CFTC set to approve leveraged spot crypto trading next month

The acting chair of the Commodities Futures Trading Commission (CFTC), Caroline Pham, has confirmed to a reliable source that the agency is currently engaged in talks with regulated exchanges to initiate spot crypto trading. Notably, this activity may comprise leveraged options and is scheduled for early next month.

Sources noted that this report was legitimate after Pham acknowledged the announcement through a shared X post where she briefly said “True,” in response to an article released on Sunday, November 9.  

The move comes as the federal government is shut down, which has impacted other crypto policy efforts. It would move away from current US rules, which largely limit leveraged trading to derivatives, such as futures and perpetual contracts, rather than the actual crypto assets underlying them.

Pham hints at the beginning of leveraged spot crypto trading

Regarding the announcement that Pham acknowledged efforts to start leveraged spot crypto trading. Sources have pointed out that the news illustrates that the acting chair has been actively negotiating with CFTC-regulated designated contracts markets (DCMs) exchanges to reach an agreement. 

This group comprises leading financial firms like ICE Futures, CME, and Cboe Futures Exchange. Additionally, it includes crypto-focused companies such as Coinbase Derivatives, Kalshi prediction markets, and US-based Polymarket.

Sources close to the situation indicated that their discussions focus on the launch of spot crypto trading products that involve leverage, financing options, and margin.

As we work with Congress to further clarify these markets via new legislation, we are also using our existing authority to adopt the President’s Working Group on Digital Asset Markets recommendations rapidly,” said Pham in a statement.

Analysts noted that this crucial step marks a significant shift in the US regulators’ approach to managing crypto markets. For example, Pham is utilizing current regulations from the Commodity Exchange Act rather than waiting for Congress to grant the CFTC clear authority over spot crypto markets.

Concerning the current regulations, it is worth noting that these rules highlight that retail trading of commodities with margin, financing, or leverage must be conducted on regulated exchanges. 

With leveraged spot crypto trading implemented, investors can borrow funds to boost their investment in digital currencies like Ether and Bitcoin. As a result, they could gain both substantial profits and larger losses. 

In this type of trading, participants typically issue part of the total trade value as collateral, known as margin, while the broker or exchange covers the remaining amount. For instance, if a trader uses 5x leverage, they could manage $5,000 worth of bitcoin by investing only $1,000 of their own cash.

While these products have been available on international crypto exchanges for several years, sources acknowledge that providing them on CFTC-regulated platforms has an added advantage. It will introduce enhanced surveillance, risk management, and safeguard measures for investors for leveraged crypto trading in the US.

Pham pushes leveraged spot crypto trading despite government shutdown 

The CFTC typically has five commissioners who come from diverse political origins. However, following the current situation, Pham is the only commissioner left, and the other positions remain vacant. This grants her more authority to lead the federal agency.

Interestingly, Pham has not halted her efforts even as the government is in a shutdown that has held up the possibility of confirming Mike Selig, currently the chief counsel for the SEC’s Crypto Task Force and Trump’s pick to head that agency.

Pham is expected to assume the role of global crypto payments company MoonPay’s chief legal officer and chief administrative officer after her time at the CFTC.

However, sources discovered that the acting chair’s confirmation post did not mention plans about MoonPay. When reporters contacted Pham and the CFTC for comment on the situation, they did not respond immediately.

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