Key Takeaways
- On August 28, 2025, the Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight issued an advisory (FBOT Advisory) to make clear the path by which foreign exchanges may provide direct market access to their trading platforms to persons physically located in the United States, including trading platforms offering digital asset products.[1]
- The advisory clarifies that foreign exchanges, including those offering digital asset derivatives products, may register as Foreign Boards of Trade (FBOTs) rather than Designated Contract Markets (DCMs), which is the registration category for domestic exchanges offering those same products.
- In an accompanying statement, Acting CFTC Chairman Caroline Pham said, “Today’s FBOT advisory provides the regulatory clarity needed to legally onshore trading activity that was driven out of the United States due to the unprecedented regulation by enforcement approach of the past several years.”[2]
Introduction
Recognizing the continued evolution of global derivatives markets that has resulted from technological innovation in the United States and abroad, the CFTC issued its FBOT Advisory to provide regulatory clarity with respect to the FBOT registration framework for non-U.S. entities that are legally organized and operate outside the United States that seek to provide members or participants physically located in the United States with direct market access to their futures and options trading platforms.
Background
The Commodity Exchange Act (CEA) requires futures contracts to be traded on or subject to the rules of a “board of trade.” A board of trade includes DCMs, which are “located inside” the United States, and FBOTs, which are “located outside” the United States.[3]
Since the 1990s, the CFTC has issued no-action letters permitting certain FBOTs to offer their U.S.-based members access to trade on their electronic trading platforms.[4] With the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), CEA Section 4(b) was amended to authorize the CFTC to establish a registration framework for FBOTs that offer “direct access” to members or other participants located in the United States to enter trades directly into the trade matching system of such FBOTs.[5] Under this authority, the CFTC adopted final rules permitting FBOTs that are registered with the CFTC to provide members or other participants located in the United States with direct access to their electronic trading and order matching systems.[6]
Despite the codified registration of FBOTs that is provided under Dodd-Frank, the CFTC brought enforcement actions against several non-U.S. crypto platforms for failure to register as a DCM,[7] which created uncertainty and confusion in the global crypto market about the proper registration path for non-U.S. exchanges, and whether there was one at all. This confusion prompted many to seek clarity from the CFTC related to FBOT registration.[8]
Overview of Regulatory Implications of Registrations
DCMs must comply with the DCM framework established under CEA Section 5, including the 23 DCM Core Principles.[9] The Core Principles include, but are not limited to, requirements related to market surveillance and monitoring, position limits and accountability, financial integrity of transactions, governance standards, and protection of markets and market participants. DCMs are also subject to CFTC oversight and enforcement, including, but not limited to, market surveillance, rule enforcement reviews, reviews of contract terms, and enforcement actions.[10] FBOTs must show that they are subject to comparable regulation in their home country, including ongoing regulatory supervision and oversight with respect to, among other things, market integrity, customer protection, clearing and settlement, and enforcement of the rules of the FBOT.[11]
Advisory
In its FBOT Advisory, the CFTC Division of Market Oversight clarifies that FBOTs may provide members or other participants located in the United States with direct access to their electronic trading and order-matching systems provided that such FBOTs are registered with the CFTC.[12] In order to qualify for CFTC registration, FBOTs must meet the following criteria:
- Possess the attributes of an established, organized exchange;
- Adhere to appropriate rules prohibiting abusive trading practices;
- Enforce appropriate rules to maintain market and financial integrity;
- Have been authorized by a regulatory process that examines customer and market protections; and
- Be subject to continued oversight by a regulator that has power to intervene in the market and the authority to share information with the CFTC.[13]
In addition, as specified in CFTC Regulation 48.4(b), FBOTs may permit U.S.-located members and other participants to access their electronic trading and order-matching systems provided they are:
- Entering orders for members’ or other participants’ proprietary accounts;
- Registered as futures commission merchants (FCMs) and are submitting customer orders to the trading system for execution;
- Registered, subject to certain conditions, as commodity pool operators (CPO) or commodity trading advisors (CTA), or are exempt from such registration, and are submitting orders for execution on behalf of a U.S. pool that the member or other participant operates, or an account of a U.S. customer for which the member or other participant has discretionary authority, respectively; or
- Registered, subject to certain conditions, with the CFTC as introducing brokers (IBs) and are submitting customer orders to the trading system for execution.
Of note, Pham confirmed that the CFTC’s FBOT registration framework “applies to all markets, regardless of asset class, and includes both traditional and digital asset markets.”[14]
Conclusion
The FBOT Advisory reaffirms the CFTC’s long-standing registration framework for FBOTs and paves the path forward for digital asset derivatives trading within the United States, restoring the clear path for foreign crypto-derivatives platforms to reenter the U.S. market. This is a tangible demonstration of the CFTC’s commitment to creating clear rules, particularly in the digital asset space, to foster open and robust globally competitive markets.
[1] CFTC Division of Market Oversight, Staff Advisory: Registration Framework for Foreign Boards of Trade Providing Direct Access to Members or Other Participants Located in the United States, CFTC Letter No. 25-27 (Aug. 28, 2025), available at https://www.cftc.gov/csl/25-27/download.
[2] Release No. 9111-25, Acting Chairman Pham Announces FBOT Advisory to Provide Regulatory Clarity for Non-U.S. Exchanges, CFTC (Aug. 28, 2025), https://www.cftc.gov/PressRoom/PressReleases/9111-25 (Pham FBOT Announcement).
[3] Section 4(a) of the CEA provides a territory-based exclusion for FBOTs from DCM registration. 7 U.S.C. § 6(a).
[4] See, e.g., Deutsche Terminborse, CFTC No-Action Letter No. 96–28 (Feb. 29, 1996), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/96-28.pdf (allowing Deutsche Terminborse to place computer terminals in the U.S. offices of its members); The International Petroleum Exchange of London Limited (“IPE”), CFTC No-Action Letter No. 99-69 (Nov. 12, 1999), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/99-69.pdf (permitting IPE to make its electronic trading and order matching system available to IPE members in the United States).
[5] Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376, 1726 (2010).
[6] See 17 C.F.R. pt. 48.
[7] See, e.g., Release No. 8680-23, CFTC Charges Binance and Its Founder, Changpeng Zhao, with Willful Evasion of Federal Law and Operating an Illegal Digital Asset Derivatives Exchange, CFTC (Mar. 27, 2023), https://www.cftc.gov/PressRoom/PressReleases/8680-23; Release No. 8270-20, CFTC Charges BitMEX Owners with Illegally Operating a Cryptocurrency Derivatives Trading Platform and Anti-Money Laundering Violations, CFTC (Oct. 1, 2020), https://www.cftc.gov/PressRoom/PressReleases/8270-20; Release No. 8884-24, CFTC Charges KuCoin with Operating Illegal Digital Asset Derivatives Exchange (Mar. 26, 2024), https://www.cftc.gov/PressRoom/PressReleases/8884-24; Release No. 8774-23, CFTC Issues Orders Against Operators of Three DeFi Protocols for Offering Illegal Digital Asset Derivatives Trading (Sept. 7, 2023), https://www.cftc.gov/PressRoom/PressReleases/8774-23.
[8] See Pham FBOT Announcement, supra note 2.
[9] See 7 U.S.C. § 7(d); 17 C.F.R. pt. 38.
[10] Contracts & Products, CFTC, https://www.cftc.gov/IndustryOversight/ContractsProducts/index.htm.
[11] 17 C.F.R. § 48.7(e).
[12] FBOT Advisory at 3-4.
[13] 17 C.F.R. § 48.2(b).
[14] See Pham FBOT Announcement, supra note 2.
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