CFTC Launches Listed Spot Crypto Trading Initiative

The Commodity Futures Trading Commission (CFTC) has launched its Listed Spot Crypto Trading Initiative, which aims to establish a framework for retail trading of leveraged, margined, or financed spot crypto asset contracts (Retail Crypto Contracts) on CFTC-registered designated contract markets (DCMs).

The initiative would utilize existing authority under the Commodity Exchange Act (CEA), which requires that retail trading of commodities with leverage, margin, or financing must be conducted on DCMs. The CFTC is exploring how to implement such a framework using current regulatory tools. As background, retail commodity transactions involving leverage, margin or financing are subject to CFTC’s plenary jurisdiction unless they result in “actual delivery” within 28 days. In 2020, the CFTC issued interpretive guidance clarifying what constitutes “actual delivery” for digital assets. Despite this guidance, no DCM has listed Retail Crypto Contracts in the five years since its publication.

This development is part of the CFTC’s “crypto sprint” following the White House’s Digital Asset Policy Report.[1] The report, developed by the President’s Working Group on Digital Asset Markets under Executive Order 14178, directs federal agencies to use existing authorities to immediately facilitate digital asset trading. In March, the CFTC withdrew a pair of advisories that had reflected the agency’s heightened review approach to digital asset derivatives.[2]

Implementation Process and Stakeholder Input

The CFTC is seeking comprehensive industry feedback to ensure effective implementation. The agency has invited stakeholders to submit comments on listing spot crypto asset contracts on DCMs, with particular focus on section 2(c)(2)(D) of the CEA and Part 40 of CFTC regulations. The agency is also requesting input on potential securities law implications.

The public comment period closes on August 18, indicating the CFTC’s intent to move quickly on implementation. This compressed timeline suggests that operational frameworks could be established relatively soon, pending resolution of technical or legal issues identified through the comment process.

If implemented, this initiative could potentially change how spot crypto assets are traded in the United States by clarifying how existing regulated venues could be used for Retail Crypto Contracts.

As the CFTC develops this initiative, businesses operating in the spot crypto asset space should monitor developments closely and consider participating in the comment process. For more information or assistance with comment letters, please contact your Katten attorney.

[1]See Katten’s Quick Reads coverage of the White House Report here.

[2]See Katten’s Quick Reads coverage of the withdrawal of the two advisories here.