CFTC Says "Hold My Keys" While It Drafts America's First Crypto Rulebook 🗝️

The U.S. Commodity Futures Trading Commission on Monday published an advance notice of proposed rulemaking, the agency's first formal step toward writing federal rules for crypto exchanges following last month's 49-50 Senate defeat of the Clarity Act market-structure bill. The notice, sent to the White House for review in September, outlines two linked frameworks: Regulation Crypto Asset Transactions (Regulation CTX) and Regulation Crypto Asset Markets (Regulation CAM). The public will have 60 days to comment once the notice appears in the Federal Register.

Both proposals rest on Section 2(e) of a 2010 Dodd-Frank provision requiring retail commodity trades offered with leverage, margin, or financing to take place on a CFTC-registered exchange, as if they were futures. Under Regulation CTX, the agency reads that authority broadly, finding that simply offering leverage through onboarding documents or terms of service could pull fully paid trades under federal oversight, provided the purchased crypto sits on the exchange's internal books rather than in the customer's own wallet. Trades escape that oversight only through "actual delivery," which the notice suggests could require customers to hold their own private keys, a bar that on-chain protocols sending tokens directly to user wallets would typically meet.

Regulation CAM would create a "crypto asset market" license, a tailored version of the designated contract market status held by futures exchanges. Trades would run through futures commission merchants, brokers subject to anti-money laundering rules, and leverage could come only from those brokers or banks they sponsor, though exchanges could also register as their own broker and clearinghouse. The CFTC said it is weighing proof-of-reserves requirements and listing standards designed to keep tokens prone to manipulation off the venue. Exchanges that do not offer leverage could continue operating under state money transmitter licenses.

The notice also repudiates the agency's past approach, describing its Biden-era cases against Kraken, Ooki DAO, and Uniswap as "regulation by enforcement." CFTC Chairman Michael Selig said the rules are "designed to prevent, rather than only prosecute after the fact, fraudulent schemes such as FTX." The Commission is seeking public comment on topics including how to prevent abusive practices in crypto trading under a uniform national regime and how the proposed framework should interact with spot crypto products that include embedded leverage features.