U.S. CFTC joins SEC in proposing crypto regulations, though spot-market gap lingers

The Commodity Futures Trading Commission proposed two interrelated rulemakings intended to govern crypto trades that use borrowed funds or otherwise involve leverage, margin or financing. One proposal would set standards for transactions in leveraged or financed crypto positions, while the other would create a new limited-exchange registration called crypto asset markets (CAMs) for platforms hosting such activity. CFTC Chairman Mike Selig framed the package as part of a comprehensive regulatory framework and said it would provide a uniform federal pathway for exchanges. Under the proposals, CAMs would be a narrower form of the agency’s existing designated contract markets (DCMs), giving exchanges an optional route to operate under CFTC oversight without necessarily taking on full DCM status. Firms that want to offer traditional derivatives such as futures, swaps or options would still need full DCM registration. The CFTC said the CAM designation would subject platforms to standards similar to other registrants, including prohibitions on listing products susceptible to manipulation. The rules target trading that depends on leverage or financing, meaning unleveraged spot trading — the direct buying and selling of tokens where assets change hands immediately at market prices — would remain outside the CFTC’s new regulatory perimeter. The agency retains its authority to pursue fraud and manipulation in spot markets, but it cannot replace state money-transmission rules that currently govern direct trading. CFTC officials acknowledged the proposals leave a residual spot-market gap and said the size of that remaining market will be clearer after industry comments during the 60-day public comment period. The move follows parallel activity at the Securities and Exchange Commission, which has been issuing rules and exemptions addressing parts of the crypto market, including custody requirements and securities tokenization. Both agencies previously attempted to clarify their jurisdictions with a joint token taxonomy. CFTC officials said these proposals are intended to further codify guidance and institutionalize CFTC oversight for leveraged and margin-dependent crypto activity in the absence of new congressional legislation.