Blockchain.com Applies for CFTC Licenses: What It Means for Digital Asset Accounting
Blockchain.com has applied to the US Commodity Futures Trading Commission for two separate licenses that would let it operate a regulated futures exchange and act as a derivatives broker for US retail and institutional clients. If approved, those licenses would mark one of the more consequential expansions of a crypto exchange into CFTC-regulated territory to date, and the implications for accounting, compliance, and reporting run deep for any firm or individual already holding digital assets.
What Blockchain.com Is Actually Applying For
According to reporting by CNBC, Blockchain.com filed applications with the CFTC for two distinct license categories: a Designated Contract Market (DCM) and a Futures Commission Merchant (FCM).
DCM: Running a Regulated Futures Exchange
A DCM license authorises a platform to list and trade futures and event contracts, effectively becoming a regulated exchange. Under a DCM designation, Blockchain.com could offer its own marketplace for event contracts (the regulatory term for prediction market products) without relying on a third-party platform. This is significant because the company announced a partnership with Polymarket in July, but CFTC approval would let it build a proprietary venue rather than simply integrate an existing one.
FCM: Becoming a Derivatives Broker
The FCM designation is a separate function: it allows a firm to solicit or accept orders for futures contracts and handle client margin. FCMs are subject to substantial CFTC oversight, including net capital requirements, customer funds segregation rules, and regular reporting obligations. Adding an FCM licence to a crypto exchange operation brings the platform squarely into the same regulatory category as traditional commodity brokers, with all the compliance infrastructure that entails.
The Broader CFTC Regulatory Context
Blockchain.com's filing does not exist in isolation. It arrives as CFTC Chair Michael Selig is actively pushing the agency's crypto rulemaking agenda, citing the November 2022 collapse of FTX as the primary justification for new safeguards. In a recent Fox Business interview, Selig argued that the proposed rules, which would apply to firms registering as licensed crypto businesses, would introduce protections against the kind of customer fund misappropriation seen in the FTX case. He reiterated that position publicly on the same day the Blockchain.com news broke.
Selig is currently the CFTC's sole commissioner and chair. As of the date of this report, the White House had not announced nominations for the four vacant seats at the agency. That staffing gap matters: major rulemaking typically benefits from a full commission, and any contested decisions carry more weight when multiple commissioners have voted on them.
CFTC's Claimed Jurisdiction Over Prediction Markets
Chair Selig has publicly asserted that the CFTC holds exclusive federal jurisdiction over prediction market platforms. That claim is being tested in the courts. Several state-level regulators have active lawsuits against prediction market operators, alleging violations of state gambling and sports-betting laws. New Jersey recently asked the US Supreme Court to consider its case against Kalshi, a move that could resolve the tension between federal CFTC authority and state regulatory power. The outcome of that litigation will shape the legal ground on which any new entrant, including Blockchain.com, would operate.
Accounting and Reporting Implications for B2B Firms
For accounting firms, CFOs, and auditors advising clients that trade on or through CFTC-regulated crypto venues, this development has several practical dimensions worth tracking now, before any licence is granted.
Treatment of Event Contracts and Derivatives Under GAAP and IFRS
Futures and event contracts traded on a DCM are financial instruments, not spot digital assets. Under US GAAP, derivatives are generally recognised at fair value on the balance sheet with changes flowing through the income statement (ASC 815), unless hedge accounting is elected and documentation requirements are met. Under IFRS 9, the treatment is structurally similar: derivatives are measured at fair value through profit or loss unless they qualify for hedge accounting under strict designation and effectiveness criteria.
This is categorically different from the accounting for spot Bitcoin or Ether holdings, where ASC 350-60 (the FASB's 2023 intangible asset guidance for crypto) or IAS 38 typically apply. Firms that currently advise clients on crypto bookkeeping software and workflows need to be ready to maintain parallel accounting streams once exchange-traded crypto derivatives become more accessible to a broader client base.
Customer Funds Segregation and Audit Trail Requirements
FCM status requires strict segregation of customer margin from firm capital. For audit purposes, this means verifying that commingling has not occurred, a task that requires robust crypto accounting software capable of tracking wallet-level balances, on-chain transactions, and off-chain ledger entries simultaneously. Firms handling audits or agreed-upon procedures engagements for FCM-registered crypto entities should begin assessing whether their current digital asset accounting software supports the granularity those engagements will demand.
Tax Classification of Derivatives Gains and Losses
Exchange-traded futures contracts on a US DCM are typically treated as Section 1256 contracts under the Internal Revenue Code. Section 1256 contracts are subject to the 60/40 rule: 60% of gains or losses are treated as long-term capital gains or losses and 40% as short-term, regardless of how long the position was held. They are also subject to mark-to-market rules at year-end, meaning unrealised gains and losses are recognised for tax purposes on 31 December each year.
If the CFTC approves Blockchain.com's DCM application and event contracts traded there qualify as Section 1256 contracts, the tax treatment for US clients trading those products would differ materially from spot crypto transactions, which are treated as property under IRS Notice 2014-21. Firms using digital asset accounting software to prepare client tax workpapers need to ensure that any platform-generated data correctly distinguishes between spot, derivatives, and event contract transactions before they flow into tax calculations.
What This Means for Individual Filers
If you're already trading crypto on centralised exchanges, the arrival of CFTC-licensed event contracts and futures from a mainstream exchange like Blockchain.com could change how you trade, and definitely changes how you file.
Section 1256 and the Mark-to-Market Trap
The 60/40 treatment under Section 1256 sounds appealing because of the long-term rate component, but the mark-to-market rule catches many traders off guard. If you hold an open futures position on 31 December, you're taxed as if you closed it that day, even if you didn't. That can create a tax liability in a year when you haven't actually received any cash. Keeping precise, date-stamped records of all open positions at year-end is essential, and generic crypto bookkeeping software that's built only for spot transactions may not capture this correctly.
Mixing Spot and Derivatives: A Reporting Risk
Holding spot Bitcoin alongside a Bitcoin futures position creates a situation where two different tax regimes apply to economically related holdings. The IRS has not issued comprehensive guidance specifically addressing this combination in the crypto context, but the general principles of tax law apply: the positions are reported separately, on different forms, under different rules. Conflating them in a single report is a compliance risk worth taking seriously.
Prediction Markets: Still a Legal Grey Zone
The prediction market component of Blockchain.com's application sits in particularly uncertain legal territory. While Chair Selig has asserted CFTC primacy, the New Jersey petition to the Supreme Court over the Kalshi case signals that state regulators are not conceding that ground. Until the courts or Congress provide a clear answer, any firm or individual participating in event contract markets should treat the regulatory status of those products as unresolved.
From an accounting perspective, event contracts that do not clearly qualify as Section 1256 instruments may need to be treated as short-term capital assets or even as wagering contracts depending on the platform and the nature of the event, each with different tax consequences. Firms should flag this uncertainty explicitly in client advice rather than defaulting to a single treatment.
For context on how the CFTC has been approaching its broader crypto rulemaking beyond this specific application, see our earlier coverage of the CFTC's proposed crypto rules and the spot market gap and the CFTC's proposed framework for leveraged retail crypto trading, both of which provide essential background on the regulatory architecture Blockchain.com would be entering.
Key Takeaways for Accounting and Compliance Teams
This application is not yet an approval. But waiting for approval before preparing is the wrong approach. The practical steps worth taking now:
For Accounting Firms and CFOs
Review whether your current crypto accounting software can classify and separately track derivatives, futures, and event contracts alongside spot holdings. Confirm that your audit methodology for digital asset clients can accommodate FCM-style segregation testing. Start mapping which clients are likely to access these products once they become available, and flag the Section 1256 and hedge accounting considerations in your planning conversations.
For Individual Filers
If you plan to trade futures or event contracts on any CFTC-regulated platform, make sure your record-keeping captures the distinction between those products and your spot holdings. Year-end mark-to-market reporting is not optional, and the tax forms involved (typically Form 6781 for Section 1256 contracts) are separate from the Schedule D or Form 8949 entries used for spot crypto. Using crypto bookkeeping software that handles only spot transactions will leave a gap in your records that could be costly at filing time.
Source: Cointelegraph
Frequently Asked Questions
What is a Designated Contract Market (DCM) and why does it matter for crypto?
A DCM is a CFTC-licensed exchange authorised to list futures and event contracts. If Blockchain.com receives DCM status, it can offer regulated derivatives and prediction market products directly to US clients, bringing those transactions under formal CFTC oversight and the associated accounting and tax rules that apply to exchange-traded derivatives.
How are futures contracts on a DCM taxed differently from spot crypto?
Futures on a regulated US exchange are typically Section 1256 contracts under the Internal Revenue Code, subject to the 60/40 long-term/short-term split and mandatory year-end mark-to-market recognition. Spot crypto is taxed as property under IRS Notice 2014-21, with gains or losses realised only on disposal. The two regimes are reported on separate forms and cannot be blended.
What is a Futures Commission Merchant (FCM) and what compliance obligations does it carry?
An FCM is a CFTC-registered broker that accepts orders for futures contracts and handles client margin. FCMs must meet net capital requirements, segregate customer funds from firm capital, and file regular financial reports with the CFTC. For auditors, this creates specific procedures around segregation testing and margin account verification that differ from standard crypto custody engagements.
Are prediction market contracts treated as Section 1256 contracts for tax purposes?
Not automatically. Whether an event contract qualifies as a Section 1256 contract depends on how the CFTC classifies it and the specific terms of the contract. Some event contracts traded on CFTC-regulated platforms have been treated as Section 1256 instruments, but the IRS has not issued definitive guidance covering all prediction market products. Firms should apply professional judgement and document their position carefully pending further guidance.
Should accounting firms update their crypto accounting software workflows now, before any licence is granted?
Yes, in the sense of conducting a readiness assessment. Identifying whether your current digital asset accounting software can distinguish between spot, futures, and event contract transactions, and whether it generates the correct tax output for each, is a low-risk step that avoids a scramble if approvals come through. It also surfaces gaps in client onboarding documentation that are easier to address before trading starts than after.