FTX Is Gone, but Its Memory Still Drives Federal Crypto Policy

Convicted fraudster Sam Bankman-Fried is serving a 25-year sentence in federal prison, but his now-defunct cryptocurrency exchange, FTX, remains top of mind for federal regulators. 

On Monday, the U.S. Commodity Futures Trading Commission (CFTC) released an advance notice of proposed rulemaking intended to clarify its regulatory approach to the cryptocurrency market. In a statement explaining the agency's stance, CFTC Chairman Michael Selig attributed the agency's expansively broad reading of its federal authority to the need to "prevent, rather than only prosecute after the fact, fraudulent schemes such as FTX."

The proposal would create a "tailored subcategory" under futures exchanges—designated contract markets (which include prediction markets) already fall under the CFTC's purview—with the cryptocurrency or digital asset as the commodity rather than the contract. This agency's newly regulated category would allow retail customers to trade "on a margined, leveraged or financed basis," according to Selig. 

The proposal only covers crypto platforms that offer customers financing for trades they can't cover with their own funds, leaving most Americans who trade or own cryptocurrency unaffected unless their exchange offers leveraged trading.