Initiative could potentially impact how spot crypto assets are traded in the United States
Coming on the heels of the CFTC's announcement of a Crypto Sprint to start implementing the recommendations in the White House digital asset report ("White House Report"), on August 4, 2025, the CFTC launched its first initiative in the Crypto Sprint for trading listed spot crypto contracts that are listed on a CFTC-registered futures exchange, i.e., a designated contract market ("DCM"). The initiative seeks public input on providing regulatory clarity on how to list spot crypto asset contracts on a DCM using its existing authority and requests comments to be submitted by all interested stakeholders to the CFTC by August 18, 2025.
The White House Report called for the CFTC and SEC to take immediate action utilizing their respective rulemaking and exemptive authority to advance digital asset trading in the United States. One of the many recommendations in the White House Report was for the CFTC to provide clarity and guidance on the listing of leveraged, margined, or financed spot retail commodity transactions on digital assets and how digital assets may be considered commodities. In this vein, the CFTC's brief announcement requests feedback and suggestions on listing spot crypto asset contracts including under Section 2(c)(2)(D) of the Commodity Exchange Act ("CEA"), Part 40 of the CFTC's Regulations (provisions common to registered entities), and whether there are any implications under the securities laws with respect to an SEC framework for trading non-security assets that are part of an investment contract. These topics dovetail with previous comments made by Acting Chairman Pham earlier this year, which is cited in the CFTC's announcement. In those comments, Acting Chairman Pham suggested a "simple" approach to regulating spot crypto that could be implemented in 12-18 months using the CFTC's exemptive authority.[1]
Based upon her previous comments, such an approach would be for the CFTC to extend current registration and compliance requirements for retail spot foreign exchange transactions to include spot crypto, which would allow futures commission merchants and retail foreign exchange dealers to immediately transact spot crypto without having to obtain a new registration. Section 2(c)(2)(D) of the CEA addresses retail commodity transactions that are offered on a leveraged, margined, or financed basis, which are subject to CFTC jurisdiction unless they result in actual delivery within 28 days.
Acting Chairman Pham also commented that designated contract markets that currently offer crypto futures and options should be permitted to list spot crypto, including crypto offered on a leveraged, margined, or financed basis without needing additional registrations. Part 40 of the CFTC's regulations lists provisions that are common to registered entities and covers requirements for listing products for trading by certification, voluntary submissions of new products and rules for CFTC review and approval, and self-certification of rules.
In her earlier statements, Acting Chairman Pham also recommended a joint exemptive order or guidance with the SEC to set forth criteria to determine that a utility token is not a security. This recommendation is similar to one of the aspects of the SEC's recently announced Project Crypto to develop clear guidelines that market participants can use to determine whether a crypto asset is a security or subject to an investment contract.[2]
The CFTC's announcement also cited a 2022 proposal by Acting Chairman Pham listing ten fundamentals for responsible digital asset markets: (1) identify the particular product or service; (2) the product or service must be within the regulatory perimeter; (3) mitigate systemic risk; (4) combat illicit finance and national security risks; (5) appropriately use activity-based and entity-based regulation; (6) protect customers and the retail public; (7) ensure transparency; (8) vigorously enforce market conduct rules; (9) address conflicts of interests; and (10) promote free markets that will unlock American innovation. These fundamental principles will likely be considered by the CFTC in connection with its latest initiative.
Likely taking heed of the White House Report calling for "immediate" action, the CFTC requests comments to this initiative by August 18, 2025. With the House's recent passage of the Digital Asset Market Clarity Act of 2025 ("Clarity Act") and the Senate Banking Committee discussion draft building upon the Clarity Act, publicly filed comments to this initiative may influence the anticipated discussion draft from the Senate Agriculture Committee in September, especially as the current version of the Clarity Act creates a new registration category for digital commodity brokers, dealers, and exchanges. Indeed, it appears that the current Administration's plan is to have financial regulators immediately use their exemptive authority to the fullest extent possible, then promulgate regulations with accompanying guidance as quickly as possible, such that those actions can then be conformed to Congress's ultimate crypto market structure legislation.
[1] Section 4(c) of the CEA, 7 U.S.C. § 6(c), authorizes the CFTC, by rule, regulation, or order, after notice and opportunity for hearing and subject to certain conditions and limitations, to exempt certain agreements, contracts, or transactions from the requirements of the CEA "[i]n order to promote responsible economic or financial innovation and fair competition." The CFTC must find that the exemption is consistent with the public interest and the purposes of the CEA and will not have a material adverse effect on the ability of the CFTC or any contract market to discharge its regulatory or self-regulatory responsibilities under the CEA.
[2] Other aspects of the SEC's Project Crypto is to give market participants maximum choice when deciding where to custody and trade crypto assets, "Reg Super App" where securities intermediaries should be able to offer a trading in non-security crypto assets alongside crypto asset securities, traditional securities and other services without requiring multiple licenses, modernizing securities regulations to allow for on-chain and decentralized software systems in the securities markets, and an innovation exemption to allow registrants and non-registrants to quickly go to market with new business models and services that do not fit within current regulations.
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