The CFTC’s Proposed Rules to Reshape US Crypto Markets | CFTC Chair Mike Selig

CFTC Chair Mike Selig said the agency has proposed its first crypto-exchange rules to bring spot trading with margin, leverage, or financing under federal oversight. The proposed framework would offer platforms a federal exchange option, described as Reg CAM, alongside state licensing. Exchanges using the federal regime could serve customers nationwide without obtaining individual state licenses; platforms outside it could remain state-regulated but would not offer the covered products. Selig said the CFTC has exclusive authority over retail commodity transactions involving margin, leverage, or financing, but has mainly exercised that authority through enforcement. Customer access to these products depends on the proposal being finalized.

Selig said federal market rules would address risks that state money-transmitter regimes were not designed to handle, including misuse of customer funds and manipulation or fraud in order books. He pointed to FTX, where affiliated Alameda received customer funds, had special trading privileges, and could carry a negative balance. The proposal would separate brokerage, exchange, and clearinghouse functions, even when the businesses share a holding company: brokers handle customer-facing services such as custody and margin, exchanges operate order books and execute trades, and clearinghouses handle settlement funds. Proposed vertical-integration and conflict-of-interest requirements would apply to both crypto-market and existing designated contract market regimes. Selig said the CFTC-regulated part of FTX worked well.

Under proposed Regulation CTX, exchanges would set margin requirements in consultation with the CFTC and using methodologies reviewed with agency staff. Customers could pledge crypto held in custody, such as ETH, to buy Bitcoin or take other positions, but falling prices could trigger a margin call. Selig said crypto perpetual and futures markets have reached about 7x leverage at the high end; that is not a proposed hard limit. He characterized margin as a familiar brokerage feature already popular offshore and said the agency wants to bring it onshore with protections while keeping US exchanges competitive. The proposed federal regime would be lighter-touch than a designated contract market because it would not cover perpetuals or other derivatives, although existing designated contract markets could offer the new transactions under additional requirements.

CFTC-registered designated contract markets could offer crypto and securities perpetual futures, traditional futures, options, and leveraged or margin-financed crypto trading. Selig said tokenized assets, crypto, securities, and derivatives positions could also serve as collateral across products, allowing customers to use capital more efficiently. He expects exchanges already entering the CFTC framework to offer perpetual contracts and other derivatives to broaden their offerings. The CFTC and SEC are coordinating through a memorandum of understanding and a joint interpretation distinguishing securities from non-securities. Selig said a token separated from its investment contract and covered by the SEC regime’s safe harbor could trade in CFTC markets, while products involving investment-contract tokens require care because they touch both agencies’ jurisdictions.

The joint interpretation groups crypto assets into digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. Selig described Bitcoin, Ether, Solana, and UNI as digital commodities whose value is largely tied to network or application effects; meme coins and some NFTs as digital collectibles; and liquid-staking tokens and network credentials as digital tools. Tokenized NVIDIA stock is an example of a digital security. He said digital commodities, tools, collectibles, and most stablecoins are not securities. Selig said the CFTC classified Bitcoin as a commodity in 2014 and later classified Ether and other crypto assets as commodities.

Selig described US spot crypto oversight as a patchwork of state rules, often money-transmitter licensing regimes that developed after the Mt. Gox collapse. He cited state-by-state burdens such as New York’s BitLicense and Hawaii’s capital or surety-bond requirements, while Montana has no money-transmitter licensing scheme. He said federal oversight is suited to interstate markets, while purely intrastate activity can remain under state regulation. The CFTC intends to use its existing authority but cannot require all exchanges to register under one standard as the proposed Clarity Act would have done. Selig said the legislation was sidetracked by ethics issues and the Genius Act, which he described as unrelated to its customer-protection goals; the CFTC is gathering industry feedback and aims to develop durable, bipartisan protections.

On prediction markets, Selig said the CFTC is defending its asserted exclusive authority over event-contract derivatives offered on designated contract markets after states sued exchanges. He warned that weak oversight of order-book markets can leave them vulnerable to manipulation, insider trading, and wash trading, and said the CFTC may lack the order-book data it wants when exchanges are supervised at the state level. New Jersey has requested Supreme Court review, and the CFTC is waiting for the outcome.