Amid legislative gridlock, the CFTC has broken new ground in regulation by unveiling two new rules—CTX and CAM—aimed at opening the door to onshore, compliant retail leveraged trading.
Author: David Christopher (Bankless Analyst)
Compiled by: DeepTech Flow
Deep Tide Editorial: With the highly anticipated U.S. CLARITY Act effectively stalled in Congress, expectations among U.S. crypto industry participants for a unified federal regulatory framework have plummeted. However, faced with the protracted legislative process, the U.S. Commodity Futures Trading Commission (CFTC) has chosen to take matters into its own hands. CFTC Chairman Mike Selig appeared on the Bankless podcast and publicly announced that the CFTC will no longer passively wait for congressional reform; instead, it will directly leverage its existing statutory administrative authority to introduce two key new regulatory rules—Regulation CTX and Regulation CAM—aimed at reshaping the landscape of the U.S. domestic crypto market.
For a long time, U.S.-based compliant exchanges such as Coinbase and Kraken have been forced to comply with the complex and stringent "money transmitter" licensing requirements of individual states. This has not only resulted in fragmented state laws and restricted user trading but has also driven high-frequency spot leveraged trading entirely into offshore black markets. The CFTC's proposed new regulations will formally permit U.S. compliant retail investors to engage in spot leveraged and margin trading on domestic platforms, while establishing a streamlined national licensing pathway directly under federal oversight, thereby putting an end to the current fragmented regulatory landscape characterized by each state operating in isolation.
This article provides an in-depth analysis of the CFTC's key regulatory measures, the safeguards established to prevent a repeat of FTX‑style misappropriation of client funds, and the CFTC's contentious clashes with state gambling regulators over jurisdictional authority in prediction markets such as Kalshi.
Ending State-Level Regulatory Fragmentation: The CFTC Takes the Initiative to Fill Gaps in Federal Legislation
While the CLARITY Act at the congressional level may have stalled, the U.S. Commodity Futures Trading Commission (CFTC) has no intention of continuing to wait passively for Congress to bring the crypto market under a unified federal framework.
For many years, domestic U.S. crypto exchanges have been crudely treated by regulators at all levels as traditional "money transmitters," legally classified no differently from Western Union or street‑level currency‑exchange kiosks. This outdated, rigid regulatory framework might have sufficed in the early days when users simply used fiat to buy and sell Bitcoin; but for today's modern digital trading platforms—operating nationwide central limit order books, matching high‑frequency, complex trades across the country, and safeguarding tens of billions of dollars in client assets—such a fragmented regulatory structure has long since become untenable.
CFTC Chairman Mike Selig is determined to personally reverse this regulatory mismatch. During an in-depth interview with Bankless, Selig laid out two new rulemaking initiatives spearheaded by the CFTC: they aim to bring retail leveraged crypto trading safely back onshore and explain why the CFTC has full legal authority to act independently, even in the absence of congressional action.
The Power of Two: Institutional Reconfiguration under the Two New Regulations, CTX and CAM
Under the current legal framework, industry leaders like Coinbase and Kraken, even when offering only basic spot trading, are forced to tirelessly apply for separate operating licenses in each of the 50 states. New York State's infamous BitLicense is the most notorious example of such onerous requirements, while other states impose vastly different compliance standards on the same companies. This has directly resulted in an utterly absurd fragmentation of the market: whether a U.S. citizen can legally trade certain assets on a platform depends entirely on their physical location.
To thoroughly address this shortcoming, Selig proposed a two‑pillar solution that is mutually reinforcing: the draft "Crypto‑Asset Trading Regulation" (Regulation CTX) and the "Crypto‑Asset Markets Regulation" (Regulation CAM).
• CTX Regulation (Trading‑Side Gatekeeping): This regulation will formally authorize compliant platforms to offer margin trading, leverage products, and financing services for spot crypto assets to retail investors. Essentially, users will, for the first time, be permitted—within a regulated framework—to borrow funds using their crypto holdings as collateral to amplify their trading positions. This effectively brings back to U.S.-based, federally regulated platforms a key set of capabilities that have long been available only through traditional U.S. equity brokers and offshore crypto giants.
• CAM Regulation (Centralized Access for Institutions): This will establish a dedicated, entirely new federal registration pathway for crypto platforms offering the aforementioned leveraged trading services. Once approved, these platforms will be directly brought under the CFTC's nationwide, integrated, end-to-end regulatory framework, thereby permanently exempting them from the cumbersome, fragmented state‑level licensing regimes and enabling truly uniform, compliant operations across the United States.
FTX's Shadow and Anti‑Hybridization Firewall: Institutional Segregation of Brokerage, Matching, and Clearing
More derivative products and higher leverage may sound enticing, but the industry will never forget the catastrophic fallout that struck when a major crypto giant last mixed customer deposits, proprietary trading, and lending operations—without adequate safeguards—in what became the FTX debacle. At the time, Alameda Research gained privileged internal access to client funds, ultimately causing this ostensibly independent business to collapse entirely.
In response to the market's pointed questions about whether the new regulations, by bringing brokerage, order matching, and clearing under one roof, might repeat FTX's fate, Selig offered a firm and unequivocal denial.
Selig emphasized that even if these diversified businesses were to come under a single parent company in the future, the proposed federal integrated framework would nonetheless establish the strictest statutory safeguards: erecting insurmountable lines of separation between functions, mandating rigorous independent custody of client‑held assets, and rigorously prohibiting any internal related‑party transactions or potential conflicts of interest. In Selig's view, only by granting trading platforms the necessary room for innovation without compromising the ironclad principles designed to prevent another FTX‑style debacle can this regulatory reform achieve the durability to endure across partisan cycles and remain viable through successive changes in political administrations.
The Flames of War Spread: A Foretold Battle Between Federal Jurisdiction and the Supreme Court Over State Gambling Laws
The jurisdictional tug-of-war between federal and state regulators is not confined to crypto exchanges; in the currently booming field of prediction markets, it has escalated into a full-blown, fiercely contested battleground.
State regulators allege that political election and sports‑event contracts offered by platforms such as Kalshi are, in essence, disguised forms of gambling and should therefore fall squarely under the jurisdiction of state gaming commissions. By contrast, the CFTC maintains a firm position that such event‑related contracts constitute standardized modern financial derivatives and, as such, ought to be subject to the uniform regulatory authority of the federal Commodity Futures Trading Commission Act.
On October 9, the CFTC issued two significant clarifications in a rare move: first, it explicitly excluded traditional sports betting wagers from the definition of financial swaps; second, it formally proposed bringing broad‑based event contracts—including those related to sports and political events—within the scope of regulated financial derivatives. Selig eloquently argued that the comprehensive federal framework governing market manipulation, insider‑trading surveillance, and liquidity‑transparency requirements—rules that apply to financial derivatives exchanges—is far better suited than the straightforward, ad hoc state‑level casino licensing regimes to safeguard the fair functioning of such high‑frequency information markets.
At present, the two sides have split the rulings at the district court level, and New Jersey has even formally appealed the dispute to the U.S. Supreme Court. From legitimizing compliant crypto‑leveraged products, to consolidating state‑level licensing privileges, and to defending the classification of prediction markets as financial derivatives, the CFTC is wielding remarkable administrative resolve to fundamentally reshape the future landscape of U.S. crypto finance.