Acting Commodity Futures Trading Commission (CFTC) Chair Caroline Pham has confirmed that the agency is in active discussions with regulated exchanges to potentially launch leveraged spot crypto trading in the US as early as next month. This initiative marks a significant shift in the regulatory approach to digital assets, moving towards utilizing existing regulatory frameworks to bring leveraged crypto trading under US oversight.

Pham confirmed a report via a post on X, noting the discussions with CFTC-regulated designated contract markets (DCMs). These discussions include major financial organizations like CME Group, Cboe Futures Exchange, and ICE Futures, as well as crypto-native firms like Coinbase Derivatives, Kalshi, and Polymarket US. The aim is to introduce spot crypto trading products that incorporate margin, leverage, and financing.

Leveraged spot crypto trading would allow investors to amplify their positions in cryptocurrencies like Bitcoin and Ether by borrowing funds. Traders would put up a portion of the total trade value as collateral, known as margin, with the exchange or broker providing the remaining financing. While this can potentially multiply gains, it also significantly increases the risk of losses. Currently, US crypto traders can access leveraged trading through offshore platforms, but these lack the regulatory oversight and investor protections of US-regulated exchanges. Pham aims to bring this activity onto regulated US exchanges, providing institutional-grade oversight, risk management standards, and investor protections.

Pham is leveraging existing provisions of the Commodity Exchange Act, which require retail commodity trading involving leverage, margin, or financing to occur on regulated exchanges. By utilizing these existing authorities, Pham is moving forward with the initiative without waiting for specific Congressional action to grant the CFTC explicit authority over spot crypto markets. This approach aligns with the recommendations in the President's Working Group on Digital Asset Markets report.

This development comes amid a government shutdown that has delayed the Senate confirmation of Mike Selig, former President Trump's nominee to replace Pham. Despite this, Pham is moving forward with the initiative, expecting the new products to "begin trading in our markets before year's end".

In September, the SEC and CFTC issued joint guidance clarifying that registered exchanges are not prohibited from facilitating trading of certain spot commodity products, including digital assets. However, uncertainty remains over which tokens fit the CFTC commodity category versus the SEC securities category. Bitcoin and Ether are often treated as commodities, but newer tokens face tougher questions.

If CFTC-registered DCMs list spot crypto, Futures Commission Merchants (FCMs) can act as intermediaries between the venue and institutions. FCMs already employ Know Your Customer (KYC) and Anti-Money Laundering (AML) controls for CME crypto futures.