Our Investment Funds Team examines an interpretive letter from the Commodity Futures Trading Commission (CFTC) that may help to clarify when non-U.S. firms with U.S. contacts can be considered non-U.S. persons for cross-border registration analysis.
- A non-U.S. trading firm with indirect U.S. ownership and affiliates remained a non-U.S. person because it is organized and controlled from outside the United States
- The letter may assist offshore exchanges dealing with crypto derivatives in evaluating which customer relationships involve U.S. persons to facilitate onboarding
- The letter helps offshore managers and exchanges understand U.S. person status, though firms should consult counsel before relying on it
The Commodity Futures Trading Commission (CFTC) has issued Interpretive Letter 25-14, nonbinding guidance that clarifies when non-U.S. firms may be considered “U.S. persons” for a cross-border CFTC registration analysis. While the letter does not have the force of a general rulemaking, it is timely and potentially helpful for offshore trading firms and offshore exchanges, particularly those operating in the crypto derivatives space.
Key Takeaways
- Generally. The CFTC’s letter suggests that non-U.S. trading firms with some U.S. contacts – including indirect U.S. ownership and U.S. affiliates – can still be “non-U.S. persons” under CFTC rules covering registration and reporting, if organized and controlled from outside the United States.
- For Offshore Managers. The letter may assist offshore managers evaluating their CFTC registration obligations in light of exemptions that depend on their non-U.S. person or foreign located person status, such as those under CFTC Rule 3.10(c) and the swap dealer registration rules.
- For Offshore Exchanges and Their Participants. Offshore, unregistered exchanges, particularly those dealing in crypto derivatives, have come under CFTC scrutiny in recent years over concerns that they may be onboarding U.S. persons, which could subject those exchanges to CFTC registration obligations under futures commission merchant (FCM), foreign board of trade (FBOT), or swap execution facility (SEF) registration rules. The letter provides insight into what customer relationships would not be considered to involve a U.S. person, which could facilitate exchange onboarding for non-U.S. trading firms with certain U.S. contacts.
The Interpretive Letter’s Decision
The May 21, 2025 letter from the CFTC’s Market Participants Division and Division of Market Oversight interpreted regulations for SCB Limited, a foreign proprietary trading firm from the Bahamas, that usefully clarifies certain U.S. person concepts for offshore managers and exchanges thinking about cross-border registration issues. Notably, although SCB had indirect U.S. person owners and certain (noncontrolling) U.S. service operations through affiliates, the CFTC concluded that SCB is not a U.S. person (or “U.S. located person”) for purposes of the relevant rules and that its activities in trading virtual currency futures, options, and perpetual contracts on non-U.S. exchanges would not subject those exchange platforms to U.S. registration under the CFTC’s FCM, FBOT, or SEF registration rules, or subject SCB itself to swap dealer reporting or registration.
The key factors for the CFTC were SCB’s place of organization and principal place of business, despite its affiliates’ U.S. activities.
Implications for Managers and Exchanges
The interpretive letter is technically nonbinding upon the CFTC and applies solely to SCB; firms should consult with counsel before relying on it in their own circumstances. However, while the letter does not have the force of a rulemaking for market participants generally, managers seeking no-action relief from registration on the basis of their status as a non-U.S. person, and exchanges pursuing such relief based on their customers’ statuses, will likely find the letter a helpful precedent. The letter also provides useful insight into the CFTC’s thinking about U.S. person status generally.
- Nondomestic investment managers considering CFTC registration should note that while CPO/CTA status – the registration categories typically of interest to investment managers and pool operators – were not the explicit subject of this release, the letter may help to clarify which managers would count as foreign located persons under Rule 3.10(c), a rule whose exemptions are often relied upon by non-U.S. managers seeking to avoid CPO or CTA registration and which was a direct subject of the CFTC’s letter.
- Both offshore managers and derivatives exchanges may find the letter to be a helpful precedent when thinking about platform onboarding issues. The letter suggests that the CFTC will not consider a manager’s U.S. affiliate relationships or even indirect U.S. person ownership as automatic hallmarks of U.S. person status for the manager under its cross-border definitions when a management firm is organized and operated outside the United States. This may help to alleviate concerns on the part of a non-U.S. exchange that it would be onboarding a U.S. person (and subjecting itself to CFTC registration obligations) by accepting a nondomestic manager with similar U.S. connections.
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