A plan from the CFTC to subject crypto exchanges to federal oversight has been released, and it calls for new rules that could change how digital markets run. Two proposed regulations are covered in the advance notice: Regulation CTX and Regulation CAM. The public is given 60 days to respond after the notice appears in the Federal Register.
The CFTC’s position is that merely mentioning leverage, margin, or financing in onboarding documents or terms of service can be enough to bring fully paid trades under federal oversight through a 2010 Dodd-Frank provision mandating such trades take place on a CFTC-registered exchange. Trades remain outside federal oversight only through “actual delivery,” which the CFTC suggests might demand customers retain control of their own private keys.
The New License and Its Requirements
Regulation CTX would allow crypto exchanges to register as a new type of federally regulated “crypto asset market.” Regulation CAM would create a “crypto asset market” license, a tailored version of the designated contract market status held by futures exchanges.
Deals would move via futures commission merchants bound by anti-money laundering rules. Borrowed money could come only from those brokers or banks they sponsor; exchanges could sign up as their own broker and clearinghouse.
The CFTC is also considering whether proof-of-reserves requirements and standards should apply to tokens that are vulnerable to manipulation. Exchanges that do not offer leverage may be allowed to continue operating under state money transmitter licenses.
Selig’s Case for the Rules
Chairman Michael Selig presented the proposal as a means of prevention rather than punishment. He described the rules as “designed to prevent, rather than only prosecute after the fact, fraudulent schemes such as FTX.”.
The announcement refers to the agency’s Biden-era cases against Kraken, Ooki DAO, and Uniswap as “regulation by enforcement.”. This formulation implies the CFTC views these rules as a substitute for its previous method, which depended on enforcement actions instead of formal regulation.
The Road to This Point
In September, the CFTC submitted its framework for review at the White House, an action that followed closely on the heels of the Senate’s rejection of the Clarity Act. Selig had already made clear in August that the agency would draft its own crypto rules should Congress fall short of producing them.
The SEC has taken action recently too. The agency proposed Regulation Crypto Assets in August and revealed an innovation exemption for tokenized stocks last month.
“Designed to prevent, rather than only prosecute after the fact, fraudulent schemes such as FTX”
What the Public Gets to Comment On
Exchanges, traders, and investors have a limited time to decide whether they prefer federal oversight or staying under state licensing. The 60-day window is meant to test which path market participants favor before any rules are finalized.
The CFTC’s proposal is sweeping. It covers on-chain trading protocols, which send tokens directly to user wallets and would usually clear the bar under the agency’s reading of actual delivery. It also covers exchanges that sponsor their own brokers and clearinghouses, which could become a requirement for firms that want to offer leverage.
A Narrow Path for Smaller Exchanges
Crypto firms now face a distinct choice. Exchanges that provide leverage must register as federal markets, satisfy anti-money-laundering rules, and may have to set aside reserves. Exchanges that don’t offer leverage can continue running with state money transmitter licenses instead.
Smaller exchanges and trading platforms that have stayed away from leverage entirely stand to gain from the division.
The Senate’s rejection of the CFTC’s move follows the Clarity Act’, which created a vacancy the agency is now attempting to address.
Watchers will keep a close eye on the public comment period. Traders, exchanges, and investors have 60 days to respond with their thoughts, and the weight of those comments could determine what these rules end up looking like once they take effect.
- Regulation CTX would allow exchanges to register as federally regulated markets
- Regulation CAM would create a crypto asset market license tied to designated contract market status
- Public comments are due within 60 days after the notice appears in the Federal Register
- The CFTC has already sent the framework to the White House for review
Congress has failed to pass the Clarity Act, so the CFTC is now writing its own rules. The SEC is also acting on its own with separate proposals. Both agencies share the same aim of federal oversight of crypto markets, though the CFTC’s approach reaches further and lays down more detailed requirements than the SEC’s.
The outcome will depend on public response. The 60-day comment period gives everyone a seat at the table, but the direction is already set. The CFTC is rewriting crypto regulation itself, and the industry is about to find out what that means in practice.
Where the paper stands
The paper backs crypto exchanges against the CFTC’s new rules and is against the agency’s plan to bring fully paid trades under federal oversight through a 2010 Dodd-Frank provision. The CFTC’s proposal would force exchanges that offer leverage to register as federally regulated markets, satisfying anti-money-laundering rules and possibly setting aside reserves. That is a moat, not a safeguard.
The CFTC’s reading of “actual delivery” as requiring customers to retain control of their own private keys is a technical hurdle exchanges cannot easily meet. The proposal also treats on-chain trading protocols as subject to federal oversight, which sends digital assets directly to user wallets. These requirements lock out smaller exchanges that cannot afford the compliance costs.
The public comment period is the chance to weigh in. Exchanges, traders, and investors have 60 days to decide between federal oversight and state licensing. The CFTC’s own record — cases against Kraken, Ooki DAO, and Uniswap — shows enforcement was the prior method. The new rules are a shift, and the agency is asking the public to accept it. Watch how the comments land, because the direction is already set.
Source material: “CFTC Unveils Plan to Bring Crypto Exchanges Under Federal Oversight,” Decrypt.
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