Key Takeaways
- • The CFTC published an advance notice of proposed rulemaking on Oct. 5 covering crypto exchanges, the first formal step toward a federal regulation, after Congress's Clarity Act failed a Senate procedural vote on Sept. 15.
- • Chairman Michael Selig described a three-rung framework for crypto exchanges, and the current proposal covers only the middle rung, which includes margin trading, with opt-in registration as a new "crypto asset markets" category.
- • Proposed requirements under discussion include proof-of-reserves reporting, segregation of client money from house money, and token listing reviews covering ownership concentration and vesting schedules.
- • A 60-day public comment period follows Federal Register publication, and final rules appear more likely in 2027 than in 2026.
- • Selig has acknowledged that CFTC action cannot substitute indefinitely for legislation, and he has stated the agency cannot require all crypto trading to occur on CFTC-registered exchanges without congressional approval.
Summary
The Clarity Act, Congress's crypto market structure bill, failed a procedural vote in the Senate on Sept. 15. According to The Globe and Mail and Yahoo Finance coverage, that failure has not stopped the Commodity Futures Trading Commission from moving forward. On Aug. 20, ahead of the Senate vote, CFTC Chairman Michael Selig said he had instructed staff to explore crypto rules under the agency's existing authority in case the legislative effort failed. On Oct. 5, the CFTC published an advance notice of proposed rulemaking, the first formal step toward a regulation.
Selig framed crypto exchanges as a three-rung ladder. The bottom rung covers ordinary exchanges selling coins outright. The middle rung adds margin trading, which lets customers borrow to amplify gains and losses. The top rung adds derivative contracts tracking coin prices, such as futures. The current proposal covers only the middle rung. Exchanges that opt in could register as crypto asset markets, a new regulatory category.
Among the measures regulators might require are proof-of-reserves reporting to show customer assets exist, and rules requiring exchange accounts to be run by brokers that segregate client funds from house funds. Exchanges may also need to conduct listing reviews before adding a token, examining ownership concentration and vesting schedules. Coverage noted that tokens such as Ethereum, Solana, XRP and Hyperliquid could be affected.
The process has further stages. After a 60-day public comment period following Federal Register publication, the CFTC could issue a proposed rule, then gather further comments before finalizing. Final rules appear more likely in 2027 than in 2026. Selig has written that a future commission could rewrite the rules, and that agency action cannot substitute indefinitely for a law. In a Wall Street Journal op-ed, he also stated the CFTC cannot require all crypto trading to occur on CFTC-registered exchanges, such as CME Group, without congressional approval. The rules are therefore described as a stopgap that will likely need legislative backing later.
Selig framed crypto exchanges as a three-rung ladder. The bottom rung covers ordinary exchanges selling coins outright. The middle rung adds margin trading, which lets customers borrow to amplify gains and losses. The top rung adds derivative contracts tracking coin prices, such as futures. The current proposal covers only the middle rung. Exchanges that opt in could register as crypto asset markets, a new regulatory category.
Among the measures regulators might require are proof-of-reserves reporting to show customer assets exist, and rules requiring exchange accounts to be run by brokers that segregate client funds from house funds. Exchanges may also need to conduct listing reviews before adding a token, examining ownership concentration and vesting schedules. Coverage noted that tokens such as Ethereum, Solana, XRP and Hyperliquid could be affected.
The process has further stages. After a 60-day public comment period following Federal Register publication, the CFTC could issue a proposed rule, then gather further comments before finalizing. Final rules appear more likely in 2027 than in 2026. Selig has written that a future commission could rewrite the rules, and that agency action cannot substitute indefinitely for a law. In a Wall Street Journal op-ed, he also stated the CFTC cannot require all crypto trading to occur on CFTC-registered exchanges, such as CME Group, without congressional approval. The rules are therefore described as a stopgap that will likely need legislative backing later.
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