CFTC's new crypto framework could face 2028 election deadline, says TD Cowen

Newly proposed rules to create a federal regulatory framework for leveraged and margined crypto trading may be too late as the 2028 election cycle looms, according to investment bank TD Cowen, upending work done by the current presidential administration. 

In a note on Monday, Jaret Seiberg, managing director at TD Cowen’s Washington Research Group, said the Commodity Futures Trading Commission's advance notice of proposed rulemaking released a week ago is a positive step for crypto platforms, but said the agency likely won't be able to finish the rulemaking until early 2028, raising the risk that the rule will never be finalized.

"Time is running out," Seiberg said. "We believe the agency at best will get its proposal out in late Q1 2027 or early Q2 2027. It could then take until early 2028 to finalize the rule."

Last week, the CFTC proposed a federal framework for crypto platforms, while skirting outright jurisdiction over spot market transactions. The proposed rules would require platforms to maintain "proof-of-reserves audits" and give the agency authority over state-licensed platforms, Seiberg said. 

Since the Senate failed in an initial vote to pass broad crypto legislation that would have given the CFTC broad authority over spot crypto trading, both the CFTC and the Securities and Exchange Commission have stepped in to regulate the crypto industry, including through a long-awaited innovation exemption. However, the two agencies lack a level of permanency that would have come from the bill. 

However, if the CFTC decides to fast-track its rulemaking, that could increase the risk of court intervention, Seiberg said.

"Expediting this process will increase the risk that a judge blocks it on procedural grounds," Seiberg said. "Even if the agency is careful, we still expect legal challenges could extend beyond 2028."