TD Cowen: CFTC's cryptocurrency regulatory framework may be difficult to complete before 2028

Investment bank TD Cowen's Washington research group Managing Director Jaret Seiberg stated in a report released on Monday that the proposed rulemaking advance notice issued by the CFTC last week is a positive step for crypto platforms, but the agency may not complete the rulemaking until early 2028. As the 2028 election cycle approaches, there is a risk that the rule may ultimately not be implemented. Seiberg noted, "Time is running out," and expects that the CFTC will not issue proposals until the end of the first quarter or early second quarter of 2027, with final rules possibly not being finalized until early 2028.

Last week, the CFTC proposed a federal regulatory framework for crypto platforms but avoided direct jurisdiction over spot market trading. According to Seiberg, the proposed rules will require platforms to maintain "reserve proof audits" and grant the CFTC jurisdiction over state-licensed platforms. Previously, the U.S. Senate failed to pass legislation that would grant the CFTC broad powers over spot crypto trading in a preliminary vote, leading the CFTC and SEC to intervene in regulating the crypto industry, including the introduction of long-awaited innovation exemptions, but both agencies lack the permanence that legislation could provide.

Seiberg also pointed out that if the CFTC decides to expedite the rulemaking process, it may actually increase the risk of court intervention. He stated that speeding up this process would raise the risk of judges blocking the rule on procedural grounds, and even if the agency is cautious enough, legal challenges could extend beyond 2028.