CFTC reverses stance on the extraterritorial application of FCM reporting requirements

On May 21, 2025, the CFTC issued an advisory letter confirming that offshore digital assets firms are not subject to U.S. registration as futures commission merchants (FCMs) if they are organized and primarily managed from outside the United States. Staff Letter No. 25-14. By doing so, the CFTC returns to its longstanding position and aligns its approach with that of the SEC (and Supreme Court precedent), focusing on a company’s legal domicile and “nerve center” to determine where it is located for purposes of regulatory jurisdiction and extraterritoriality.

The CFTC had previously departed from this approach in its May 2024 enforcement action against Falcon Labs in which it asserted the Seychelles-based crypto firm was subject to U.S. jurisdiction and required to register as an FCM based on its business dealings with U.S. counterparties. Although not a binding rule, the advisory letter offers welcome relief to offshore digital asset dealers by reaffirming their ability to operate without triggering onerous U.S. registration requirements. Many crypto services firms have historically chosen to domicile outside the U.S. to avoid significant compliance costs and an unclear or inconsistent regulatory landscape. Under the new staff advisory (and previous precedent), a foreign-registered company would not be subject to CTFC jurisdiction if their “nerve center” (i.e., the principal location of the decision makers) is also offshore.

Last updated 06/10/2025.