CFTC's Bold Move to Define Crypto as Hot Commodity in U.S. Regulated Markets

The U.S. commodity regulator is taking unprecedented steps to establish cryptocurrency as a defined commodity that can be traded through traditional regulatory channels. This shift represents a fundamental redefinition of how digital assets are categorized and traded within the American financial system. As the sole commissioner currently leading the CFTC, Caroline Pham has emerged as the architect of this transformation, using existing regulatory authority to accelerate what might otherwise require years of congressional action. The policy framework she’s advancing could reshape both retail and institutional participation in the crypto space throughout 2025 and beyond.

The CFTC’s approach essentially bypasses the need for explicit congressional authorization by leveraging powers already on the books. Pham’s administration is working directly with regulated exchanges to develop real-time trading products for individual investors, with potential launches slated for early this year. Beyond spot transactions, the framework extends to margin and leveraged trading of major cryptocurrencies like Bitcoin and Ethereum, structured through Designated Contract Markets (DCMs)—venues already embedded in the commodity regulatory ecosystem. This legal maneuver has drawn both support and scrutiny from lawyers and policy observers who debate whether a single acting commissioner can legitimately create such sweeping market structure changes without a full board.

Retail Access: The Gateway to Crypto Becoming a Hot Commodity

For years, cryptocurrency remained trapped between two regulatory silos: the SEC claimed jurisdiction over certain digital assets as securities, while the CFTC maintained authority over commodity-like instruments. This ambiguity meant that retail investors faced friction accessing straightforward, regulated crypto trading. Pham’s push to define cryptocurrencies through the commodity framework on regulated exchanges removes that friction.

Kris Swiatek, a digital assets lawyer at Seward & Kissel, explains the market appeal: “Traditional institutions and established financial participants are far more likely to increase their crypto exposure if they can transact these assets on regulated exchanges in a familiar, compliant venue.” This isn’t abstract theory—it reflects a years-long industry argument that substantial institutional capital has been sidelined waiting for the regulatory clarity that now appears within reach.

The CFTC is already in advanced discussions with exchanges qualified as DCMs, including crypto-native platforms like Coinbase and Bitnomial, alongside newer entrants like Kalshi and Polymarket. Each platform represents a different angle on how the regulatory framework can accommodate this emerging hot commodity market. Industry observers note that structured access through established venues makes a material difference: it’s the difference between institutional investors viewing crypto as a speculative frontier versus viewing it as another asset class where they can apply existing risk management and compliance protocols.

Institutional Participation: Redefining Crypto’s Market Maturity

The ultimate goal of the CFTC’s initiative is to attract traditional institutional players by proving that regulated, compliant venues exist. Unlike the offshore or less-regulated platforms that currently dominate crypto trading volume, the CFTC-supervised approach offers what the industry calls “regulatory parity”—the ability to trade this hot commodity under the same disclosure, position-reporting, and enforcement mechanisms that govern traditional derivatives markets.

Cody Carbone, CEO of the Digital Chamber of Commerce, highlighted this moment: “The CFTC’s recent work on spot market regulation is particularly encouraging. Progress ultimately hinges on when Congress returns to full operations, but until then, agencies must move forward with supervisory actions aligned with presidential directives and recommendations from the Administration’s working group.”

The irony is that while the SEC has captured public and media attention for its stringent oversight of the crypto industry, Paul Atkins—the SEC chairman appointed by the Trump administration and known as a crypto supporter—has openly acknowledged that most digital assets clearly fall outside securities classification and therefore outside SEC jurisdiction. This reality means the CFTC, despite being the smaller agency, effectively holds primary authority over the vast majority of crypto-asset transactions. Coinbase’s Chief Policy Officer Faryar Shirzad expressed cautious optimism: “The Chair has made clear that she welcomes direct input from firms like Coinbase on the CFTC’s development process.”

Leveraged Trading and Market Depth

Beyond spot transactions, Pham’s framework explicitly enables leveraged, margin-financed trading of Bitcoin, Ethereum, and other cryptocurrency commodities. This expansion addresses another structural gap: while offshore platforms routinely offer 10x, 25x, or 50x leverage on crypto assets, regulated U.S. venues have largely avoided this segment. The CFTC’s framework brings leveraged products into a fully regulated environment with position limits, disclosure requirements, and custodial safeguards designed to protect both traders and market integrity.

This regulatory containment of leverage matters to institutional investors who might otherwise avoid a speculative environment seen as lightly supervised. A prominent investment firm, a16z, recently submitted detailed comments to the CFTC stating: “The agency’s public framework represents a critical step in bringing cryptocurrency trading back onshore and into U.S. regulatory oversight. This allows retail and sophisticated investors to access leveraged crypto products through comprehensive regulatory architecture while upholding high standards for market protection and investor safeguarding in the derivatives ecosystem.”

The technical implementation routes such trading through DCMs operating under commodity law. This means clearinghouses, position surveillance, and risk management protocols designed for traditional futures markets now extend to digital assets. While the scope of permitted products remains narrower than what offshore platforms offer, ample room exists for Congress to eventually expand the boundaries through formal legislation.

The Stablecoin Breakthrough: Defining a Commodity Linchpin

Parallel to the spot and leverage trading initiative, the CFTC is advancing a separate but complementary policy shift: permitting stablecoins to function as tokenized collateral within derivatives trading. This framework is targeted for finalization in mid-2025, marking what Pham has called the “killer app” for stablecoins. Currently, derivatives traders post collateral in dollars or other traditional instruments; this new framework would allow blockchain-based stablecoins to serve the same function, streamlining settlement and reducing custody friction.

The approach represents a structural breakthrough because it directly addresses a core use case for stablecoins: how they function in actual trading operations rather than remaining peripheral to established finance. Implementation will likely begin in U.S. clearinghouses already handling crypto futures, with elevated disclosure requirements for position sizes, large trader identities, and transaction volumes. The pilot phase emphasizes operational transparency and risk monitoring to ensure clearinghouses maintain their risk management standards while embracing tokenized instruments.

This policy shift redefines how the CFTC itself views stablecoins—not as standalone payment networks but as operational infrastructure within commodity markets, effectively conferring upon them a “commodity-adjacent” status that supports broader market functionality.

The Power Question: One Chair, Multiple Mandates

The CFTC is statutorily supposed to operate with five commissioners, yet Pham currently serves as the sole officer in place. This unusual arrangement grants her extraordinary autonomy but has triggered debate about the legal durability of decisions made without a full board.

Cryptocurrency advocates and attorneys have raised concerns about whether a solo commissioner—operating without dissenting board members to provide institutional counterbalance—can legitimately create binding policy frameworks. The Trump administration’s stance appears to be that existing legal authority, coupled with presidential directives and working group recommendations, justifies unilateral action by the acting chair. This legal question will likely be tested in courts or during congressional oversight, especially if external stakeholders challenge specific decisions.

Pham’s other major initiative involves internal restructuring. She is rebuilding the CFTC’s enforcement division with specialized expertise in cryptocurrency matters and plans to recruit experienced financial sector managers—often retaining proven talent from competitors and government agencies. Additionally, she is exploring hiring in lower cost-of-living regions like Kansas City to optimize budget efficiency. This institutional restructuring underscores her view that the CFTC must evolve its internal capabilities to match the pace and complexity of crypto market development.

The Transition Ahead: Continuity and Uncertainty

Mike Selig, Trump’s nominee for permanent CFTC chair, has been deeply involved in digital asset policy development—first through the SEC’s Crypto Initiative and subsequently through the administration’s inter-agency coordination task force. Industry observers widely expect him to maintain continuity with Pham’s crypto-supportive trajectory once confirmed by the Senate. However, the confirmation timeline remains uncertain, particularly given recent congressional operational disruptions. This delay keeps Pham in the acting chair role, extending her window to push through additional reforms before a formal transition occurs.

Multiple former CFTC commissioners have already transitioned into the digital asset space: Summer Mersinger moved to lead the Blockchain Association, Brian Quintenz joined a16z’s crypto team, and J. Christopher Giancarlo serves on the Chamber of Digital Commerce board while authoring policy commentary. These personnel movements reflect a broader phenomenon: the CFTC’s regulatory framework has become attractive to ambitious policy leaders precisely because it now defines a hot commodity market ripe for institutional participation.

The Bigger Picture: Redefining an Asset Class

What ties all these initiatives together is a fundamental redefinition of cryptocurrency within U.S. regulatory structure. The CFTC is establishing a framework that treats major digital assets not as speculative fringes but as defined commodities suitable for trading on supervised exchanges by retail and institutional participants alike. Stablecoins become operational linchpins rather than speculative plays. Leverage operates under position limits and clearinghouse oversight. Retail access and institutional safeguards coexist within the same architecture.

This definitional shift matters because it transforms how the entire financial industry thinks about crypto exposure. As Kris Swiatek concluded, “This represents a fundamental opportunity for traditional market participants to compete for a share of this expanding digital asset ecosystem without leaving the familiar regulatory framework.”

The practical outcome remains contingent on continued executive prioritization and eventual congressional action to formalize what the CFTC is pioneering through interpretation of existing law. But if these early frameworks take hold through 2025 and into 2026, the regulatory treatment of cryptocurrency could transform from an area of legal ambiguity into one where the CFTC’s commodity framework becomes the established foundation for a maturing, domesticated market. That would represent a remarkable reversal from the crypto industry’s long struggle for regulatory clarity—achieved not through legislative breakthrough but through determined administrative reinterpretation of what “commodity” means in an age of tokenized assets and digital settlement.