The Commodity Futures Trading Commission is preparing a regulatory fallback for U.S. crypto markets that could bring certain trading venues under a new, purpose-built category of federally supervised market if Congress does not pass the CLARITY Act.
Speaking on August 20 at the first meeting of the CFTC’s Innovation Advisory Committee, Chair Michael S. Selig said he had directed agency staff to begin exploring rulemaking under existing authority. The work would examine whether CFTC-registered firms and currently unregistered crypto venues could be designated as a specialized form of Designated Contract Market, or DCM, called a “Crypto Asset Market.”
Such a framework could allow approved venues to offer leveraged or margined crypto-asset trading under CFTC supervision and rules designed specifically for those products. A DCM is a regulated marketplace authorized to list derivatives contracts, with obligations involving market surveillance, customer protections, reporting, and operational controls.
Selig presented legislation as the preferred route. The CLARITY Act, which seeks to define oversight boundaries between the CFTC and the Securities and Exchange Commission, would give Congress the opportunity to establish a more comprehensive digital-asset market structure. The agency’s parallel work on rulemaking suggests the CFTC does not intend to wait indefinitely for that legislation before considering how parts of the crypto market could fit within its existing derivatives mandate.
A potential route for leveraged crypto trading
The proposed “Crypto Asset Market” concept is the most concrete element of Selig’s digital-asset roadmap. It places attention on leveraged and margined trading, areas that have historically raised difficult questions about which federal rules apply and which agency has authority over a venue.
Under the approach described by Selig, a platform would not simply receive a general endorsement to offer crypto products. It would operate as a CFTC-supervised market subject to defined requirements. That structure could give U.S.-based venues a clearer route for listing leveraged crypto products while placing those products inside a framework built around DCM standards.
The distinction matters for platforms that currently operate across different legal models. Some crypto businesses have sought registration under existing financial rules, while others have limited access to U.S. customers or structured their offerings around products considered outside conventional derivatives markets. A dedicated CFTC category could reduce some uncertainty, though the details would depend on any formal proposal, its definitions, eligibility requirements, and final rules.
Selig also said CFTC staff have been directed to engage directly with developers of onchain finance protocols. The agency plans to assess how those protocols might be offered legally and compliantly in the United States, extending its inquiry beyond centralized exchanges and conventional trading venues.
That outreach recognizes that crypto market infrastructure increasingly includes software-based protocols for lending, trading, collateral management, and settlement. Bringing such systems into a supervised framework would require regulators to address practical questions around governance, accountability, customer access, market integrity, and whether a protocol’s design can meet obligations normally applied to a registered market operator.
Congress remains the agency’s preferred path
Selig’s comments place the CFTC’s preparation for rulemaking alongside, rather than ahead of, the legislative debate in Washington. He described Congress-written market-structure legislation as the better solution for establishing durable lines between the CFTC and SEC.
The CLARITY Act is central to that goal because crypto assets can raise overlapping questions about commodities, securities, trading platforms, custody, and disclosures. A statutory framework could specify which assets and activities belong under each regulator, reducing the need to resolve major jurisdictional issues one rulemaking or enforcement dispute at a time.
The CFTC’s existing authority is strongest in commodity derivatives, including futures and certain leveraged or margined transactions. Any agency-led crypto framework would therefore likely be shaped by that mandate rather than serving as a complete replacement for a congressional market-structure law.
Selig’s roadmap does not create immediate new requirements for traders or declare a shutdown timetable for unregistered venues. The agency is at the stage of exploring rulemaking options, a process that would ordinarily involve a formal proposal, public comment, revisions, and a final commission vote before new obligations take effect.
CFTC also targets compute and event contracts
Crypto assets were one pillar of Selig’s three-part “Roadmap for the New Frontier of Finance.” The other two address markets for AI computing capacity and the increasingly contentious business of prediction markets.
On artificial intelligence, Selig said the CFTC is not trying to regulate AI models. Its interest is in “compute” — the processing capacity, including high-performance graphics processing units, used to train and run AI systems.
As demand for compute rises, companies purchasing that capacity face price and supply risks. Selig said those conditions could eventually support spot, forward, futures, and other derivatives markets, provided compute becomes sufficiently standardized and tradable.
The CFTC and U.S. Department of Commerce issued a request for comment on “Compute Markets” one week before Selig’s speech. The agencies will use submissions to examine how a regulatory framework could support price discovery and risk-management tools for the developing market.
Prediction markets are further along, with event contracts already listed on some designated contract markets. Selig said the policy debate has moved toward how such contracts should be supervised under the derivatives framework.
He emphasized the CFTC’s position that Congress gave it exclusive oversight of commodity derivatives listed on DCMs, adding that the agency would continue to defend that jurisdiction in court.
Event-contract rules face a detailed rewrite
The CFTC has already proposed changes to Rule 40.11, which governs certain event contracts involving subjects such as war, terrorism, assassination, gambling, and unlawful activity. Selig said the current rule lacks sufficiently clear definitions for terms including “gaming” and “involve,” making public-interest reviews less consistent.
The June proposal would establish more explicit language and a contract-by-contract review process for products linked to those sensitive categories. The CFTC has also proposed a redesigned data-reporting system for fully collateralized event contracts, replacing temporary no-action letter arrangements with a more formal and uniform reporting structure.
Selig said the agency expects to propose further updates to Parts 38 and 40 of CFTC regulations. Those rules cover core principles for designated contract markets and product-listing procedures. The expected revisions would address retail customer protections, product governance, market design, and incentive programs.
The debate surfaced during the advisory committee meeting when CME Group Chief Executive Terry Duffy and Kalshi co-founder Luana Lopes Lara disagreed over manipulation risks in event contracts. Selig intervened to say that examples raised by Duffy were not listed in the United States, according to his remarks.
Together, the initiatives show a CFTC looking for ways to apply its market-supervision model to products that do not fit neatly into traditional commodity futures. For crypto, that effort now includes a potential regulatory pathway for supervised leveraged trading even if Congress does not deliver a broader market-structure law.
For deeper context on U.S. oversight shifts, explore how future U.S. crypto regulation could impact digital-asset markets.
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