custody customer money and crypto, settle trades, and provide lending, though each activity could require separate approvals. The proposal would also impose customer-protection and market-integrity measures. Draft requirements include segregation of customer and firm assets, enhanced recordkeeping, manipulation surveillance, loan verification and contingency planning for losses. The CFTC is also considering proof-of-reserves standards and listing protections to limit easily manipulated tokens. Under the plan, trades would flow through brokers already subject to anti-money-laundering obligations, and only those brokers or sponsoring banks could extend leverage. CFTC Acting Chairman Gretchen Selig positioned the rules as preventive measures aimed at stopping fraud and large failures like FTX, and the agency’s notice distinguishes the new proposal from past enforcement-first actions targeting firms such as Kraken, Ooki DAO and Uniswap. Market participants have interpreted the framework as a clearer path for onshore leveraged products — including perpetual futures — though the draft also signals higher compliance costs that could force some products or firms to change or exit. The agency’s next steps will depend on industry feedback during the comment period and any subsequent rulemaking process.