CFTC Clarifies Path for Foreign Exchanges: FBOT Registration vs. DCM Designation
De Silva Law Offices
On August 28, 2025, the Commodity Futures Trading Commission’s Division of Market Oversight issued an advisory reaffirming the Foreign Board of Trade (FBOT) registration framework. The move brings clarity for non-U.S. exchanges seeking to provide direct access to persons physically located in the United States. For years, uncertainty over whether offshore platforms needed to register as Designated Contract Markets (DCMs) resulted in some U.S. traders being forced offshore. This advisory confirms that FBOT registration, and not DCM designation, is the lawful pathway for non-U.S. platforms wishing to open markets to U.S. participants.
What is an FBOT?
An FBOT is an exchange that operates from outside the U.S. yet registers with the CFTC to provide direct market access within U.S. borders. Under Part 48 of the CFTC’s rules, FBOTs may admit proprietary traders, futures commission merchants, commodity pool operators, commodity trading advisors, and introducing brokers, so long as customer order flow is correctly intermediated. By intermediated, this means that U.S. retail customers cannot be onboarded directly. Trades must flow through an eligible FCM or similar intermediary. A prominent example of an FBOT is the London Metal Exchange, regulated by the UK’s Financial Conduct Authority, and registered with the CFTC to allow U.S. participants to trade its contracts.
What Is a DCM and How Does It Differ?
A Designated Contract Market, or DCM, is a U.S.-based exchange that operates under the direct supervision of the CFTC. It is governed by Part 38 of the CFTC’s regulations and must comply with twenty-three Core Principles set out in the Commodity Exchange Act. These principles cover everything from governance and market integrity to financial resources, access, surveillance, position limits, and self-regulatory duties. Unlike an FBOT, a DCM can serve the entire U.S. market, including retail customers, without the need for intermediaries.
FBOT vs. DCM: Why the Distinction Matters for Crypto
The difference between FBOTs and DCMs begins with who regulates them. FBOTs remain under the oversight of their home-country authorities, while the CFTC’s role is to determine whether that oversight is comparable and whether there are proper information-sharing arrangements in place. DCMs, on the other hand, are subject to direct CFTC supervision and must meet all of the Core Principles on an ongoing basis. The range of products also sets the two apart. FBOTs may list only cleared derivatives such as futures, options, and swaps that would otherwise qualify for trading on a DCM. DCMs may offer those same derivatives, but under recent initiatives they may also list spot digital asset contracts.
Retail Access, Event Contracts, and Spot Crypto
Retail access is especially important for exchanges that aim to attract large numbers of everyday, or retail U.S. customers. Under the FBOT framework, U.S. participation is limited to professional categories trading through intermediaries, and direct access for retail investors is not permitted. By contrast, a U.S.-based crypto exchange such as Kraken is able to serve retail traders directly, offering spot crypto trading and derivatives products to individual investors within a regulatory framework that allows retail participation.
Consider a hypothetical event contract platform. Event contracts are treated as derivatives under U.S. law and must be listed on a DCM or similar regulated exchange. A foreign exchange could register as an FBOT to offer event contracts, but U.S. retail users could only participate through an FCM or other approved intermediary. If the exchange intends to tap United States based retail business, FBOT registration will not suffice.
A similar issue arises for spot crypto platforms. FBOT status applies only to derivatives, not spot trading. The CFTC’s Listed Spot Crypto Trading Initiative contemplates spot contract listings via DCMs. Therefore, a spot crypto platform that wants to serve U.S. retail investors must pursue DCM designation or collaborate with a registered DCM.
A History of Enforcement: Why Foreign Exchanges Withdrew
The advisory is being seen as a chance for global crypto exchanges that once blocked U.S. users to come back. Industry coverage notes that platforms like Binance, Bybit, and OKX may now re-enter the U.S. market through FBOT registration, so long as they meet the CFTC’s requirements and can show that their home-country regulation is comparable.
For years, U.S. traders faced uncertainty when trying to access global crypto markets. Because neither the CFTC nor the SEC offered a clear pathway for non-U.S. crypto exchanges to register, enforcement actions became the default tool. The CFTC targeted BitMEX in 2020 and Binance in 2023 for illegally serving U.S. customers without registration, while the SEC pursued its own cases against platforms such as Poloniex, Bittrex, and most recently Coinbase for allegedly operating as unregistered securities exchanges. This pushed many foreign exchanges to block U.S. users or move their operations overseas.
So while the FBOT framework was on the books, it was unused for crypto. This created a fragmented market where American investors had limited choices and liquidity shifted abroad.
For example, in March 2023, the CFTC filed a civil enforcement action in the Northern District of Illinois against Binance Holdings Limited, its founder Changpeng Zhao, and Samuel Lim, the company’s former Chief Compliance Officer. The complaint alleged that Binance had illegally offered and executed commodity derivatives transactions for U.S. customers without registering as a futures commission merchant or a designated contract market, in violation of the Commodity Exchange Act and CFTC regulations. The agency also accused Binance of failing to implement essential anti-money laundering and know-your-customer procedures.
That case culminated in November 2023 with a massive settlement. Binance agreed to pay $2.7 billion in civil monetary penalties to the CFTC, and Zhao personally paid an additional $150 million. The court entered consent orders that permanently enjoined the company and Zhao from further violations and required significant compliance reporting. At the same time, the Department of Justice announced its own $4.3 billion resolution with Binance.
This is why many exchanges withdrew access for U.S. customers. While the CFTC has had a FBOT registration process since the 1990s (codified in Part 48), this was designed for traditional futures and commodities (LME, EUREX, ICE Futures Europe). The new FBOT advisory issued in August 2025 for the first time allows crypto exchanges to strive for FBOT status and thereby reach U.S. persons.
What the New Advisory Signals for Crypto Exchanges
Non-U.S. crypto derivatives exchanges now have a clear and legally sound path through FBOT registration to serve U.S. market participants again. Spot-only or event contract platforms that aim to tap retail demand must pursue DCM designation. For many exchanges, FBOT is the practical compliance route. For others seeking retail access, DCM remains essential. The SEC has no equivalent FBOT pathway, and its framework for alternative trading systems (ATSs), or national securities exchages remains U.S. centric.
At De Silva Law Offices, we remain at the forefront of regulatory developments shaping global trading platforms and digital asset markets. We monitor the CFTC’s evolving frameworks for FBOT registration and DCM compliance, and we advise funds and intermediaries on how best to anticipate these requirements as they expand into the U.S. market. With a practice that unites decades of derivatives experience and a forward-looking focus on digital assets, we serve as a trusted partner for exchanges and funds seeking to enter and thrive in the U.S. market.
Sources:
Commodity Exchange Act, 7 U.S.C. § 7(d) (2020); 17 C.F.R. pt. 38 (2024);
17 C.F.R. pt. 48 (2024) (Foreign Boards of Trade).
https://www.cftc.gov/PressRoom/PressReleases/9111-25?utm_
NB: This article is provided for informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. Parties considering participation in cryptocurrency or derivatives markets should consult qualified legal counsel regarding their specific circumstances and obligations.