Galaxy Research said in an analysis by Thaddeus Pinakiewicz, translated by TechFlow, that U.S. Commodity Futures Trading Commission Commissioner Michael Selig has released a 108-page advance notice of proposed rulemaking, or ANPR, built around Regulation CTX and the related Reg CAM. The document is presented as the CFTC’s first structured attempt in years to lay out how parts of the crypto derivatives market could operate within a federal framework.
The analysis says Selig introduced the proposal on Monday at an academic symposium at Fordham University School of Law, opening with Ronald Reagan’s line about “the nine most terrifying words in the English language” before formally rolling out Regulation CTX.
A first detailed compliance discussion after years of enforcement
As summarized in the piece, the Dodd-Frank Act of 2010 requires retail commodity transactions involving leverage, margin, or financing to take place on properly registered venues. Over the past decade, the CFTC has repeatedly used that standard in enforcement actions against crypto firms, while offering little practical guidance on what a compliant structure would actually look like.
Galaxy Research says the ANPR changes that dynamic. Rather than leaving the industry to guess at the rules and respond under threat of enforcement, the notice asks specific questions on issues such as margin treatment and custody mechanics, giving market participants a formal channel to engage on the substance.
Reg CAM would permit fully integrated crypto market structures
The article breaks the traditional futures market into three separate regulated functions. A designated contract market, or DCM, handles order matching, rule enforcement, and market surveillance. A futures commission merchant, or FCM, holds customer funds and keeps them segregated from house assets. A derivatives clearing organization, or DCO, steps into matched trades, guarantees performance, and maintains resources sufficient to absorb the largest member default risk.
Even when the same corporate group owns more than one of those businesses, the legal entities are licensed separately and operate under different rulebooks. CME Group is cited as an example of a group that includes both exchange and clearing operations.
Crypto venues, by contrast, were not built around that fragmentation. The analysis says this is due in part to the native bearer nature of crypto assets and in part to the long absence of tailored guidance. Listing, matching, clearing, settlement, and custody are often bundled into one platform, with customer balances reflected as entries on an internal ledger.
Under Reg CAM, the CFTC would not force those businesses to split into separate legal entities. Instead, qualifying crypto asset markets could register as self-operated FCMs, self-operated DCOs, or both, forming what the proposal calls a “Fully Integrated CAM.” According to the analysis, that integrated structure is the same core model Coinbase pushed for in a public letter to regulators last year.
The piece also addresses the obvious comparison with FTX. It says the CFTC’s response is rooted in the treatment of customer funds during the collapse: while FTX became an extreme stress case for integration, customer assets inside its CFTC-registered compliant entity remained segregated, in contrast with 130 offshore affiliated entities that entered bankruptcy.
Private-key control emerges as the core test for “actual delivery”
Galaxy Research argues that the most consequential section for the broader Web3 sector is the CFTC’s treatment of “actual delivery.”
Under the current framework, a commodity transaction can avoid the requirement to trade on a licensed exchange if actual delivery is completed within 28 days. Regulation CTX, as described in the article, gives digital assets a more concrete standard. The proposal states that actual delivery may require “actual possession of access credentials (such as private keys).”
That distinction matters. An internal book-entry transfer on a centralized exchange would not count as actual delivery under this reading. A withdrawal to an independent wallet controlled entirely by the user’s private keys would.
The analysis adds that the CFTC’s preliminary view is that on-chain trading protocols generally deliver assets directly to the buyer’s digital wallet. Footnote 279 of the notice says that once on-chain delivery is completed, the CFTC would no longer exercise day-to-day regulatory jurisdiction over the asset, except in cases involving fraud or market manipulation.
Selig also echoed the phrase “Not your keys, not your coins” on social media and wrote: “For those who wish to act in accordance with the cypherpunk original vision, we are committed to providing the necessary certainty to let on-chain finance flourish.”
Galaxy Research says that reading would mean purely self-custodial on-chain interactions, such as those associated with Uniswap, would not need CAM, DCM, or FCM registration. The article also points to a broader alignment across U.S. financial regulators on the custody question. Former SEC Commissioner Hester Peirce had previously said peer-to-peer smart contract matching does not require exemptive relief, and the SEC’s latest custody proposal would allow advisers to hold private keys themselves in extreme cases.
Front ends, code verification, and proof-of-reserves are also in scope
Even if self-custodial trading activity itself sits outside the same licensing perimeter, the analysis says interfaces that trigger those trades may still face scrutiny. Regulation CTX takes a broad view of what it means to “offer leverage.” If a centralized platform’s terms of service include leverage, or if the same retail app used to buy crypto assets also directly integrates yield-generating on-chain vaults, the compliance treatment of that interface becomes a live issue.
The article points to Coinbase App’s integration of Morpho vaults curated by Steakhouse as an example, arguing that the legal characterization of such front ends could shape how far CeDeFi products can be combined in one user experience.
On smart contract oversight, the commission is asking whether autonomous contracts that operate without human intervention should be subject to pre-deployment testing, formal verification, and circuit-breaker mechanisms. The analysis notes that conventional code audits have often produced limited signal, but says formal verification could become a meaningful compliance threshold as large language model coding tools and fuzz testing mature.
Proof-of-reserves is another area under discussion. The article says the CFTC is exploring how to use the native transparency of blockchains, and that Galaxy is urging regulators to adopt on-chain Merkle Tree structures. In Galaxy’s view, that would move the industry from basic proof-of-reserves toward proof-of-solvency.
On-chain order-book exchanges enter the regulatory conversation
The final issue highlighted in the analysis comes from Section V.B of the notice, which asks whether a compliant market could use a blockchain network itself as the layer for order matching and execution.
If that model were allowed, the article says, the U.S. could eventually see a regulated on-chain exchange with a high-performance order book running directly on-chain, while the front end restricts access through KYC controls for compliant U.S. users. The piece describes that as something close to a compliant version of Hyperliquid and says one possible condition for entering that framework could be fully open-sourcing the underlying node code.
Selig closed his speech with this line: “Satoshi Nakamoto’s technological revolution fundamentally transformed the global financial system. If the United States can embrace this paradigm shift and establish the right regulatory framework, we will surely enter another golden age.”