CFTC Crypto Rulemaking Opens Federal Path for Leveraged Trading

What the CFTC actually did

The Commodity Futures Trading Commission has formally started writing rules for crypto markets. It is relying on authority it already has rather than waiting for new legislation. On October 5, 2026, the agency released an advance notice of proposed rulemaking (ANPRM) that sets out two linked frameworks. Regulation Crypto Asset Transactions (CTX) would define when retail crypto trades fall under CFTC jurisdiction, and Regulation Crypto Asset Markets (CAM) would create a new federally regulated category of trading venue for those trades.1218 The notice was published in the Federal Register under RIN 3038-AF80. It touches 17 CFR Parts 1, 38 and 39, and public comments are due December 14, 2026.1116

The document matters, but it is an early step. An ANPRM poses questions and contains no rule text. Any binding requirements would have to come through a later proposed rule and then a final rule.14 Chairman Michael Selig has called it "just the beginning" of the agency's work.12 The White House Office of Information and Regulatory Affairs reviewed the framework from September 17 to October 2, so it reached the public having already passed through executive review.1419

The legal hook: leverage and "actual delivery"

The whole structure depends on Section 2(c)(2)(D) of the Commodity Exchange Act. That provision gives the CFTC authority over retail commodity transactions offered on a leveraged, margined or financed basis.11 The agency reads it broadly. Under Regulation CTX, the CFTC says it holds exclusive authority over any arrangement in which a retail customer can accept a leveraged offer, even if a particular trade is fully paid.12 In practice, a platform that offers leverage anywhere in its rulebook could bring all of its trading for those customers under federal oversight.

The exception for "actual delivery" is just as important. Building on the Ninth Circuit's 2019 decision in CFTC v. Monex Credit Co., the agency's preliminary view is that a customer has crypto only if they control the credentials, meaning the private keys to the wallet.1112 A purchase that exists only as a book entry on an exchange's internal ledger would not count as delivery and would stay under CFTC jurisdiction. The agency expects most of these transactions to work that way.12 One summary reports that delivery generally happens when the asset reaches an independently controlled wallet within 28 days.20

The effect is that custody, a back-office question for most traditional assets, decides whether the regulation applies at all.

Regulation CAM and the integrated exchange

Regulation CAM would create a special subcategory of designated contract market (DCM) for venues that list only these crypto transactions. They would operate under tailored "CAM Core Principles" adapted from the 23 statutory DCM principles.1217 Existing DCMs could list crypto transactions under their current registration.12 The agency is asking how its rules should handle listing standards such as circulating supply, governance and the resilience of the underlying blockchain, and how surveillance should deal with price oracles, trading spread across multiple venues and on-chain execution.11

The most notable concession is about market structure. Major crypto exchanges typically combine trading, clearing, custody and financing in one company, and the CFTC says it wants to preserve that integrated model rather than split it apart.12 The notice describes several registration models. One entity could hold CAM, futures commission merchant (FCM) and derivatives clearing organization (DCO) registrations together, or a firm could pair CAM with only one of the other two.11 Leverage would generally have to come from registered FCMs or from qualified banks sponsored by FCMs. The agency is also considering a de minimis exemption for smaller venues.1113

Selig has framed the effort around preventing fraud before it happens, naming FTX as the kind of collapse he wants to stop.1418 One account points out that while FTX's founders misappropriated roughly $8 billion, customer funds at FTX's CFTC-registered unit stayed segregated and intact.19 The agency appears to be using that history to argue that its segregation and insolvency rules work.

Where the coverage diverges

All accounts agree on the basic structure: two frameworks, the Section 2(c)(2)(D) basis, and voluntary participation. They differ on details. One summary says CAM venues would face proof-of-reserves requirements and that CFTC staff would review leveraged products before launch, with no fixed leverage caps.15 Law-firm analyses of the notice do not highlight those features. They describe open questions about margin regimes and abusive financing terms instead.12 Because the ANPRM is a list of questions, readers should treat any description of specific mandates with caution until a proposed rule appears.

Sources also give different timelines for the failure of the CLARITY Act in the Senate. One says the ANPRM came three weeks after a failed cloture vote, while another places that failure in the same month as the notice.1719 The substance is the same either way. This is the CFTC's first major crypto proposal since comprehensive market-structure legislation stalled.12

Why it matters: regulation without Congress

Selig has openly acknowledged the plan's main limit. Without legislation, the CFTC cannot require crypto trading to happen on its registered platforms.18 Unleveraged spot trading would remain under state money-transmitter licenses.15 How far the framework reaches therefore depends on whether exchanges decide that federal registration and the ability to offer leverage to retail customers are worth the compliance cost.15 Commenters are being asked directly whether firms that stay under state regimes still have a commercially viable path.12

The strategy has real vulnerabilities. Rules built through agency rulemaking and exemptions are easier for a future commission to reverse than a statute.14 The Loper Bright decision, which ended judicial deference to agency interpretations, raises the risk of lawsuits against an aggressive reading of a decades-old provision.15 The agency is also doing this with fewer people: one report says CFTC staffing has fallen 25% since January 2025, while the agency is also moving to classify sports and political event contracts as swaps.20

In my view, the CFTC is building a regime meant to work in both possible outcomes. If CLARITY comes back, this rulemaking record becomes the starting point for implementing it. If it does not, CTX and CAM may serve as the de facto U.S. crypto market regime for years.17 The CFTC is also coordinating with the SEC under "Project Crypto" instead of running a parallel effort.16 Earlier in 2026, the two agencies jointly said that assets including bitcoin and ether are not securities and fall within CFTC authority.19

The custody-bank front

By tying jurisdiction to private-key control, the framework puts more weight on who holds customer crypto. That question is already in court. On October 2, the Independent Community Bankers of America sued the Office of the Comptroller of the Currency in federal court in Washington, D.C. The suit challenges the OCC's March 2026 chartering rule, its 2021 Interpretive Letter 1176, and its conditional approval of Protego's proposed trust bank.2527 The complaint says the OCC has approved or conditionally approved 21 trust banks under the current administration, at least 13 of them crypto companies.25

The list of firms that could be affected is long. Coinbase received preliminary conditional approval in April, and Circle announced final approval for its national trust bank in July.25 Block applied on September 8 to form Builders Bank & Trust to custody bitcoin and stablecoins for Cash App.30 Modern Treasury has applied for a trust charter covering stablecoin custody.21 The lawsuit does not suspend any existing charter, and no preliminary injunction motion had been found as of early October.25

The overlap with the CFTC plan is my analysis rather than anything the agencies have said. The ANPRM sends leverage through FCMs or qualified banks sponsored by FCMs.11 A court ruling that narrows the national trust charter could therefore reduce the set of federally regulated custodians and banks that the CFTC's model appears to assume.

ETF flows: a cautious backdrop

The market context is mixed. U.S. spot bitcoin ETFs lost about $679 million in the week ended October 9, their largest weekly outflow since June.7 One tracker shows October net outflows of roughly $540 million through October 14, after inflows of $3.5 billion in August and $2.6 billion in September.1 Daily figures have swung: $175.6 million came in on October 13, $261.5 million left the next day, and October 15 saw a small $5.06 million net inflow.219

Trackers disagree slightly on the totals. Cumulative net inflows since the January 2024 launch are put between about $56.9 billion and $57.8 billion, and total assets between roughly $100 billion and $109 billion.128 Bitcoin was trading around $83,000 to $84,000, about 32% below its October 2025 peak.37 Some of the inflows reflect hedge-fund basis trades, which can reverse quickly, rather than long-term allocations.3

The flows show that regulated crypto products are now well established, but demand through them is not steady. A federal path for leveraged retail trading would add another regulated channel. Whether it brings new activity or mostly moves existing offshore and state-licensed trading onshore is a question the December 14 comment deadline will begin to answer.