CFTC Proposes First Crypto Rules as CLARITY Act Stalls

The U.S. Commodity Futures Trading Commission (CFTC) is moving ahead with its first crypto-specific rulemaking after Congress failed to advance the CLARITY Act.

On October 5, the CFTC published an Advanced Notice of Proposed Rulemaking (ANPRM) covering two proposed regulatory frameworks: Regulation Crypto Asset Transactions (CTX) and Regulation Crypto Asset Markets (CAM). The agency is seeking public comments as it works toward a federal framework for crypto trading on CFTC-regulated platforms.

The move comes just weeks after the Senate failed to advance the CLARITY Act. It also follows the CFTC's September filing of the same rulemaking with the White House, which marked an earlier step in the process. Altcoin Buzz previously reported on that filing in CFTC files crypto market rules with White House as CLARITY Act stalls.

CFTC opens the door to federal crypto oversight

The new CFTC framework is focused on retail crypto transactions involving margin, leverage, or financing under Section 2(c)(2)(D) of the Commodity Exchange Act.

The agency said the rules are intended to create a comprehensive framework for these transactions while bringing them into a more uniform national regulatory system. The CFTC is also asking market participants how it can prevent abusive trading practices and establish clearer compliance expectations for crypto businesses.

Chairman Michael Selig described the move as an important step toward giving American consumers greater clarity and protection when trading crypto.

The CFTC is also seeking feedback on industry practices that could serve as compliance standards and on creating a new subcategory of designated contract market registration specifically for crypto markets.

The agency's notice is an early stage of the rulemaking process. It does not mean the CTX and CAM frameworks are already in effect.

What CTX and CAM would change

Under Selig's framework, CTX would cover retail crypto transactions where customers trade on a margined, leveraged or financed basis.

CAM, meanwhile, would create a new type of CFTC-regulated exchange designed specifically for these crypto asset transactions. Existing designated contract markets (DCMs) could also offer CTXs under tailored rules.

Importantly, the CFTC is not proposing to force every crypto exchange to register with the agency.

Selig said the framework would instead give exchanges a federal option alongside existing state licensing arrangements. Only Congress can require all crypto exchanges to register with the CFTC.

This distinction separates the proposal from the CLARITY Act. The legislation was intended to establish a broader statutory market structure and define the respective roles of the CFTC and Securities and Exchange Commission (SEC).

Under the proposed CFTC framework, exchanges that choose the federal route could offer retail customers leveraged or margined crypto trading, subject to CFTC requirements.

Customer protection is a major focus

The proposed CAM framework would also bring additional requirements around customer funds and intermediaries.

The CFTC is considering requiring futures commission merchants (FCMs) to intermediate CTX transactions. These firms would handle customer accounts and funds while remaining subject to existing customer-protection requirements, including disclosures, capital rules and segregation of customer property.

FCM involvement could also bring crypto trading activity under existing anti-money-laundering and customer-identification requirements applicable to those intermediaries.

The goal is to create a clearer line of responsibility between exchanges, intermediaries and customers rather than leaving those obligations spread across different state-level regimes.

CLARITY Act failure pushed regulators forward

The timing of the CFTC announcement is important.

The Senate failed to advance the CLARITY Act in September after a 49-50 procedural vote, leaving the broader federal crypto market-structure framework unresolved. The bill needed 60 votes to clear the procedural hurdle.

That failure did not end the possibility of future legislation, but it removed the most immediate path toward a comprehensive congressional framework.

Altcoin Buzz previously covered the setback in CLARITY Act fails key Senate vote as crypto bill stalls.

With Congress stalled, regulators have increasingly turned to authority they already possess.

The SEC has taken a similar approach. Earlier this month, the agency moved ahead with tailored crypto custody rules for investment advisers and funds rather than waiting for Congress to resolve the broader market-structure debate. 

Related: SEC moves ahead with new crypto custody rules for funds.

CFTC says agency rules are not enough

Despite moving forward independently, Selig acknowledged that regulatory action by the CFTC cannot replace legislation from Congress.

The proposed CTX and CAM frameworks are designed to address specific parts of the crypto market that fall within the CFTC's existing authority. They do not create the broader statutory framework that the CLARITY Act was intended to establish.

That leaves an important limitation.

The CFTC can create a federal regulatory pathway for certain leveraged and financed crypto transactions, but it cannot simply take jurisdiction over the entire spot crypto market without congressional authorization. Reuters similarly reported that the agency's authority over spot crypto remains limited, making congressional action important for a comprehensive framework.

For now, the CFTC is asking the industry to help shape what that narrower federal framework should look like.

The comment process could therefore become the next major step in U.S. crypto regulation, even as the larger debate over the CLARITY Act remains unresolved.