A Deep Dive into the Digital Asset Market Structure Discussion Draft on a Landmark Bill to Regulate Spot Digital Asset Markets
This blog post provides a detailed analysis of the U.S. House Financial Services Committee’s Digital Asset Market Structure Discussion Draft. The proposed legislation introduces the first comprehensive federal framework for regulating spot markets in digital commodities—tokens that are not securities or stablecoins. It outlines a dual oversight regime shared by the CFTC and SEC, establishes registration pathways for intermediaries, introduces safe harbors for token issuers and DeFi developers, and aims to bring clarity and coherence to the currently fragmented regulatory environment for digital assets.
Bridging the Regulatory Divide
One of the core problems this draft addresses is the current jurisdictional tug-of-war between the SEC and the CFTC. The bill proposes a simple but powerful fix: it splits oversight based on what the asset is and how it’s being traded.
The CFTC would take the lead on digital commodities, including decentralized tokens and qualifying stablecoins.
The SEC would continue to oversee securities and maintain anti-fraud authority when digital assets are traded through registered intermediaries.
This alone could radically reduce the regulatory uncertainty that has caused many projects to launch offshore.
This discussion draft creates the first unified federal regime for cash/spot markets in digital commodities—tokens that are not securities or payment stablecoins. It splits primary oversight between the CFTC and the SEC, builds parallel registration systems for trading venues and intermediaries, carves out bona-fide DeFi activity, and tells both agencies to coordinate on rulemaking and avoid duplicative oversight. In short, it tries to replace today’s enforcement-only patchwork with clear, functional rules that protect customers while keeping digital-asset innovation on-shore.
Title I defines core terms such as what counts as “mature” or “decentralized,” lets would-be exchanges, brokers, and dealers file a temporary “notice of intent” and operate under baseline consumer protection duties until full CFTC rules are in force, and reserves existing derivatives and securities authorities.
Title II specifies that a token sold under an investment contract is not itself the security, exempts secondary-market trades from securities law, creates a tailored fundraising safe harbor (up to $150 million) with a staged disclosure requirement until the network is “mature,” caps insider resales, and sets SEC reporting requirements for them.
Title III removes digital commodities and qualifying stablecoins from the statutory definition of “security,” while preserving SEC antifraud power when they trade on SEC-registered platforms. It forces the SEC to let alternative trading systems list tokens and settle in real time, permits dual SEC/CFTC registration, modernizes record-keeping via blockchains, shields banks from balance-sheet capital on custodied tokens, and exempts DeFi activities.
Title IV gives the CFTC exclusive authority over cash/spot trading via registered digital commodity exchanges, brokers, and dealers. It lays out core-principle regimes for those entities (listing standards, surveillance, custody through qualified custodians, segregation, conflicts, capital, customer disclosures, staking opt-in, etc.), requires FCMs to use qualified token custodians, sets a certification and approval process for listing tokens, provides a streamlined “notice registration” for SEC-regulated platforms, and similarly exempts DeFi activities.
Title V creates the Office of Financial Innovation at the SEC and codifies LabCFTC. It mandates joint SEC/CFTC studies on DeFi, NFTs, tokenized market infrastructure, and digital-asset financial literacy, and records Congress’s intent to keep the U.S. at the forefront of blockchain innovation.
Title II – Offers and Sales of Digital Commodities
This title excludes crypto tokens from being considered securities, limits regulation on secondary trading, and provides exemptions from registration for issuers that meet specific criteria. It also provides insider resale rules and defines token network maturity.
Section 201 – Excluding “investment contract asset” from being a security
Defines “investment contract asset” as a digital commodity that (i) is natively transferable on a blockchain without an intermediary, and (ii) is sold under an investment contract. If a token meets this definition, it is not treated as a security, even if the contract it was sold under is.
Under current law, a token sold via an investment contract is generally still treated as a security unless a Howey test analysis proves otherwise. This provision supersedes that and removes the token from SEC jurisdiction if it qualifies as an investment contract asset.
Section 202 – Safe harbor for secondary market trading
States that secondary offers or sales by parties other than the issuer or its agent are not investment contracts, provided the token doesn’t convey rights to profits, revenues, or assets. This clarifies that such resales are not securities transactions.
Section 203 – Primary sales exemption
Creates a tailored exemption from registration for token sales under amended Section 4(a)(8), subject to five conditions including a $150 million cap, decentralization timeline, buyer concentration limits, disqualifier categories, and staged disclosures.
This replaces the current reliance on Reg D, Reg A+, and Reg CF, which are poorly suited for open-source blockchain projects.
Section 204 – Insider resale rules
Sets limits on insiders selling tokens before and after maturity. Pre-maturity: one-year holding period, exchange trading only, capped volumes. Post-maturity: limits based on float and trading volume apply after one year or three months post-maturity.
Section 205 – Defining maturity
Networks are “mature” if they are open-source, permissionless, rules-based, with no controlling entity holding more than 20% power, and if value derives from the system—not promises. Issuers may self-certify maturity with SEC rebuttal within 60 days.
In short: Title II decouples tokens from investment contracts, enables compliant secondary trading, provides tailored fundraising exemptions, and gives insiders safe resale rules, all while maintaining SEC antifraud oversight.
Title III – Registration for Intermediaries at the SEC
This title shifts the SEC’s focus from classifying assets to regulating intermediaries’ conduct, enabling digital commodities and stablecoins to trade under a lighter, but supervised, regime.
Section 301 – Redefines “security”
Excludes digital commodities and payment stablecoins from the statutory definition of securities across all federal laws.
Section 302 – Preserves anti-fraud authority
Extends the SEC’s antifraud powers (like Rule 10b-5 and others) to broker-handled trades in digital commodities—without treating them as securities. This closes the current regulatory gap.
Section 303 – Opens ATS venues to spot crypto
Forbids the SEC from denying ATS platforms the ability to list digital commodities or stablecoins, mandates ATS reform to allow real-time custody and settlement.
Sections 304–307 – Dual registration and modernization
Authorizes SEC/CFTC joint oversight for dual-registered intermediaries. Permits blockchain-based recordkeeping and allows SEC to grant exemptions more flexibly.
Section 308 – Preempts state law
Designates brokered or custodied digital commodities as “covered securities,” removing state-by-state registration burdens.
Section 309 – DeFi safe harbor
Protects developers, node operators, and liquidity providers from registration requirements.
Section 310 – Custody clarification
Overrules SAB 121 by prohibiting federal agencies from treating custodial tokens as bank liabilities requiring capital reserves.
Section 311 – Market entry for banks
Amends the Bank Holding Company Act to classify digital commodities activities as “financial in nature,” enabling banks to enter the space without special Fed approval.
In short: Title III offers a middle ground—exchanges and brokers may operate under existing frameworks with tailored reforms, while removing state law friction and regulatory overreach.
Title IV – Registration for Intermediaries at the CFTC
Expands the CFTC’s oversight of spot crypto trading by creating formal registration requirements and regulatory standards—akin to futures markets.
Section 401 – Clarifies agency jurisdiction
CFTC gains exclusive authority over digital commodity spot trades on registered platforms. Stablecoin rules remain with banking regulators. Securities-linked activities still fall under SEC oversight.
Section 402 – Qualified custodians for FCMs
Mandates that FCMs hold customer crypto with certified custodians.
Section 403 – Token listing approvals
Exchanges must file certifications with the CFTC affirming a token’s compliance before listing.
Section 404 – What is a digital commodity exchange?
Defines which platforms must register based on trading volume and user scope. Registered entities must meet listing, governance, and custody requirements.
Section 405 – Custodian criteria
Custodians must be federally or state-regulated and meet safety standards. The CFTC may approve entities that maintain governance firewalls.
Sections 406–408 – Broker, dealer, and fund manager rules
Defines roles and responsibilities for intermediaries, including capital requirements, conduct standards, segregation, and compliance programs.
Section 409 – DeFi safe harbor
DeFi infrastructure operators are exempt from registration but remain subject to fraud laws.
Section 411 – Express path for SEC-regulated firms
SEC-regulated ATSs and brokers may register with the CFTC via a simplified notice, enabling dual compliance without redundant frameworks.
In short: Title IV builds a formalized CFTC-led regime for spot crypto trading that mirrors protections in U.S. futures markets while making room for banks and DeFi.
Why This Matters
The Digital Asset Market Structure Discussion Draft isn’t perfect, and it’s still early days—it’s just a draft, not a final bill. But it’s the most comprehensive and well-thought-out legislative proposal we’ve seen in the U.S. to date.
Instead of regulation by enforcement, it offers rules of the road. Instead of endless ambiguity, it provides structure.
And most importantly, it recognizes the fundamental innovation at the heart of blockchain technology—while still putting up the guardrails needed to protect market integrity and retail investors.
If enacted, this bill could reshape the U.S. regulatory landscape, finally bringing crypto into the financial mainstream without crushing the experimentation and openness that make the technology so powerful.
Conclusion
The Digital Asset Market Structure Discussion Draft represents the most comprehensive and ambitious federal proposal yet to bring clarity, coherence, and legal certainty to the U.S. digital asset ecosystem. By drawing clear lines between commodities and securities, redefining the roles of the SEC and CFTC, and establishing exemptions and safe harbors tailored to the realities of token issuance and decentralized finance, this bill could transform how digital assets are launched, traded, and regulated across the country.
It shifts the conversation from the existential question of “what is this token?” to a more practical focus on market integrity, consumer protection, and innovation policy. While many details will hinge on future rulemaking and the political appetite to see the bill through, its structure lays a strong foundation for rational digital asset oversight in the United States.
Written by: Yufan Cao (Legal Intern, Montague Law)
