CFTC Examines Crypto Margin Trading as Selig Clarifies 7-Fold Leverage
Key Facts
The U.S. Commodity Futures Trading Commission has launched a preliminary process to examine the regulation of financed or margined spot cryptocurrency trading, according to an announcement published on October 5, 2026. The move takes the form of an advance notice of proposed rulemaking, through which the agency is seeking comments to guide potential future regulatory action. CFTC Chairman Michael Selig said the objectives include providing clarity, certainty and consumer protection in crypto asset markets. He added in the statement: "The American people deserve clarity, certainty and consumer protection." The initiative addresses a pathway for margined spot trading that Selig distinguishes from perpetual contracts and other cryptocurrency futures already available in U.S. markets.
In an interview with Bankless, Selig said leverage of about 7 times represented the highest level reached by comparable products in markets for perpetual contracts and other crypto futures. He added: "It is not a fixed rule," describing that level in comparable markets. He explained that margin requirements under the model he is discussing would be set by the platform in consultation with the agency. The official notice, meanwhile, presents an option under which the agency would establish more detailed rules for margin and eligible collateral. That option is presented as an alternative to extending the model under which the clearing organization generally sets those requirements, as part of consultations on how to regulate the transactions.
On platform registration, Selig outlined a proposal in a speech at Fordham University to create a new subcategory within designated contract market registration. The pathway targets platforms seeking to offer only crypto transactions covered by the planned framework. Platforms already registered as designated contract markets could offer these transactions under rules tailored to them, according to his proposal. The framework also includes a requirement that transactions be conducted through a futures commission merchant responsible for customer accounts and funds. The intermediary's handling of those accounts and funds would be subject to requirements to protect them, according to Selig's presentation of the proposed arrangements governing the relationship between platforms, intermediaries and customers.
The safeguards include a proof-of-reserves requirement for platforms holding customer property in omnibus accounts for their benefit, according to Selig's speech. In an article published by the agency that originally appeared in The Wall Street Journal, its chairman cited the experience of the FTX group. He said customer property at the group's CFTC-registered subsidiary "remained segregated and safe." He contrasted that with the bankruptcy of most of the group's offshore and state-regulated entities. His discussion of customer protection linked requirements for holding customer property at the CFTC-registered entity to the experience of the group's other entities.
As background to the initiative, Selig criticized U.S. state money transmission laws, saying they lack uniformity. He described them as designed more for payment service providers than for financial markets, outlining the reasons a framework to regulate these transactions is needed. He clarified that the planned rules would not require all crypto assets to trade on CFTC-registered platforms. He said imposing such a requirement would require congressional action, defining the scope of what the agency can accomplish through regulation. He added that "agency action cannot indefinitely substitute for a legislative framework enacted by Congress."
The consultations cover the benefits and risks of using blockchain technologies to calculate margin continuously, according to the notice published in the Federal Register. The agency is also seeking views on using these technologies for automated liquidation and risk management of leveraged positions. It asks whether rehypothecation of customers' crypto assets should be permitted in margin transactions. The requested comments address how to restrict rehypothecation to protect customer funds, among the issues under consideration to guide future regulatory action. The notice set December 14, 2026, as the deadline for receiving public comments on the proposed regulatory framework.