CFTC Launches Rulemaking to Create Federal Path for Retail Crypto Leverage

The US Commodity Futures Trading Commission on Oct. 5 opened a rulemaking process for two new regimes—Regulation Crypto Asset Transactions (CTX) and Regulation Crypto Asset Markets (CAM)—aimed at platforms that offer retail customers margined, leveraged or financed crypto trading. The proposal is framed as an advance notice of proposed rulemaking, with the CFTC seeking public feedback before drafting detailed regulations. The agency said participation would be optional for standard spot crypto exchanges, which could continue operating primarily under state money-transmitter licensing while remaining subject to the CFTC's existing anti-fraud and anti-manipulation authority. The initiative is designed to give US crypto venues a federal route to offer retail leverage as Congress remains stalled on market-structure legislation. The CFTC also acknowledged limits to its reach, saying it cannot force the broader crypto market onto CFTC-regulated venues without congressional action. Citing Section 2(c)(2)(D) of the Commodity Exchange Act, the commission said it already has authority over certain leveraged retail commodity transactions. Under the framework, the regulatory path would depend on the products a platform seeks to provide US customers: • Spot-only exchanges: largely state-licensed, with existing CFTC enforcement authority for fraud and manipulation. • Retail leveraged or financed crypto transactions: eligibility to pursue federal registration under CAM. • Futures, perpetual contracts and other derivatives: remain under the designated contract market (DCM) regime. The proposal would also allow existing DCMs to offer CTXs under tailored rules, while enabling crypto platforms to come under federal supervision without becoming traditional derivatives exchanges. Hyperliquid Policy Center said this could create a clearer progression from state-licensed spot trading to federally supervised leverage and established derivatives regulation. The CFTC said federal registration would allow access to leveraged products that state licensing alone does not provide. It also noted that offshore venues have used leveraged trading and perpetual contracts to attract active traders and generate significant volume, while US platforms have offered fewer products because of regulatory constraints. CFTC oversight could require operational changes for platforms that combine exchange, brokerage and custody functions. Larry Florio, deputy general counsel at synthetic-dollar developer Ethena Labs, said retail leverage alone could be sufficient to draw exchanges voluntarily into a single federal framework, with potential volume and revenue gains shaping whether large platforms view the additional constraints as worthwhile. CFTC Chairman Michael Selig positioned the effort as a response to lessons from FTX's bankruptcy, arguing for preventive safeguards rather than primarily relying on enforcement after customer losses. Speaking Oct. 5, Selig said protecting customers from fraud should coexist with responsible crypto innovation. Under CAM, operators would face requirements commonly associated with DCMs, including financial integrity, surveillance, conflict-of-interest controls and operational safeguards. The CFTC said it is also weighing crypto-specific standards. Exchanges could be required to evaluate factors such as token concentration, distribution methods, vesting schedules, lockups, programmatic issuance and buybacks when assessing an asset's susceptibility to manipulation. For platforms that hold customer property in omnibus accounts, the CFTC is considering proof-of-reserves requirements, which Selig linked directly to risks highlighted by FTX. For CTX trades, registered futures commission merchants (FCMs) would intermediate customer activity. That would subject customer accounts and property to capital, disclosure and segregation requirements, and bring customer-facing processes within Bank Secrecy Act obligations, including anti-money laundering controls, customer identification and suspicious-activity reporting. The CFTC noted these obligations would raise participation costs beyond registration fees and compliance staffing. The CTX concept would also clarify how the Commodity Exchange Act's actual-delivery exception applies to certain leveraged retail commodity transactions. In general, transfers to a customer's external noncustodial wallet within 28 days would satisfy the exemption from exchange-trading requirements. Separately, Selig said the agency is considering how to treat developers who publish software but do not take customer orders, control execution or hold customer assets. He argued that publishing code alone should not require registration as an introducing broker. The CFTC said it is consulting developers on how "control" functions in on-chain venues and when software activity begins to resemble regulated financial intermediation. Detailed rules are expected to address leverage terms, asset eligibility, custody, reserves and intermediary requirements. Key open questions include leverage limits, capital standards and how FCM intermediation could reshape exchange business models. The CFTC noted that agency rules are less durable than legislation and could be revised by a future commission. Still, if major platforms accept materially deeper oversight in exchange for federally regulated retail leverage, the framework could draw offshore trading activity into regulated US markets without waiting for Congress.