The U.S. crypto spot exchange industry is getting a massive upgrade. Earlier this year, the CFTC issued a request for comment on how to implement 7 U.S.C. § 2(c)(2)(D), which requires an exchange be designated as a DCM in order to offer leveraged retail spot crypto trading. At the same time, Congress is considering the CLARITY Act, a proposed market structure bill that would place fully collateralized spot digital asset trading under CFTC jurisdiction. Together, these initiatives signal a historic moment: U.S. policymakers are constructing a coherent statutory and regulatory framework under the CFTC for both leveraged and fully collateralized spot crypto markets.
The Statutory Foundation: Trading and Clearing
Section 2(c)(2)(D) of the Commodity Exchange Act is clear: leveraged or margined retail commodity trades must take place on a DCM. Just as important, 17 C.F.R. § 38.601 requires those trades to be cleared through a Commission-registered DCO.
Congress deliberately paired DCMs and DCOs. The exchange provides transparent, fair access and matching, while the clearinghouse manages systemic risk and prevents contagion from a single failure. Leveraged commodity trading without both is not contemplated in law and is expressly prohibited.
The Regulatory Gap: Money Transmitters vs. Market Oversight
Until now, most U.S. crypto spot exchanges have operated under state MTLs, a framework designed for services like MoneyGram or Western Union. These rules focus on payments, KYC, and AML, not market oversight.
The result is a critical gap. Under MTL regulation:
- No transparency standards for publishing things like daily volume or prices.
- No surveillance requirements to detect or deter market manipulation.
- No rules guaranteeing fair access to the order book.
- In some cases, MTL-based exchanges could even prioritize or discriminate between retail and institutional orders.
By contrast, DCMs operate under a statutory framework that ensures governance, surveillance, transparency, and equal treatment of all participants, the same protections that have defined U.S. markets for centuries and made them the global standard.
The Market Disruption Ahead
MTL-based spot crypto exchanges are on the verge of obsolescence as the CFTC's new rules and proposed CLARITY Act are transforming the U.S. crypto landscape. DCMs and DCOs bring institutional-grade infrastructure, real-time surveillance, and robust risk management to spot crypto trading. New entrants have a rare opportunity to enter the largest financial market in the world as this massive shakeup unfolds.
Why Clearing Still Matters
DCMs are required to clear transactions on a DCO as required by 17 C.F.R. § 38.601. Clearinghouses remain indispensable in managing systemic risk even in the case of quickly settled transactions. By netting obligations, enforcing margin standards, handling settlement issues, and guaranteeing settlement, DCOs ensure that one failure cannot cascade into a crisis. Under Section 2(c)(2)(D), if a retail commodity transaction involves margin, leverage, or financing, it must be executed on a DCM and thus cleared through a DCO. The statutory obligation does not turn on whether the leverage is extended directly to the retail customer by the exchange, or indirectly through a broker, lender, or other intermediary. Any leverage in the chain creates the kind of credit exposure that Congress required to be managed within the DCM–DCO framework.
The U.S. equity market provides a clear analogy. Even though many trades are prefunded and settled quickly, national clearing agencies like the DTCC remain central because margin lending, securities borrowing, and settlement mismatches still create systemic exposures. Crypto spot markets are no different: leverage introduces risks that only clearinghouses can manage at scale.
Lessons from Kraken
In 2021, the CFTC enforced this statutory mandate against Kraken for offering leveraged retail spot crypto trading outside of a DCM and FCM structure CFTC Press Release 8433-21. Commissioner Dawn Stump’s concurring statement highlighted the need for clear statutory pathways rather than leaving U.S. traders with no compliant choices Stump Statement, Sept. 28, 2021.
A Turning Point: The CFTC’s Current Initiative
Today, the Commission is moving beyond enforcement. Under Chair Caroline Pham, the CFTC has launched a leveraged spot trading initiative aimed at restoring U.S. competitiveness CFTC Press Release 9105-25. Together with the CLARITY Act, these efforts form a coherent framework for spot crypto trading, whether fully collateralized or leveraged.
For DCMs and DCOs such as Bitnomial Exchange and Clearinghouse, the opportunity is historic. With established infrastructure, perpetual futures, crypto margin collateral, and statutory protections, they can finally compete head-to-head with offshore platforms in leveraged spot crypto trading.
Bitnomial underscored these points in its recent public comments to the CFTC.
Conclusion
U.S. crypto spot markets are finally moving into their proper regulatory home: DCMs under CFTC oversight, with DCO clearing as the systemic risk management safeguard. This is not new law but the application of long-standing statute.
What is new is the willingness of regulators and lawmakers to enforce and modernize this framework. This marks the turning point where U.S. crypto markets stopped playing defense and began to lead globally.