Rachael Schwartz, a partner in Sullivan's Investment Management practice, contributed to a new paper published by the Independent Directors Council (IDC), Multiple Series Trusts: An Overview for Fund Trustees. The paper examines the structure and benefits of multiple series trusts (MSTs), which allow unaffiliated investment advisers to offer registered funds under a common trust with shared governance and service providers. It explores the unique oversight responsibilities of independent fund trustees, including adviser compliance, board governance, advisory contract reviews and risk management considerations. The paper also provides practical questions and considerations to help trustees navigate the governance complexities associated with overseeing multiple unaffiliated advisers within a single trust structure. IDC, part of the Investment Company Institute (ICI), serves the U.S.-registered fund independent director community and promotes effective fund governance. Read the full paper here.

On October 13, 2026, the Commodity Futures Trading Commission (the “CFTC”) issued an advance notice of contemplated rulemaking outlining two related initiatives concerning retail crypto asset transactions under Section 2(c)(2)(D) of the Commodity Exchange Act (the “CEA”). The first, referred to as Regulation CTX, sets out the CFTC’s preliminary interpretations of when crypto asset transactions are offered on a leveraged, margined or financed basis and when those transactions result in “actual delivery.” The second, referred to as Regulation CAM, describes a contemplated regulatory framework for trading venues and intermediaries handling covered transactions. If ultimately adopted substantially as contemplated, the initiatives could expand the circumstances in which crypto asset transactions are subject to federal commodities regulation and create a new regulatory pathway for crypto asset trading platforms seeking to operate under CFTC supervision. Background A Section 2(c)(2)(D) transaction is any transaction in a commodity that is both “(I) entered into with, or offered to (even if not entered with), a person that is not an eligible contract participant or eligible commercial entity" and "(II) entered into with, or offered to (even if not entered with), on a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the offeror or counterparty on a similar basis.”  Unless an exception applies, Section 2(c)(2)(D) subjects such transactions to specified provisions of the CEA as if they were futures contracts and generally requires them to be conducted on or subject to the rules of a CFTC-regulated exchange. The CFTC contends that uncertainty surrounding the application of Section 2(c)(2)(D) to digital assets has impeded the migration of crypto trading activity to federally regulated markets.  According to the CFTC, retail market participants have instead relied primarily on state-level regulatory frameworks that were developed for money transmission activities rather than for trading markets.  The CFTC’s proposal seeks to replace that fragmented approach with a federal framework focused on market integrity, customer protection, transparency and risk management. Regulation CTX Regulation CTX, as described in the advance notice, contemplates a new comprehensive interpretation of how Section 2(c)(2)(D) applies to crypto asset transactions, following the CFTC’s withdrawal in 2025 of its prior interpretive guidance concerning actual delivery of digital assets. The advance notice focuses principally on two threshold issues: (a) when a transaction is deemed to be offered on a leveraged, margined or financed basis, and (b) when a crypto asset transaction is deemed to result in "actual delivery" sufficient to fall outside Section 2(c)(2)(D).  The advance notice reflects the CFTC's view that a broad range of crypto asset transactions currently conducted on spot trading platforms may fall within the scope of Section 2(c)(2)(D) and therefore may be subject to a federal regulatory framework comparable to that applicable to futures transactions. Broad Interpretation of "Offer" Perhaps the most consequential aspect of Regulation CTX is the CFTC's contemplated interpretation of what constitutes an "offer" of leverage, margin or financing. The CFTC preliminarily concludes that a transaction may become subject to Section 2(c)(2)(D) not only when leverage is actually utilized, but whenever a retail customer is offered the ability to obtain leverage, margin or financing, regardless of whether the customer ultimately elects to transact on a fully paid basis.  Thus, a covered offer may arise through a variety of customer-facing arrangements, including account opening documentation, exchange terms and conditions, margin agreements, financing programs and similar contractual arrangements that make leverage available to customers. The CFTC also suggests that financing arrangements offered through affiliated or coordinated third parties could trigger Section 2(c)(2)(D) treatment.  The CFTC also preliminarily concludes that financing offered by a third party may constitute a covered offer where the arrangement is facilitated, arranged, endorsed or materially assisted by the offeror or counterparty, including through marketing, influence over financing terms, revenue-sharing arrangements or integration with the offeror’s platform. Interpretation of the Actual Delivery Exception The advance notice also addresses the scope of the "actual delivery" exception in the context of in the application of Section 2(c)(2)(D) to digital assets.  The “actual delivery” exception excludes from Section 2(c)(2)(D) certain contracts that result in actual delivery and reflects typical cash market activity rather than the economic substance of an open futures contract.  In short, it reflects Congress’s intent not to interfere in the spot markets.  In the advance notice, the CFTC preliminarily concludes that actual delivery requires the customer to obtain a meaningful degree of possession or control over the purchased crypto asset. Depending on the asset and transaction, a meaningful degree of possession or control may require the customer to possess the credentials, such as private keys, associated with the relevant wallet address or account. Where an asset carries governance, staking or similar rights, the CFTC suggests that meaningful possession and control may also require the customer to exercise those rights directly and without material intermediary restrictions.  Under the CFTC’s preliminary interpretation, a fully paid, open CTX that remains reflected only through an exchange’s internal book-entry system would generally remain subject to Section 2(c)(2)(D) until actual delivery or another statutory exception applies. Continued Regulation of Fully Paid Positions The CFTC also takes the preliminary position that a fully paid crypto asset transaction may remain subject to Section 2(c)(2)(D) until actual delivery occurs. As a result, crypto assets held through an exchange's custodial or book-entry system, rather than transferred to a customer-controlled wallet, could remain within the scope of the CFTC's regulatory authority notwithstanding that the customer has paid the full purchase price.  Conversely, the CFTC acknowledges that many transactions executed through on-chain protocols may naturally satisfy the actual-delivery requirement because settlement occurs directly to customer-controlled wallets and results in the customer obtaining meaningful possession and control of the acquired assets.  Taken together, the contemplated interpretations of “offer,” “actual delivery” and fully paid positions would significantly broaden the circumstances in which crypto asset transactions may become subject to CFTC regulation. Regulation CAM Regulation CAM, as described in the advance notice, contemplates a new federal regulatory framework for crypto asset trading venues that offer transactions subject to Section 2(c)(2)(D). Rather than requiring digital asset platforms to fit within regulatory structures developed for traditional futures markets, the advance notice would create a specialized subset of designated contract market registration designed specifically for crypto asset transactions while preserving core principles relating to customer protection, financial integrity, market surveillance and risk management. Creation of a New Crypto Asset Market Registration Category Under the advance notice, a registered "Crypto Asset Market" ("CAM") would operate as a specialized form of designated contract market subject to modified regulatory requirements intended to accommodate the commercial realities of digital asset trading. The CFTC contemplates a framework that would permit, among other things, continuous 24-hour trading, integration of blockchain technologies into trading and market infrastructure, crypto-specific disclosure and surveillance requirements, specialized custody and operational standards, and the use of technology-enabled compliance controls. In developing the CAM framework, the CFTC repeatedly emphasizes the need to balance innovation and technological flexibility with traditional regulatory objectives such as customer protection, market transparency, prevention of manipulation and operational resilience. As currently contemplated, CTXs conducted on a CAM would be intermediated by an FCM and cleared and settled through a DCO, although the CAM, futures commission merchant (FCM) and derivatives clearing organization (DCO) functions could be performed by affiliated entities or, subject to appropriate registrations and safeguards, combined within a single integrated organization. Acceptance of Vertically Integrated Market Structures A particularly significant aspect of the advance notice is the CFTC’s willingness to accommodate vertically integrated business models that are commonly used in digital asset markets. Unlike traditional market structures that often separate trading, brokerage, custody and clearing functions among different regulated entities, the advance notice contemplates that a CAM could itself register as, or be affiliated with, a FCM and/or a DCO. Specialized Margin and Financing Framework The advance notice also would establish a framework for retail leveraged crypto asset transactions. Under the contemplated regime, retail customers would be permitted to obtain financing through arrangements administered by registered FCMs or qualifying banking institutions sponsored by FCMs. Those financing arrangements would serve as the basis for leveraged crypto asset transactions conducted on a CAM. Recognizing the volatility and operational characteristics of digital asset markets, the CFTC is considering a tailored margin regime rather than simply importing existing futures margin requirements. Among the subjects specifically identified for comment are continuously monitored margin systems, automated liquidation mechanisms, smart-contract-based risk management tools, standards governing acceptable collateral and rules addressing the treatment of customer assets securing financing arrangements. Custody, Customer Protection and Insolvency Issues The advance notice likewise devotes substantial attention to customer asset protection and raises numerous questions regarding how customer assets should be safeguarded within the CAM structure. In particular, the CFTC requests comment regarding customer asset segregation, rehypothecation practices, proof-of-reserves frameworks, custody arrangements, insolvency protections and the treatment of customer assets in the event of an intermediary bankruptcy.  The advance notice reflects the CFTC’s willingness to consider significant modifications to existing regulatory requirements governing exchange, brokerage, custody and clearing functions where necessary to accommodate the technological and operational characteristics of crypto asset markets, while preserving customer-protection, risk-management and market-integrity objectives. Sullivan Observations Convergence of Traditional and Digital Asset Market Infrastructure. The advance notice does not simply seek to regulate existing crypto trading activity.  Rather, it adapts core concepts of the CEA to digital asset markets, including exchange regulation, intermediary oversight, customer protections, clearing and margin requirements.  As a result, the advance notice may lower regulatory barriers for traditional financial institutions that have been reluctant to participate in digital asset markets while simultaneously imposing a more institutional regulatory framework on existing crypto market participants.   Expansion of CFTC Jurisdiction and Reorientation of Market Structure Regulation. Although framed as an interpretive and rulemaking initiative, the advance notice would significantly expand the practical reach of the CFTC's authority over crypto asset markets. The contemplated interpretations of "offer" and "actual delivery" would subject many transactions that market participants have historically viewed as spot transactions to a federal regulatory framework under Section 2(c)(2)(D). More broadly, the advance notice reflects the CFTC’s view that covered trading activity should operate within a uniform federal market-structure regime, rather than remain principally dependent on state money-transmission and crypto-asset licensing frameworks. The precise extent to which federal regulation would displace particular state-law requirements, however, remains to be developed.   Part of a Broader SEC-CFTC Digital Asset Regulatory Framework. The advance notice should not be viewed in isolation. Throughout the release, the CFTC repeatedly situates Regulation CTX and Regulation CAM within a broader federal effort, undertaken jointly with the SEC, to establish a comprehensive regulatory framework for digital asset markets. The advance notice builds on the agencies' March 2026 Joint Crypto Asset Taxonomy, the SEC-CFTC memorandum of understanding regarding digital asset regulation, and the SEC's contemplated Regulation Crypto Assets (91 Fed. Reg. 54510, August 21, 2026) all of which are intended to provide greater clarity regarding the regulatory treatment of crypto assets and secondary market trading. The advance notice also reflects an increasingly consistent regulatory focus on customer asset protection and custody arrangements. While operating under different statutory frameworks, the SEC and the CFTC are examining issues such as custody, customer asset segregation, intermediary insolvency, and the safeguarding of digital assets held for customers. (See Sullivan Client Alert SEC Proposes New Crypto Custody Framework for Registered Investment Advisers and Regulated Funds.)  Market participants should expect continued regulatory scrutiny of trading, custody, financing and clearing arrangements, particularly where a single platform performs multiple functions within the digital asset ecosystem.   Potential Impact on Existing Market Structures. The advance notice may require digital asset exchanges, custodians, lenders, broker-dealers and other market participants to reevaluate custody arrangements, wallet structures, financing programs, customer onboarding documentation and affiliated business models. Platforms that offer margin or financing features may find that transactions historically viewed as spot transactions become subject to CFTC regulation unless actual delivery occurs, while integrated trading, custody and financing arrangements may face increased regulatory scrutiny. What Comes Next Public comment of the advance notice closes December 14, 2026.  As the advance notice does not contain contemplated regulatory text and leaves many central elements of both initiatives open for comment, the CFTC would need to undertake additional notice-and-comment rulemaking before adopting binding Regulation CTX or Regulation CAM requirements. For More Information This Client Alert has been prepared by John Hunt, a Partner in the Investment Management practice group, and Natalie Lederman, a Partner in and Leader of the Fintech & Blockchain practice group, of the international law firm of Sullivan & Worcester LLP.  For more information, Mr. Hunt may be reached in our Boston office by calling +1 (617) 338-2961 or our London office by calling +44 (0)20 7448 1000, or by email at jhunt@sullivanlaw.com. Ms. Lederman may be reached in our New York office by calling +1 (212) 660-3039 or by email at nlederman@sullivanlaw.com. This Client Alert is provided for general informational purposes only and does not constitute legal advice.