CFTC offers federal route for retail crypto leverage

On Oct. 5 the Commodity Futures Trading Commission published an advance notice of proposed rulemaking for two frameworks called Regulation Crypto Asset Transactions (CTX) and Regulation Crypto Asset Markets (CAM). The agency said the proposals would give U.S. crypto exchanges an optional federal path to offer retail customers margined, leveraged or otherwise financed crypto trading.

Under the proposal, CTX would govern certain leveraged retail commodity transactions, while CAM would create a middle federal category for platforms that want to offer leveraged or financed spot-like trading without converting into traditional derivatives exchanges. Ordinary spot venues could remain under state money-transmitter licensing and the CFTC’s existing anti-fraud authority because the agency lacks statutory power to require migration to federal supervision.

The CFTC is invoking Section 2(c)(2)(D) of the Commodity Exchange Act to assert jurisdiction over leveraged retail commodity transactions. The draft structure envisions three coexisting regulatory tracks: state-regulated spot trading for unleveraged activity; a CAM federal registration for venues that offer retail leverage or financing; and the current designated contract market regime for futures, perpetuals and other derivatives. Existing designated contract markets could offer CTX products under tailored rules.

CAM operators would face core obligations similar to those applied to designated contract markets, including requirements for surveillance, financial integrity, conflict-of-interest management and operational resilience. The agency is also considering crypto-specific standards such as token-concentration testing, review of distribution methods, vesting schedules, lockups, programmatic issuance and buybacks when assessing whether an asset is susceptible to manipulation. Platforms that hold customer property in omnibus accounts might be required to provide proof-of-reserves or similar safeguards.

Retail CTX trades would be intermediated through registered futures commission merchants, which would bring customer accounts and assets under regulated capital, disclosure and segregation regimes. That intermediation would extend Bank Secrecy Act obligations to covered activity, including anti-money-laundering controls, customer identification and suspicious-activity reporting.

Larry Florio, deputy general counsel at Ethena Labs, described retail leverage as “the proposal’s central attraction,” and said access to leveraged products could persuade exchanges to opt into a single federal framework. Industry participants also noted that accepting federal oversight could require separating exchange, brokerage and custody functions and increase compliance costs.

The proposal addresses onchain activity in part by clarifying the Commodity Exchange Act’s “actual delivery” exception: CTX would treat transfers to a customer’s external non-custodial wallet within 28 days as generally meeting the exemption for certain leveraged retail transactions. The commission is separately consulting software developers about when publishing or maintaining code rises to the level of financial intermediation that would trigger registration obligations. CFTC Chair Michael S. Selig wrote in the notice: “The lesson from FTX’s failure should have been obvious,” linking the initiative to preventive customer protections.

Key specifics remain unresolved. The CFTC is seeking public input before drafting detailed rules on leverage limits, capital standards, the scope of FCM intermediation, custody requirements and asset eligibility. The agency noted that future commissions could modify any final rule. The CFTC said the prospect of federally authorized leverage could draw trading activity back from offshore platforms if enough large U.S. exchanges choose federal registration.