This matters because perpetual contracts have, until now, traded almost entirely outside the United States. The statement explains that uncertainty about how these products fit within U.S. law pushed their market overseas, and the CFTC’s aim is to give them a clear, regulated path to develop at home instead (Policy Statement, p. 2; p. 6). The agency released the statement together with an order approving the first U.S. perpetual futures contract, one tied to the spot price of bitcoin, and used the statement to explain how it will handle perpetual contracts on other assets (Policy Statement, p. 1; p. 3, n.4).

This post explains what the CFTC said: why it acted now, how perpetual contracts differ from ordinary futures, the manipulation concerns their design creates, and why the agency wants to review these products before they launch. One point is worth making at the start: the policy statement is guidance, not a binding rule, so it does not change the law or create new legal obligations (Policy Statement, pp. 3-4).

Why did the CFTC issue a perpetual contracts policy statement?

The CFTC acted because the market for these products had developed almost entirely offshore. The statement explains that perpetual contracts “have become a dominant form of crypto derivative trading in global markets,” but that, “given the regulatory uncertainty concerning the appropriate classification of these types of contracts,” the market “has largely developed outside of the United States, with the majority of trading occurring on offshore trading venues” (Policy Statement, p. 2).

The CFTC had spent about a year preparing for this step. On April 21, 2025, Commission staff asked the public for input on trading and clearing perpetual-style derivatives, CFTC Release No. 9069-25, along with a companion request on round-the-clock (24/7) trading, CFTC Release No. 9068-25 (Policy Statement, p. 2, nn.1-2). The statement also points to the President’s Working Group on Digital Asset Markets report of July 30, 2025, which urged the CFTC and the U.S. Securities and Exchange Commission to use their existing authority to give faster, clearer guidance for new derivatives products, including perpetual contracts (Policy Statement, p. 3, n.3).

The bitcoin order issued the same day set the boundaries of the statement. That order let a regulated exchange (a designated contract market) list a perpetual contract tied to the spot price of bitcoin, and the policy statement covers everything the order does not, namely perpetual contracts on other kinds of assets (Policy Statement, p. 1; p. 3, n.4).

How do perpetual contracts differ from traditional futures contracts?

The main difference is simple: a perpetual contract never expires. The statement defines perpetual contracts as “derivative contracts that have no fixed expiration date, and which rely on a periodic funding rate mechanism, rather than a fixed expiration date, to maintain relative price parity with the underlying asset’s spot price” (Policy Statement, p. 2).

An ordinary futures contract stays close to the market price because it expires on a set date. A perpetual contract has no expiration, so it uses a recurring payment between buyers and sellers to keep its price in line. As the statement explains, “When a perpetual contract trades above the spot price, the traders with long positions make payments while the traders with short positions receive payments; and vice versa” (Policy Statement, p. 4). Those payments give traders a reason to trade against any gap between the contract price and the real market price, which pulls the two back together (Policy Statement, p. 4).

In short, the funding rate does the job that an expiration date does for a normal futures contract. The statement calls it a tool that “functions as a replacement to the traditional expiration-based convergence mechanism upon which a futures contract typically relies” (Policy Statement, p. 5).

What concerns do perpetual contracts raise under DCM Core Principle 3?

Because a perpetual contract never expires, it is harder to guard against manipulation, and that is the CFTC’s main concern. Under DCM Core Principle 3 (7 U.S.C. 7(d)(3)), a regulated exchange may list a contract only if it is not easily manipulated. For an ordinary futures contract, regulators mainly need the settlement price to be reliable at one moment, when the contract expires; a perpetual contract has no such moment, so its reference price must stay reliable the entire time it trades (Policy Statement, p. 5).

The statement makes this point directly, connecting the manipulation concern to its decision to require advance review:

Perpetual contracts raise novel and complex questions relating to market structure, customer protection, resilience during periods of market stress, and consistency with the Core Principles applicable to registrants under the CEA. For example, a perpetual contract’s design and characteristics raise important considerations with respect to DCM Core Principle 3, which requires that a DCM list only those contracts that are not readily susceptible to manipulation.⁷ For a traditional, cash-settled futures contract, the susceptibility-to-manipulation analysis directed at the cash settlement reference price is an analysis of one moment in time: the settlement reference price must be reliable at expiry. For a perpetual contract, however, the reference must be reliable at every funding interval, without interruption, for as long as the contract remains active.

It is therefore the Commission’s view that perpetual contracts that reference asset classes that are not contemplated in the Order should be submitted for Commission review and approval pursuant to the voluntary product approval process under Commission Regulation 40.3.

Policy Statement Concerning the Listing of Perpetual Contracts (p. 5)

Why does the CFTC favor Regulation 40.3 review over 40.2 self-certification for perpetual contracts?

The CFTC wants to review these products itself before they go live. Normally, under Regulation 40.2 (17 CFR 40.2), an exchange can certify on its own that a new product follows the law and then list it without waiting for approval. The CFTC decided that perpetual contracts are new and complicated enough that the public is better protected if the agency reviews them first, through the approval process in Regulation 40.3 (Policy Statement, pp. 5-6).

The agency also pointed to the benefits of reviewing products in advance. Advance review, the statement says, “promotes transparency, facilitates engagement between Commission staff and registrants during product development, and provides greater regulatory clarity” for companies trying to bring new products to market responsibly (Policy Statement, p. 6).

The CFTC also signaled that it will treat different assets differently. A footnote calls perpetual contracts on agricultural products “likely particularly ill-suited” to this design, while perpetual contracts on equity securities or narrow-based security indexes “would benefit from review by the Commission and the U.S. Securities and Exchange Commission” (Policy Statement, p. 3, n.5). The agency added that it may revisit perpetual contracts later through separate guidance or a formal rule, but it made no commitment either way for now (Policy Statement, pp. 6-7).

For more on this topic and related developments, see our resource center at digitalasset.law. If you have questions, you can request a consultation.

Frequently Asked Questions

Editor’s note (May 24, 2026): This article describes the SEC’s January 28, 2026 Staff Statement on Tokenized Securities. On March 17, 2026, the SEC and CFTC issued a joint interpretive release establishing a broader five-part token taxonomy for crypto assets (digital commodities, digital collectibles, digital tools, stablecoins, and digital securities). The January 28 staff statement remains in effect and was not altered by the joint release; this article should be read together with the March 2026 joint release for the complete current framework.

On January 28, 2026, the Securities and Exchange Commission issued an important statement clarifying how federal securities laws apply to tokenized securities. This guidance, released by the Divisions of Corporation Finance, Investment Management, and Trading and Markets, underscores that the format of a security, whether traditional or tokenized, does not alter its regulatory obligations.

At its core, the statement defines a tokenized security as follows:

[A] financial instrument enumerated in the definition of “security”[4] under the federal securities laws that is formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks.

Crypto assets here refer to any digital value recorded on such ledgers, while tokenization involves creating these digital representations of assets. The SEC emphasizes that tokenized securities typically arise in two ways: through issuer-sponsored models where the issuer directly tokenizes the security, or third-party models where unaffiliated entities create tokenized versions.

Importantly, the underlying economic reality determines the instrument’s status, not its digital wrapper. This means stock tokenized on a blockchain remains equity, subject to the same registration requirements unless an exemption applies.

Issuer-Sponsored Tokenization

Issuer-sponsored tokenized securities involve an issuer creating a security in the form of a crypto asset using distributed ledger technology (DLT).

In the primary model, the issuer (or its agent) integrates DLT directly into the master securityholder file, the official record of ownership. Transfers of the tokenized crypto asset on the blockchain automatically update this onchain master file, which functions as an onchain database. The issuer combines onchain data (e.g., wallet addresses, quantities) with offchain details (e.g., holder names and addresses) for complete recordkeeping. A single security class may be issued in both tokenized and traditional formats, with holders able to convert between them.

Importantly, the format (onchain vs. offchain) does not alter federal securities law obligations: registration requirements under the Securities Act, definitions such as “equity security,” and other rules apply equally regardless of issuance method. However, tokenized versions may constitute a distinct class if rights differ materially; substantially similar rights and privileges may classify them as the same for certain regulatory purposes.

An alternative approach issues the security offchain while providing a separate crypto asset to holders. Here, the crypto asset carries no direct security rights and does not form part of the master file. Instead, transferring the token notifies the issuer to update the offchain master record, enabling indirect onchain-facilitated transfers while keeping official ownership offchain.

Third-Party Tokenization

Third-party-sponsored tokenized securities involve unaffiliated entities tokenizing securities issued by others, using models that differ from direct issuer-sponsored tokenization. The resulting crypto assets may or may not replicate the rights, obligations, or benefits of the underlying security, and holders face additional risks (e.g., third-party bankruptcy) not present with direct ownership.

Two primary models exist.

Custodial Tokenized Securities

A third party holds the underlying security in custody and issues a crypto asset representing a security entitlement, an indirect interest in the held asset. The entitlement can be recorded using distributed ledger technology (DLT) integrated into the third party’s systems, so transferring the crypto asset updates the entitlement record onchain. Alternatively, records remain offchain, with onchain transfers used to sync and update the offchain database. The format (crypto or traditional) does not alter federal securities law applicability.

Synthetic Tokenized Securities

The third party issues its own crypto asset providing synthetic (indirect) exposure to the underlying security, without any direct obligation from or rights against the original issuer.

• Linked Security: A third-party-issued security (e.g., structured note as debt or exchangeable stock as equity) whose value or returns track the referenced security or related events. It functions like issuer-sponsored tokenized assets but offers only economic linkage.
• Security-Based Swap: A tokenized swap providing synthetic exposure to a single security, narrow-based index, or issuer-related events (per Exchange Act §3(a)(68) and CEA definitions). It typically conveys no equity, voting, or informational rights. Sales to non-eligible contract participants require Securities Act registration and exchange trading unless exempt. The crypto asset mirrors issuer-sponsored forms but faces distinct regulatory rules.

Linked securities and security-based swaps are economically similar, but security-based swaps trigger additional regulations (e.g., counterparty limits). Classification depends on whether the instrument qualifies as a “swap” and meets security-based swap criteria, or falls under exclusions (e.g., certain notes, options, or securities under the Securities Act/Exchange Act). Economic substance, not labeling, governs the determination.

Overall, this statement reinforces that innovation must fit within established frameworks. Tokenization does not exempt securities from disclosure, registration, or anti-fraud provisions.

The SEC’s statement can be found here.

This article was originally published on January 29, 2026 on digitalasset.law. It was reviewed and reposted on gdowd.law on May 24, 2026.

On May 29, 2025, the Commodity Futures Trading Commission (CFTC) announced a whistleblower award of approximately $700,000 to a single whistleblower, underscoring the critical role of whistleblowers in enforcing regulations within commodity markets, including emerging areas like digital assets.

Whistleblower Program Background

The CFTC Whistleblower Program, established under Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, incentivizes individuals to report violations of the Commodity Exchange Act (CEA) by offering monetary awards and protections against retaliation. Since issuing its first award in 2014, the CFTC has granted approximately $390 million in awards, associated with enforcement actions resulting in over $3.2 billion in monetary sanctions (CFTC Whistleblower Program). Whistleblowers may receive between 10% and 30% of the monetary sanctions collected, paid from the CFTC’s Customer Protection Fund, financed entirely by sanctions from violators, not taxpayers. The program also provides confidentiality protections, ensuring the CFTC does not disclose information that could reveal a whistleblower’s identity, except in limited circumstances.

Details of the Recent Award

The CFTC awarded the $700,000 to a whistleblower whose information prompted the opening of an investigation and described the misconduct addressed in the enforcement order (CFTC Press Release 9081-25). The whistleblower provided substantial assistance, helping the Commission conserve resources during the investigation. However, the award was reduced due to an unreasonable delay in reporting the violations and the whistleblower’s culpability, illustrating the importance of timely reporting and ethical considerations.

Brian Young, director of the Division of Enforcement, emphasized the courage required to come forward, stating, “Whistleblowers often provide the most valuable evidence about wrongdoing.” Cynthia Lie, acting director of the CFTC’s Whistleblower Office, noted, “The Whistleblower Office is committed to rewarding whistleblowers for their significant contributions in identifying fraud, manipulation, and abuse in commodity markets.” This award aligns with past significant awards, such as nearly $200 million in 2021 and over $15 million to two whistleblowers in 2023, showing the potential financial rewards for valuable information (CFTC Awards Nearly $200 Million, CFTC Grants Two Whistleblower Awards).

The Role of Whistleblowers in Market Regulation

Whistleblowers are vital in uncovering fraud, manipulation, and other abuses in commodity markets, providing regulators with insider knowledge that might otherwise remain hidden. This is particularly relevant for digital assets, where transactions can be opaque and rapidly evolving. The CFTC’s program has seen remarkable growth, with over 1,530 tips received in the 2023 fiscal year, up from 58 in its first 18 months, highlighting its increasing importance. Whistleblowers can identify misconduct such as market manipulation, fraudulent initial coin offerings (ICOs), or schemes exploiting the nascent nature of digital asset markets.

The program offers strong protections, including confidentiality and anti-retaliation measures, crucial for encouraging individuals to report without fear of job loss or other adverse consequences. These protections are supported by legal frameworks ensuring whistleblowers can seek remedies like reinstatement, backpay, and litigation costs if retaliated against.

Benefits of Engaging an Attorney for Whistleblower Complaints

Filing a whistleblower complaint involves navigating complex legal landscapes, making legal representation highly beneficial. Attorneys assist in assessing the situation, weighing risks and benefits, and ensuring the complaint is filed correctly and timely.

One key benefit is protecting a whistleblower’s anonymity. The CFTC allows anonymous filings, but this requires representation by an attorney who acts as an intermediary, safeguarding the whistleblower’s identity throughout the process. Attorneys also defend against potential retaliation, such as wrongful termination or a hostile work environment, by seeking legal remedies under whistleblower protection laws.

Importance of Expertise in Financial and Digital Asset Markets

For whistleblowers in financial sectors, especially those involving digital assets, engaging an attorney with both legal expertise and deep knowledge of financial markets is crucial. Digital assets, such as cryptocurrencies and tokens, operate on blockchain technology and involve unique trading mechanisms and regulatory challenges.

Attorneys with this specialized knowledge can better interpret evidence, identify relevant legal issues, and communicate effectively with regulators navigating an evolving landscape. As the regulatory framework for digital assets develops, with overlapping jurisdictions between the CFTC and SEC, such expertise is vital for strategic positioning of the whistleblower’s information. For background on both the SEC and CFTC whistleblower programs, see the Whistleblower Programs resource at digitalasset.law.

Conclusion

The $700,000 award on May 29, 2025, exemplifies the significant impact whistleblowers can have in enforcing regulations and maintaining market integrity.

• CFTC Release Number 9081-25
• CFTC Order Determining Whistleblower Award Claim, No. 25-WB-07
• Whistleblower.gov for more information about the CFTC’s Whistleblower program

This article was originally published on May 29, 2025 on digitalasset.law. It was reviewed and reposted on gdowd.law on May 24, 2026.

The SEC Whistleblower Program, established in 2010, encourages reporting of securities law violations, including cryptocurrency fraud, by offering awards up to 30% of collected sanctions. A March 24, 2025, whistleblower award proceeding (Release No. 102717) involved four covered actions. Initially, claims for two actions were late, but the SEC waived the filing deadlines due to unique circumstances, such as the claimant’s active military duty and technical fax issues. Ultimately, the claimant received awards for all four actions, highlighting the SEC’s flexibility in procedural matters.

As of FY24, which ended September 30, 2024, the program had awarded over $2.2 billion to 444 whistleblowers since 2011, with $255 million in FY24, including a notable $98 million shared by two individuals. In FY24, 8% of tips were related to ICOs and crypto assets, underscoring the program’s role in cryptocurrency regulation. Whistleblowers can report anonymously through an attorney, receiving protections against retaliation.

Detailed Summary

Whistleblower Award Proceeding No. 102717, March 24, 2025, details a proceeding under the Securities Exchange Act of 1934 evaluating claims for four covered actions.

Covered Actions

The claimant submitted award claims for four covered actions, each resulting in monetary sanctions exceeding $1 million. For Covered Action 1, the notice was posted on a redacted date with a 90 day deadline, but the claim was submitted approximately three weeks late. For Covered Action 2, the claim was also late, while Covered Actions 3 and 4 had timely submissions. Specific violation details are redacted, but the actions led to court judgments against the parties involved.

Preliminary Determination and Claimant’s Response

The Claims Review Staff (CRS) initially recommended awards for Covered Actions 2, 3, and 4, finding the claimant provided original information leading to their success, and suggested waiving the deadline for Covered Action 2 under Exchange Act Section 36(a). However, for Covered Action 1, the CRS recommended denial due to the late filing. The claimant contested, arguing for waiver due to active military service limiting communication, reliance on counsel, the information’s crucial role, a calendaring error (deadline mistakenly set a month late), the three week delay not hindering Commission functions, and post notification contact with the Office of the Whistleblower (OWB) for guidance.

Based on these unique facts and circumstances, the SEC exercised its general exemptive authority under Section 36(a) to waive the filing deadline for both Covered Actions 1 and 2. For Covered Action 1, the waiver was due to the claimant’s military duty, limited communication, and reasonable efforts post restoration. For Covered Action 2, it was due to technical fax issues on the deadline, with prompt follow-up.

Analysis and Conclusion

The SEC’s analysis focused on the timeliness requirement but concluded that waivers were warranted for Covered Actions 1 and 2, leading to awards for all four actions. The final decision was to award the claimant a percentage (redacted) of the monetary sanctions collected for each covered action, emphasizing the program’s flexibility in accommodating exceptional circumstances (Whistleblower Award Proceeding No. 102717, p. 4: “The Commission orders that the Claimant receive an award of percent (%) of the monetary sanctions collected, or to be collected, for Covered Actions 1, 2, 3, and 4”).

This case illustrates the program’s strict procedural standards, particularly the 90 day filing deadline under Rule 21F-10(b), and the limited but existent discretion for waivers. The Order specifically suggests that this discretion should not be relied upon by claimants, noting:

While we exercise our Section 36(a) exemptive authority to excuse Claimant’s late WBAPP in Covered Actions 1 and 2 under these unique facts and circumstances, we do not expect to routinely exercise such exemptive authority to waive the requirements under Rules 21F-10(a) and (b) to timely file an award application. The filing deadline serves important programmatic interests and will be typically enforced absent the unique facts and circumstances presented here.

Relevance to Cryptocurrency

The program’s applicability to ICOs and digital assets is noteworthy. In FY24, 8% of tips involved such allegations, reflecting the SEC’s focus on this sector. While the specific covered actions in the proceeding are redacted, the program’s enforcement actions underscore the SEC’s role in addressing digital asset related fraud. Literature suggests whistleblowers have been instrumental in uncovering cryptocurrency Ponzi schemes and fraudulent ICOs, with potential awards for reporting such violations. (See “Report Cryptocurrency Fraud and Earn a Whistleblower Award“)

Background on the SEC Whistleblower Program

The SEC Whistleblower Program was designed to encourage reporting of specific, timely, and credible information about possible federal securities law violations. It is particularly relevant in the cryptocurrency space, where fraudsters often exploit innovations like initial coin offerings (ICOs) and blockchain technology. The program’s official page outlines its purpose: to provide awards to eligible individuals who provide high-quality original information leading to enforcement actions (Whistleblower Program SEC Overview).

As of the end of FY24 (October 1, 2023, to September 30, 2024), the program has awarded over $2.2 billion to 444 individual whistleblowers since 2011, with FY24 seeing over $255 million awarded to 47 whistleblowers. Notable awards include two whistleblowers sharing approximately $98 million, marking the fifth largest in program history (SEC Press Release).

The FY24 annual report highlights key statistics, including approximately 24,980 Tips, Complaints, and Referrals (TCRs) received, with about 14,000 from two individuals, and allegations related to ICOs and crypto asset securities accounting for 8% of tips (SEC FY24 Annual Report, p. 3: “In FY 2024, the Commission awarded over $255 million to 47 whistleblowers, and 8% of allegations involved Initial Coin Offerings and Crypto Asset Securities”).

Whistleblowers can submit tips anonymously through an attorney, which is crucial in any situation where retaliation risks are high. The Dodd-Frank Act provides protections against retaliation, including the right to sue for reinstatement, back pay, and litigation costs.

Legal and Procedural Insights

This case demonstrates that compelling arguments, such as military service or technical issues, can lead to deadline waivers. However, claimants rely on the possibility of obtaining a waiver at significant risk. The SEC’s emphasis on timely filings aligns with its goal of efficient administration, but the flexibility shown in this case is encouraging for whistleblowers facing unique challenges.

This article was originally published on March 24, 2025 on digitalasset.law. It was reviewed and reposted on gdowd.law on May 24, 2026.

March 22, 2025

The Commodity Futures Trading Commission (CFTC) recently secured a significant victory against Debiex, a fraudulent digital asset platform. On March 13, 2025, the U.S. District Court for the District of Arizona issued a default judgment, holding Debiex liable for misappropriating over $2 million in customer funds through a sophisticated scam. This case underscores the growing prevalence of digital asset fraud and the CFTC’s commitment to protecting investors, offering valuable lessons for graduate students studying regulatory enforcement in financial markets.

Debiex’s scheme, detailed in the CFTC’s January 17, 2024 complaint, relied on a “pig butchering” tactic. Solicitors built romantic or friendly relationships with victims via social media, luring them to fund fake trading accounts. “Instead of using the funds to trade on behalf of the customers, as promised, Debiex misappropriated the customers’ digital assets,” the CFTC alleged. This deception targeted vulnerable Asian Americans, exploiting trust for profit.

2 Million Reasons the CFTC Targeted Debiex

The court orders, issued March 12 and 13, 2025, imposed a $221,466 civil penalty and $2,263,517 in restitution on Debiex, banning it from CFTC-regulated markets. A separate order addressed relief defendant Zhāng Chéng Yáng, a money mule whose wallet facilitated the fraud. His assets were redirected to victims, showcasing the CFTC’s focus on restitution alongside punishment.

CFTC Commissioner Kristin N. Johnson emphasized the human cost of such scams: “In the current case, the fraudsters used a shared native language and other similar evidence of shared identity to build trust – only to later exploit these intimate connections”. This statement highlights the psychological manipulation at play, a critical area of study for understanding modern financial crimes.

CFTC Enforcement Trends

The Debiex case fits into a broader CFTC enforcement trend. A March 20, 2025 press release noted the agency’s collaboration with the FBI to combat digital asset fraud, signaling a proactive stance. With romance scams costing victims $1.3 billion in 2022 alone, per the FTC, the CFTC’s actions reflect an urgent response to an evolving threat landscape, relevant to students exploring regulatory jurisdiction.

Legal scholars may note the CFTC’s jurisdictional reach under the Commodity Exchange Act. The complaint asserted that Debiex’s digital assets were “commodity interests,” enabling CFTC oversight. This interpretation, upheld by the court, reinforces the agency’s authority over crypto-related fraud.

The CFTC cautioned, “Orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets”. This reality underscores the practical limits of restitution, a key consideration in victim-centered justice discussions.

The Debiex ruling is a wake-up call for investors and regulators alike. As digital asset markets grow, so do opportunities for fraud.

The article “2 Million Reasons the CFTC Targeted Debiex” first appeared on GDowd.Law on March 22, 2025.

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