TL;DR: The CFTC is proposing crypto rules that would pull most retail spot trading under its oversight and arguing that sports event contracts are swaps, while courts and the NFL push back. Deep cuts to staff and enforcement at the agency could also prompt a federal probe.
Key Takeaways:
The U.S. Commodity Futures Trading Commission (CFTC) is taking steps to burnish its role as the primary regulator of digital assets, but its efforts to erect a regulatory moat around prediction markets aren’t faring nearly as well.
Last week, the CFTC issued a request for public comment on its proposed rules governing retail commodity transactions involving ‘crypto assets.’ You have until December 2 to comment on the 108-page document, which aims to help fill the gap left by last month’s failure of the Senate’s digital asset market structure bill (the CLARITY Act).
The CFTC is proposing two major changes, one involving the establishment of a new category of platforms under the CFTC’s purview, which the regulator is calling ‘crypto asset markets’ (CAMs). The goal is to establish a national “uniform set of regulations” under which CAMs can operate without worrying about different and/or contradictory state-level licensing regimes.
CAMs would be a subcategory of the CFTC’s designated contract markets (DCMs), and would specifically apply to platforms offering retail trades involving leverage, margin, or financing. (So, basically, futures, but not futures.) CAMs would require the use of futures commission merchants (FCMs) as intermediaries in these trades.
However, the second proposed rule aims to define ‘crypto asset transactions’ (CTX) in a way that encompasses most crypto transactions, thereby allowing CAMs to effectively conduct spot-based trading, something outside the CFTC’s purview.
The CFTC would define a CTX as any retail commodity trade in which the customer doesn’t take ‘actual delivery’ of the tokens within 28 days of a trade. The CFTC’s ‘actual delivery’ definition implies the tokens must land in a customer’s private digital wallet under their direct control. So if the assets stay on a CAM, it’s a CTX.
Former CFTC general counsel Rob Schwartz suggested that, as written, meeting the CTX definition doesn’t actually require the customer to use leverage; “it just has to be offered that way.”
Schwartz summed up the CFTC’s “clever thinking” thusly: “As a result of all of this: (1) offered, even if not executed, on margin; and (2) no actual delivery because the asset is not actually delivered on chain — you *must* trade the spot crypto asset on a registered exchange. Voila, a CFTC-registered and regulated spot crypto exchange.”
(Amanda Fischer, a former chief of staff at the Securities and Exchange Commission (SEC), noted that in 2018 the Coinbase (NASDAQ: COIN) exchange was lobbying for the exact opposite of the CFTC’s proposal, aka “that blockchain finality wasn’t required for ‘actual delivery’ to be satisfied.” The circle of life…)
The day the proposed rules were unveiled, CFTC chairman Michael Selig gave a speech at the Fordham Law Blockchain Regulatory Symposium in which he claimed that registering as a CAM “is a federal option for crypto asset exchanges.” [Emphasis in the original.] Selig said exchanges could continue to pursue individual state-level money transmission licenses “based upon the products and services the firm intends to offer.”
Selig called CAMs “Rung 2 exchanges” while DCMs occupy Rung 3. “To obtain designation as a CAM, an exchange would be required to adhere to the statutory DCM core principles, but with the benefit of a tailored set of regulations that are purpose-built and designed for CTXs. An exchange offering futures, options, or swaps would remain subject to the current DCM framework.”
Selig noted that the CAM proposal also “contemplates a “proof-of-reserves” obligation for exchanges that maintain customer property in omnibus accounts held for their customers’ benefit.” Selig suggested that customers of the bankrupt FTX exchange “would have benefited” from such an obligation.
However, TD Cowen analyst Jaret Seiberg said Monday that Selig is playing beat-the-clock with his new rule proposals. Seiberg said “at best” the CFTC’s post-comment rules won’t be out until late-Q1 or early-Q2 2027, which would push the final rulemaking into 2028, a presidential election year. A new White House occupant could appoint their preferred candidate to run the CFTC, one who might not share Selig’s zeal for lowering crypto guardrails.
Seiberg further warned that any attempt by Selig to speedrun this process would increase the likelihood of a federal judge pausing the process while legal challenges run their course. In other words, CAMs and CTXs are still a long way off from becoming the law of the land.
Predicting when sports bets are swaps is a mug’s game
Last Friday, October 9, CNBC reported that the Blockchain.com platform had applied to the CFTC for DCM and FCM licenses so it can join the rest of the cool kids at the crypto table who have added prediction markets and derivatives to their exchange offering.
Blockchain.com CEO Peter Smith said his platform’s users “should be able to manage their digital assets, trade derivatives, and take positions on real-world events easily, without jumping between different apps.”
Blockchain.com partnered with prediction market giants Polymarket this year to offer event contracts to non-U.S. customers. Blockchain.com also partnered with the Hyperliquid decentralized exchange to offer perpetual futures to non-U.S. customers, but Blockchain.com is now eager to cut out the middlemen and launch its own U.S.-facing products.
The CFTC has gone all in on prediction markets like Polymarket and Kalshi over the past two years. This has included filing lawsuits against nine U.S. states that insist prediction markets offering ‘event contracts’ on sporting events must acquire sports betting licenses in every state they operate.
The CFTC’s argument that sports ‘contracts’ aren’t state-regulated bets but federally-regulated ‘swaps’ has so far produced more losses than wins in state and federal courts. Some federal appeals courts have noted that, under the CFTC’s expansive definition of swap, state-licensed sportsbooks would be breaking federal law by offering bets on sports.
On October 9, the CFTC issued two documents seemingly intended to blunt that argument. The first was an interim final rule that “casino-style gambling products, including wagers placed on sportsbooks and casino games, are excluded from the ‘swap’ definition.” Selig was quoted in the release saying “casino-style gambling products are not derivatives.”
But the second release that day was a notice of proposed rulemaking that defined the term ‘swap’ to include “event contracts, including those based on sports, politics, cultural, and weather-related events … financial instruments that are commonly known to the trade as swaps.” Selig was quoted as saying, “These products are commodity derivatives squarely within the CFTC’s regulatory remit under the Commodity Exchange Act and are within the agency’s exclusive jurisdiction.”
If you’re left scratching your head as to how a sports wager placed on a sportsbook isn’t a swap but wagering on a sports-based event contract is a swap, you’re not alone. As with the CTX proposal above, the CFTC’s lawyers appear to be writing these documents with fingers crossed behind their backs, hoping no one will notice the at-times threadbare logic.
The CFTC’s argument took another serious hit last week when the National Football League urged the U.S. Supreme Court to take up the matter in its current session. But in doing so, the NFL also stated its unequivocal view that ‘event contracts’ on NFL games are sports betting and should be regulated by states, not the CFTC.
CFTC’s lack of enforcement sparks federal probe?
Selig appeared on CNBC on October 6 to sell his CAM/CTX proposals, but, in the process, made an unfortunate verbal slip that his critics might call Freudian. Asked what the benefit of a federal licensing option under the CFTC meant for crypto platforms, Selig said: “With federally regulated crypto markets, you’re able to offer fraud… not fraud, you’re able to offer margin, leverage or financing.”
The odd slip of the lip notwithstanding, Selig’s critics appear to fear that the significant staff reductions at the CFTC under Trump 2.0 have undercut the agency’s capacity and/or willingness to conduct investigations and bring charges against crypto companies that color outside the regulatory lines.
Last week, NPR reported on the ~21% reduction in CFTC staff between June 2024 and January 2026. The CFTC has seen a modest uptick in staffing this year, but as of July, the headcount was still 16% below its decade average.
Former CFTC enforcement attorneys see a direct correlation between the staffing cull and the 80% reduction in enforcement actions the CFTC brought in 2025 compared with the average over the previous 10-year period.
Former CFTC enforcement lawyer Jeff Le Riche told NPR the staff cull “castrated the enforcement team.” Another former enforcement lawyer, Joe Konizeski, said then-acting chair Caroline Pham told enforcement staff “we’re closing all our crypto [cases] … any matter that was even marginally related to crypto ended up getting closed.”
Konizeski added that “fewer cops on the beat … creates a real incentive to start engaging in fraudulent and deceitful behavior. Enforcement is down and that means that there’s going to be more fraud.”
But NPR reported on the existence of a letter sent in July by the federal Government Accounting Office (GAO) to Sen. Elizabeth Warren (D-MA) in response to her request for the GAO to “review matters relating to actions taken at the [CFTC] to reduce the CFTC’s workforce.”
The letter said it “will address this work as part of our response to a related request from [REDACTED].” The GAO indicated it would be “about five months” before “staff with the required skills will be available to initiate an engagement.” That timeline suggests a probe could get underway in December.
FAQs:
What is a crypto asset market (CAM)?
A CAM is a proposed CFTC platform category for retail crypto trades involving leverage, margin, or financing.
What is a crypto asset transaction (CTX)?
A CTX is any retail crypto trade where the customer doesn’t take “actual delivery” of tokens into their own wallet within 28 days.
When is the CFTC crypto proposal comment deadline?
Comments are due December 2. Analyst Jaret Seiberg expects final rules no earlier than late Q1 or early Q2 2027, which could push finalization into 2028, a presidential election year.
Does the CFTC say sports bets are swaps?
Yes. On October 9, the CFTC proposed defining “swap” to include sports event contracts while excluding casino-style sportsbook wagers. The argument has produced more court losses than wins so far.
Why did the NFL go to the Supreme Court?
The NFL urged the Court to take up the dispute and stated that event contracts on NFL games are sports betting that states, not the CFTC, should regulate.
How much has the CFTC cut staff and enforcement?
Staff fell by about 21% between June 2024 and January 2026, and 2025 enforcement actions dropped by 80% compared with the previous 10-year average, according to NPR and former CFTC enforcement attorneys.
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