The CFTC Is Writing the Crypto Rules Congress Couldn't Pass

On September 15 the Senate voted 49-50 against even taking up the Digital Asset Market Clarity Act. Twenty days later, Commodity Futures Trading Commission Chairman Michael Selig walked into Fordham Law's Blockchain Regulatory Symposium and announced that his agency would start writing crypto market rules anyway.

The vehicle is an advance notice of proposed rulemaking released on October 5 that previews two linked regimes: Regulation Crypto Asset Transactions (Reg CTX) and Regulation Crypto Asset Markets (Reg CAM). Selig called it "a critical step in the CFTC's ongoing efforts to ensure America remains the crypto capital of the world," according to the agency's release. It is not a rule. It is a detailed sketch of one, with comments due 60 days after it appears in the Federal Register, which puts the deadline around early December by Genfinity's estimate.

The lever is leverage

The CFTC is not claiming new power. It is reaching for an old one. A 2010 Dodd-Frank provision, Section 2(c)(2)(D) of the Commodity Exchange Act, says retail commodity transactions offered on a leveraged, margined or financed basis must be treated as futures and run on a registered exchange, unless the asset is actually delivered within 28 days. The agency has never written rules explaining how that applies to crypto. Reg CTX is that explanation, and it reads the statute broadly.

According to a client alert from Lowenstein Sandler, a "covered offer" would attach to any transaction where a retail customer could accept leverage, even if that customer trades fully paid. The offer can live in onboarding documents, terms of service or margin paperwork, and can sweep in every trade on an exchange or in an account. "Acting in concert" would also be read widely, potentially capturing financing that a platform arranges, markets or shares revenue from, even when a third party extends the credit.

Decrypt summarized the practical effect: merely offering leverage could pull fully paid trades under CFTC oversight if the crypto sits on the exchange's internal books rather than in the customer's wallet. Exchanges that offer no leverage at all could keep operating under state money transmitter licenses.

What "actual delivery" now means

The escape hatch is delivery, and the CFTC wants to define it tightly. Citing the Monex precious-metals case, the notice suggests that possession and control may require holding the private keys to the wallet. Book entries alone would not count. Where a token carries governance or staking rights, delivery may require that the customer can exercise them directly.

The striking part is the flip side. The agency suggests that on-chain protocols that deliver assets straight to a purchaser's wallet may satisfy actual delivery, possibly even with a lien outstanding, per Lowenstein. Decrypt reported the CFTC said such protocols would usually meet the standard. The commission is still asking whether an exchange interface into on-chain "vaults" is itself a covered offer.

The new plumbing

Reg CAM creates a crypto-only subcategory of designated contract market, the license futures exchanges already hold. A CAM could list only covered crypto transactions, under tailored core principles, while existing DCMs could list them under their current registration. Every covered trade would be intermediated by a futures commission merchant, bringing Bank Secrecy Act anti-money-laundering obligations and customer-fund segregation with it. Leverage could come only from an FCM or a bank that an FCM sponsors, and that bank would have to commit in writing to follow FCM requirements.

The notice also floats proof-of-reserves obligations for platforms holding customer assets in omnibus accounts, listing standards that weigh token distribution and vesting schedules to screen out manipulation-prone assets, and questions on rehypothecation, smart-contract margining and auto-liquidation. It also contemplates a de minimis exemption from CAM registration, though no thresholds have been published.

Who this actually touches

For US exchanges, the trade is clear. Anyone that wants to offer retail margin on spot crypto gets a defined, federal path instead of fifty state regimes and the threat of enforcement, which the notice itself calls the "regulation by enforcement" of the Kraken, Ooki DAO and Uniswap cases. The cost is building or buying an FCM, a clearing relationship and a surveillance stack.

For offshore-style venues, the picture is narrower than the headlines suggest. Perpetual futures are already derivatives under exclusive CFTC jurisdiction; Reg CTX does not change that. What it targets is the hybrid that offshore platforms popularized: custodial accounts where spot, margin and lending blur together on internal ledgers. That model now has a name and a license requirement if it touches US retail. Onshoring is already happening product by product. Kalshi won approval for a bitcoin perpetual, Coinbase got relief to route US customers to its Deribit affiliate, and Bloomberg reported in August that Hyperliquid was in advanced talks to reach US traders through Bitnomial, owned by Kraken parent Payward. Reg CAM gives that kind of deal a standard wrapper.

The quieter winner may be DeFi. If wallet-to-wallet settlement counts as actual delivery, a self-custodial protocol can sit outside the on-exchange requirement while a custodial exchange offering the same trade cannot. That is a meaningful regulatory edge, and it remains a preliminary view open for comment.

The limits of routing around Congress

Selig has been candid about the ceiling. The new framework would not force spot crypto trading onto CFTC-registered platforms: "We don't have the authority to impose such a requirement without congressional action," CoinGape quoted him saying, adding that the rules are no substitute for CLARITY. The SEC is running the same play on its side, positioning its August 18 Regulation Crypto Assets proposal as the capital-formation half of a split that the CFTC's notice explicitly describes as complementary.

The durability problem is structural. An advance notice precedes a proposed rule, which precedes a final rule, a sequence that typically takes well over a year. Selig took office in December 2025 and has served as the commission's sole sitting member since Caroline Pham's departure, according to Crypto Briefing. A regime adopted by one commissioner under one reading of a 2010 statute can be narrowed by the next commission or challenged in court in a way a statute cannot.

So the comment letters matter more than usual. Watch three fights: whether exchanges can shrink "covered offer" until leverage disclosed in terms of service no longer taints spot trading, whether the on-chain delivery view survives pushback from custodial incumbents, and where the de minimis line is drawn. Those answers decide whether Reg CAM becomes the license every US crypto exchange holds, or a niche wrapper while the volume stays on-chain and offshore.