On October 5, the Commodity Futures Trading Commission (CFTC or Commission) released an advance notice of proposed rulemaking (ANPRM) addressing transactions subject to Section 2(c)(2)(D) of the Commodity Exchange Act (CEA), announcing its intent to establish “fit-for-purpose” rules for leveraged, margined, or financed retail transactions in crypto assets. The ANPRM previews two likely upcoming regulation proposals: (i) Regulation Crypto Asset Transactions (Reg CTX), which would set out the CFTC’s preliminary interpretation of when crypto asset transactions are subject to CEA Section 2(c)(2)(D), and (ii) Regulation Crypto Asset Markets (Reg CAM), which would create a tailored subcategory of designated contract market (DCM) registration called a Crypto Asset Market (CAM). CAM designation would be limited to exchanges that only list these covered crypto asset transactions. Comments are due 60 days after publication in the Federal Register.
The ANPRM also expressly positions the CFTC’s proposals as a complement to the Securities and Exchange Commission’s (SEC) proposed Regulation Crypto Assets, released on August 18, 2026. Read together, the three regulations would create a division of labor in which the SEC addresses capital formation and investment-contract status and the CFTC provides a federal market regulatory regime for crypto assets subject to CEA Section 2(c)(2)(D) that trade freely in secondary markets.
Background
The ANPRM is the latest step in the CFTC’s response to the July 2025 President’s Working Group Report, which recommended that the CFTC provide guidance to DCMs on listing leveraged spot retail crypto transactions. It also follows the CFTC’s 2025 Crypto Sprint and request for comment on listed spot crypto trading, the first listed spot crypto trading on a U.S. regulated exchange in December 2025, the March 2026 SEC-CFTC memorandum of understanding, the March 2026 Joint Crypto Asset Taxonomy, and the CFTC staff’s FAQs, 24/7 trading advisory, and no-action relief for crypto wallet software developers.
Section 2(c)(2)(D) of the CEA, which was added by the Dodd-Frank Act in 2010, requires that a retail commodity transaction entered into with, or offered to, a person that is not an eligible contract participant or eligible commercial entity on a leveraged or margined basis, or financed by the offeror, counterparty, or a person acting in concert with them, be treated “as if” it were a futures contract and conducted on or subject to the rules of a DCM unless an exception applies. Section 2(c)(2)(D) contains exceptions for, among other things, a contract that results in “actual delivery” within 28 days and for agreements, contracts, or transactions in any security.
The CFTC acknowledges in the ANPRM that it has never adopted rules explaining how Section 2(c)(2)(D) applies to crypto assets. The ANPRM criticizes the CFTC’s prior “regulation by enforcement” approach and asserts that state money transmission and crypto-specific licensing regimes (such as New York’s BitLicense and California’s Digital Financial Assets License) do not provide the market-structure protections of the CEA, pointing to losses suffered by customers of various subjects of prior CFTC and/or SEC enforcement actions. At the same time, the ANPRM asks whether Reg CAM would leave a commercially viable path for crypto asset exchanges to continue operating under existing regulatory regimes for crypto leveraged spot transactions. That tension is likely to be an important comment topic for state-regulated platforms and state regulators (especially those, like the New York DFS and California DFPI, that generate a great deal of revenue from charging licensing and examination fees and may be incentivized to challenge the CFTC’s authority to enact these regulations).
Reg CTX: The CFTC’s Interpretation of CEA Section 2(c)(2)(D)
CEA Section 2(c)(2)(D) applies to agreements, contracts, or transactions in any commodity offered to a retail customer on a leveraged or margined basis or financed by the offeror or counterparty or a person acting in concert with either on a similar basis. Because this includes transactions “offered” (even if not entered into) on a leveraged, margined, or financed basis, the CFTC stated that it believes a “covered offer” attaches to all transactions for which a retail customer could accept leverage, regardless of whether any particular transaction is actually leveraged. A covered offer may be made through standard customer documentation, such as onboarding documents, exchange terms and conditions, or credit and margin documentation. It can also be made with respect to all transactions on an exchange, in a customer account, or in a product class. Under the ANPRM, the CFTC would also read “acting in concert” broadly to capture financing that the offeror or counterparty facilitates, arranges, endorses, markets, shares revenue from, or offers through a financing platform it operates.
The ANPRM also focuses on what, under Reg CTX, would constitute actual delivery of a crypto asset, which is particularly important given the possibility that multiple individuals could hold keys or shards of keys, or other indicia of control over a given asset. Citing CFTC v. Monex Credit Co., which requires real and immediate possession or control rather than a book entry, the CFTC stated that it believes possession and control of a crypto asset may require possession of the private keys to the associated wallet or account. Where a crypto asset carries governance rights or staking entitlements, actual delivery may require the capacity to exercise those rights directly.
The CFTC also stated that it believes the mechanics of actual delivery, including the transfer from the exchange to the customer’s wallet, may properly be addressed through CFTC rulemaking. This is significant because it could support federal preemption arguments for CTXs whose delivery mechanics fall within the CFTC framework. The CFTC also stated that it believes a fully paid transaction executed after a customer declines a covered offer remains subject to the CEA, including the on-exchange requirement, for as long as the purchased crypto asset is recorded only on the exchange’s internal book entry and has not been actually delivered. Once actual delivery occurs, the CFTC’s jurisdiction would be limited to its anti-fraud and anti-manipulation authority.
The CFTC stated that it understands many onchain trading protocols deliver purchased crypto assets directly to the purchaser’s wallet and therefore result in actual delivery, potentially even where a lien security interest remains outstanding. The CFTC has requested comment on this view and on whether access to onchain “vaults” through an exchange interface could itself be a covered offer. If the Commission adopts this view, a crypto asset transfer could satisfy actual delivery even where a lien follows the asset, provided the customer obtains meaningful possession or control.
Reg CAM: A Framework for CTXs
As stated above, Reg CAM would create a separate subcategory of DCM designed to list only CTXs. Under this framework, CAMs could elect to register with the CFTC by complying with tailored CAM Core Principles that would be designed to meet the statutory DCM Core Principles. Existing DCMs could list CTXs under their current DCM registration, which would be a significant benefit for existing DCMs and those with designation pending (assuming they have sought the ability to trade on margin; prediction markets have not done so to date, although Kalshi has sought to modify its designation order to offer trading on margin). The CFTC contemplates that all CTXs would be intermediated by an FCM under a modified “FCM CTX regime.” Under this structure, FCMs would provide general and asset-specific risk disclosures covering the underlying technology, functionality, governance and control, trading volume and volatility, and FCM conflicts of interest. The CFTC has asked whether a limited-purpose FCM category is warranted and, if so, what modifications to FCM requirements (e.g., segregation requirements, net capital, NFA membership, bankruptcy treatment, etc.) should be considered.
Under Reg CAM, leverage would be available only through “leverage arrangements” enumerated in the CAM’s rulebook and administered by an FCM or by a qualified banking institution sponsored by an FCM, which would provide a written representation that it will comply with applicable FCM requirements. If proposed and adopted in its current structure, Reg CAM would also benefit existing FCMs and potentially banks that have been slower to enter into crypto transactions. Customers of FCMs would obtain financing under bilateral agreements with individualized terms, and the leveraged position would be subject to liquidation under a CAM margin regime. The CFTC is considering whether to retain DCO-set margin or adopt a more prescriptive approach, possibly with delegation to the NFA, and has asked about eligible margin collateral, including whether crypto collateral should satisfy minimum capitalization, daily trading volume, liquidity, or price stability criteria; programmatic risk management, including whether smart contracts could support continuous margining and auto-liquidation without creating operational or customer protection concerns; and rehypothecation, including whether customer crypto assets may be reused in margined transactions without undermining FCM segregation, Part 190, or Bankruptcy Code protections.
The ANPRM recognizes that a CTX may consist of a spot leg that settles on the CAM’s books and a separate financing agreement. The CFTC seeks comment on a modified “DCO CTX regime,” including whether the spot leg requires traditional clearing and whether a DCO could provide a limited guaranty on leveraged positions rather than full novation. Recognizing that crypto exchanges typically integrate listing, trading, settlement, and custody, the ANPRM, if proposed and adopted in its current structure, would permit a CAM to register dually as an FCM and/or DCO or to affiliate with them. However, one major question this raises relates to potential conflicts of interest, and the CFTC has requested comments on those conflicts. The ANPRM also contemplates a de minimis exemption from CAM registration and asks whether the proposal leaves a commercially viable path for exchanges to continue operating solely under state regimes by not making covered offers.
Interplay With the SEC’s Regulation Crypto Assets
The ANPRM is expressly designed to work alongside the SEC’s proposed Regulation Crypto Assets. The SEC proposal includes a conditional safe harbor under which a crypto asset would be deemed not to be subject to an investment contract if the safe harbor’s conditions are satisfied, as well as two exemptions from Securities Act registration. The CFTC states that the ANPRM is intended to provide “a complementary federal regulatory framework for crypto assets subject to the safe harbor proposed in Regulation Crypto Assets and thus freely tradable in secondary markets.” The SEC/CFTC Joint Crypto Asset Taxonomy set forth in those agencies’ guidance cited above classified digital commodities, digital collectibles, and digital tools as non-security crypto assets, while digital securities are securities and stablecoins may or may not be. The ANPRM notes (overbroadly) that the CFTC-registered entities generally may not list derivative contracts referencing securities, so the securities-law status of the underlying crypto asset is a key boundary issue for any CAM listing.
The disclosure regimes also reflect the traditional differences between the SEC and CFTC regimes. The CAM crypto asset disclosures are designed to focus on manipulation risk and, by contrast to Regulation Crypto Assets, would not serve as issuer-style disclosures allowing investors to evaluate the merits of the asset. This raises questions for dual registrants and entities that deal in both securities and derivatives markets related to crypto assets. For instance, the ANPRM asks whether the proposal raises compliance issues for FCMs that are also registered broker-dealers. SEC Chairman Paul Atkins has stated that he asked SEC staff for recommendations that would allow tokens tied to an investment contract to trade on non-SEC-regulated platforms, including CFTC-registered intermediaries, while capital formation remains under SEC oversight, and he has supported “super-apps” that permit trading across asset classes under a single license. If Reg CAM were to create a regulatory home for such multi-asset platforms, many of the details would still need to be ironed out.
Looking Ahead
The ANPRM is an early-stage request for input, and any Reg CTX or Reg CAM would require a further proposed rule and a final rule. The CFTC’s questions cover a wide range of topics, including those involving DCMs, FCMs, DCOs, IBs, margin, and bankruptcy rules, which give various market participants a significant opportunity to shape any future framework. Market participants should consider coordinating comments on the ANPRM with any comments on the SEC’s Regulation Crypto Assets, given the interdependence of the two proposals.
The ANPRM sets forth dozens of questions asking for industry input. A few of the major questions are:
- How should the CFTC interpret “offer” under CEA Section 2(c)(2)(D)(i), including whether a covered offer applies even when a customer ultimately trades on a fully paid basis?
- What should qualify as “actual delivery” of a crypto asset, and when does possession and control include internal book-entry treatment?
- What factors should determine whether a crypto asset underlying a CTX is readily susceptible to manipulation?
- Is the existing Part 40 listing process sufficient for CTXs, or does the CFTC need a modified listing mechanism?
- How should a CAM surveil trading in both the CTX market and the underlying spot markets, including use of blockchain data, pricing oracles, and information from other trading facilities?
- How should Reg CAM address crypto-specific market disruptions such as blockchain congestion, downtime, forks, reorganizations, and pricing oracle failures?
- What custody, segregation, and customer-protection requirements should apply to CTXs, including fully paid open positions and crypto assets held through custodians?
- What margin regime should apply to CTXs, including collateral eligibility, margin-setting authority, continuous margining, auto-liquidation, and smart-contract-based risk management?
- Is the existing DCO framework fit-for-purpose for clearing and settling CTXs, and what exemptions or modifications are needed for the spot CTX leg and leveraged positions?
- Does Reg CAM provide a viable federal path for exchanges to comply with the on-exchange requirement while preserving legitimate spot-market and onchain activity?
Lowenstein Sandler will continue to monitor these developments closely. Lowenstein Sandler has significant experience advising crypto asset issuers and entities regulated by the CFTC, the SEC, FINRA, the NFA, and other federal and state regulators on a wide variety of regulatory matters, including the application of the federal securities and derivatives laws to digital assets, tokenized collateral, and blockchain-based systems. Please reach out to one of the listed authors of this Client Alert or your regular Lowenstein Sandler contact if you have any questions regarding the ANPRM or its implications for your business.
