On July 24, the Commodity Futures and Trading Commission (CFTC) announced that it is granting a no-action relief to Small Exchange, which is owned by Kraken, regarding its Designated Contract Market procedures. This no-action letter will grant the platform more flexibility to restart its regulated derivatives trading.
In a letter issued on July 24, CFTC staff granted temporary relief from dormant DCM rules for Small Exchange. Kraken’s parent company, Payward, had acquired Small Exchange in late 2025. However, it had been inactive for more than a year. Without this relief, it would have been dormant and had to go through a lengthy reinstatement process.
The no-action relief will allow Small Exchange to list products and restart trading without any immediate fear of enforcement action if it complies with certain conditions and an October 2026 deadline. This will also help Kraken to expand its regulated derivatives business in the U.S.
The official statement mentioned that “The Commodity Futures Trading Commission’s Division of Market Oversight today announced it has issued a no-action letter to Kraken Derivatives Exchange Inc., formerly Small Exchange Inc., a designated contract market, which addresses certain procedures related to dormancy. The no-action position is time-limited and subject to the terms and conditions in the division’s no-action letter.”
CFTC Leans into No-Action Letters to Kraken as Crypto Regulation Evolves
The no-action letter is a major relief for Kraken, which will allow the exchange to use Small Exchange’s existing DCM status to offer regulated futures and derivatives more easily. This letter will help Kraken to expand its operation into traditional finance beyond the crypto-based offerings.
Kraken is expanding its boundaries into various growing markets, such as tokenized securities. Payward’s xStocks platform is now tokenizing Hong Kong-listed stocks, and it is preparing to add UK, European, and South Korean stocks. However, it still needs regulatory approval. This expansion comes after its US tokenized equities and aims to give users round-the-clock on-chain access to global markets. It has also made partnerships with GTN to help with execution, custody, and recordkeeping.
While Kraken is entering the new market, Kraken’s Federal Reserve master account is still unused after a few months. It is the Federal Reserve master account ever approved for a digital asset bank. The limited “skinny” account gives direct access to Fed payment systems but comes with restrictions. Kraken has called it a major achievement for its institutional infrastructure. However, it is still under regulatory review.
Arjun Sethi, co-CEO of Payward and Kraken, stated in the press release, “With a Federal Reserve master account, we can operate not as a peripheral participant in the U.S. banking system, but as a directly connected financial institution. For a Wyoming SPDI structured on a full-reserve model, this creates a uniquely resilient foundation. It gives us the ability to settle directly on Fedwire, reduce dependency on correspondent banks, and integrate regulated fiat liquidity directly into digital asset markets.”
The CFTC relief is following a pattern of targeted accommodations for crypto companies. The agency has issued similar letters before for event contracts and swap reporting in order to balance innovation with proper regulatory oversight. These letters come with strict conditions and deadlines, which allow the agency staff to keep an eye on results without rushing new rules.
Earlier this year, CFTC granted a no-action letter to Bitnomial Exchange, LLC, a designated contract market, and Bitnomial Clearinghouse, LLC, a registered derivatives clearing organization.
Kraken, one of the longest-standing, most liquid and secure cryptocurrency platforms, has launched a new suite of options contracts on Bitcoin (BTC) and Ether (ETH), giving a broader base of professional and institutional clients access to a part of the digital asset derivatives market that Kraken expects to scale materially over the coming years.
On July 16, Kraken revealed the launch of options contracts on Bitcoin (BTC) and Ether (ETH). Alexia Theodorou, Director of Derivatives at Kraken, said that “Crypto options activity is still a fraction of what it is in traditional markets but the gap is closing as professional and institutional capital continues to move into digital assets.”
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