The Desk: September Edition

You may have seen the update yesterday that MVA’s Swaps & Derivatives team is now the “Derivatives & Trading” team. We are a markets team at our core with transaction and regulatory experience in swaps, derivatives, commodities, securities, digital assets, prediction markets, and other assets. The new name and expanded mandate captures the scope of work the team has grown to cover over the past few years. Because of the expanded coverage, the Derivatives & Trading team will be lead under a co-head structure between Barrett Morris and Stuart Armstrong.

Before you get too dialed in on the details below, enjoy this college football and swaps related news story that broke the last week. Allegedly, a third-party has been using Kalshi’s prediction markets to help LSU hedge against possible bonus payments due to Head Coach Lane Kiffin based on his performance.

You can listen to us discuss these matters on the podcast at Apple Podcasts or Spotify.

Enforcement Round-Up

CFTC, SEC, and FinCEN Charge UBS Financial Services

What Happened. On August 3, 2026, the CFTC, the SEC, and FinCEN announced coordinated enforcement actions against UBS Financial Services Inc. (“UBS”) arising from alleged deficiencies in the firm’s anti-money laundering (“AML”) transaction monitoring systems for wire transfers denominated in foreign currencies (“FX”). The agencies collectively imposed over $150 million in civil monetary penalties, including a $125 million penalty assessed by FinCEN, a $20 million penalty imposed by the SEC, and an $8 million penalty imposed by the CFTC.

According to the agencies’ orders, from January 2019 through mid-2023, UBS failed to adequately monitor certain FX wire transactions for suspicious activity. FinCEN alleged that the firm’s monitoring and customer due diligence controls were insufficient with respect to a significant volume of FX wires and certain higher-risk customers, resulting in failures to identify and investigate potentially suspicious activity. UBS’s alleged transaction monitoring deficiencies covered both the period when the firm used a manually generated report to capture relevant FX wires for monitoring as well as the period when the firm transitioned to an automated monitoring system.

The CFTC’s order alleges UBS violated one count of CFTC Regulation 166.3, which imposes on every Commission registrant, other than associated persons with no supervisory duties, an affirmative duty to “diligently supervise the handling by its partners, officers, employees and agents . . . of all commodity interest accounts carried, operated, advised or introduced by the registrant and all other activities of its partners, officers, employees and agents . . . relating to its business as a Commission registrant.” CFTC Director of Enforcement David I. Miller previously identified “willful failures to follow anti-money laundering and know-your-customer laws and rules” as one of the Division’s five enforcement priorities.

The SEC’s order alleges violations of Section 17(a) of the Exchange Act and SEC Rule 17a-8, finding that the deficiencies contributed to delayed suspicious activity reporting.

FinCEN’s order alleges that UBS’s conduct willfully violated the Bank Secrecy Act (“BSA”). The action follows UBS’s prior 2018 FinCEN settlement involving similar AML monitoring issues, where UBS was assessed a civil penalty of $14.5 million. FinCEN alleges that UBS failed to fully remediate the underlying deficiencies and did not self-report the continuing issues. This is the largest FinCEN penalty ever imposed against a broker-dealer for BSA violations to date.

The FinCEN order also requires UBS to work with a third-party consultant to complete a lookback to identify and report to FinCEN suspicious transactions that went undetected due to the AML monitoring failures and to undergo an independent review of its AML program. The independent review must prioritize certain illicit finance risks, including the U.S. Southwest border, cartels, narcotics trafficking, Iran, Russia, and Venezuela, underscoring the current geopolitical emphasis in financial crimes enforcement.

Why It Matters. The actions highlight continued regulatory focus on AML compliance, transaction monitoring, customer due diligence, and supervisory controls. They also demonstrate the significant consequences that can result when regulators conclude that previously identified compliance deficiencies were not adequately remediated.

This matter is also notable for its coordinated, multi-agency approach. Firms subject to oversight by multiple regulators should consider the potential for a single compliance failure to generate parallel enforcement exposure across agencies.

Practical Takeaways.

• Prior findings warrant prompt remediation. Regulators continue to scrutinize whether firms effectively address issues identified through examinations, audits, or prior enforcement actions.
• Technology and system changes require careful oversight. Firms implementing new monitoring tools should consider robust testing, validation, and post-implementation review procedures.
• Customer due diligence and transaction monitoring remain closely linked. Inadequate customer-risk profiling can affect a firm’s ability to identify, investigate, and report suspicious activity.

The Goliath Alleged Fraud Scheme

What Happened. On August 11, 2026, the CFTC announced that it had filed a civil enforcement action in the U.S. District Court for the Middle District of Florida against Goliath Ventures Inc. and its CEO, Christopher Delgado. The complaint alleges that the defendants fraudulently solicited approximately $400 million from roughly 1,600 customers for purported bitcoin and ether trading through an alleged Ponzi scheme.

According to the complaint, customer funds were misappropriated, fictitious profits were paid to certain participants, and customers received false account statements reflecting nonexistent trading gains. The CFTC seeks restitution, disgorgement, civil monetary penalties, trading and registration bans, and injunctive relief.

The filing follows Delgado’s June 2026 guilty plea in a parallel criminal proceeding brought by federal prosecutors. The SEC also filed a related civil action against Delgado and Goliath the same day.

Why It Matters. The action reflects the CFTC's continued focus on fraud involving digital assets and alleged misconduct affecting retail customers. Although the agency has indicated an interest in providing greater regulatory clarity in certain areas of the digital asset market, recent enforcement actions underscore that fraud and misappropriation cases remain a core priority.

This matter, like the UBS matter, also highlights the continued coordination between civil and criminal enforcement authorities in significant fraud investigations.

Practical Takeaways.

• Fraud enforcement remains a priority in digital asset markets. Regulatory developments affecting market structure or registration requirements do not diminish scrutiny of alleged fraud.
• Retail investor harm remains a significant enforcement focus. Firms should review controls around customer communications, performance reporting, custody of assets, and fund flows.
• Parallel proceedings are increasingly common. Conduct that attracts regulatory scrutiny may also generate criminal exposure and investigations by multiple agencies.

Supplemental CFTC Consent Orders Against Alameda & FTX Executives

What Happened. On August 19, 2026, the CFTC announced that the U.S. District Court for the Southern District of New York entered supplemental consent orders resolving outstanding remedies issues involving Caroline Ellison (the former Alameda CEO) and Gary Wang (the Alameda and FTX co-founder).

The court previously entered consent orders in 2022 finding Ellison and Wang liable for certain fraud-related violations and permanently enjoining future violations of the Commodity Exchange Act. Those orders reserved issues relating to monetary and other relief.

Under the supplemental orders, Ellison is subject to a five-year trading ban and ten-year registration ban, while Wang is subject to a five-year trading ban and eight-year registration ban. The bans run from December 23, 2022, the date of the initial consent orders.

The supplemental orders also reflect the Commission’s decision not to seek restitution, disgorgement, or civil monetary penalties against these individuals. The CFTC cited, among other things, the defendants’ cooperation in its investigation and related proceedings, as well as criminal forfeiture obligations imposed in the parallel criminal cases.

Director of Enforcement Miller stated: “Today’s resolution further underscores the high value this Division places on robust cooperation. Ellison and Wang were senior executives who committed fraud at Alameda and FTX for which they were found liable. Their sanctions, however, reflect their material assistance in the Commission’s FTX-related investigations.”

Why It Matters. The resolution provides another example of the CFTC affording significant credit for cooperation when determining remedies, offering a useful indication of how the Division of Enforcement’s Cooperation Advisory may be implemented in practice. It also illustrates the Commission’s willingness to consider sanctions imposed through parallel criminal proceedings when resolving related civil enforcement actions.

More broadly, the outcome of this matter is generally consistent with several other recent actions in which the Commission has reexamined prior enforcement positions, emphasized cooperation, or tailored sanctions in light of parallel proceedings and other case-specific considerations.

Practical Takeaways.

• Cooperation may influence remedial outcomes. Recent CFTC actions suggest that meaningful cooperation can play an important role in determining sanctions and settlement terms.
• Parallel proceedings matter. Criminal penalties, forfeiture obligations, and other remedies may be relevant considerations in related civil resolutions.
• Global resolution strategy remains important. Firms and individuals facing scrutiny from multiple agencies should carefully assess how developments in one proceeding may affect outcomes in another.

Tiffany Payne & Nader Raja | Email

SEC’s Proposed Regulation Crypto Assets Proposes Exemptions and an Exit

The SEC has finally put pen to paper on the offering-side half of its crypto project. On August 18, 2026, the Commission proposed “Regulation Crypto Assets” or “Reg CA”, which is a set of rules designed to create a clear, fit-for-purpose framework for certain investment contracts involving crypto assets. The rulemaking follows the Commission’s March 2026 interpretation addressing how the federal securities laws apply to crypto assets and transactions involving them. Where the March guidance told the market how the Commission reads Howey in a crypto context, this proposal supplies what the guidance could not: an actual capital-raising pathway.

Exemptions

The centerpiece is a pair of new exemptions from Securities Act registration, tailored specifically to investment contracts involving crypto assets:

• The first is a one-time “fundraising” exemption permitting offerings of up to $5 million during a four-year period.
• The second “fundraising” exemption permits two pathways: (i) Tier 1 permits offerings of up to $20 million over a 12-month period and (ii) Tier 2 permits offerings of up to $75 million over a 12-month period.

Both tiers condition the fundraising exemption on principles-based narrative disclosures to investors, and issuers relying on the larger exemption must also provide financial statements and submit to ongoing reporting. Tier 1 financial statements do not need to be audited, but Tier 2 financial statements must be audited.

The architecture will feel familiar to anyone who has worked with Regulation A's tiered structure: a lightweight on-ramp for early-stage token projects, and a larger annual allowance that trades scale for a genuine disclosure and reporting regime. Whether a $5 million lifetime cap is commercially meaningful for token launches in 2026 is a fair question, but the $20 million and $75 million tiers are real money, and the principles-based disclosure approach is a deliberate departure from forcing crypto issuers into Form S-1 line items that never quite fit.

Safe Harbor

The provision market participants will spend the most time with, however, is the safe harbor. The proposal includes a conditional safe harbor from the term “investment contract” in the definitions of “security” under both the Securities Act and the Exchange Act.

Those conditions are that the issuer has:

• completed or otherwise permanently ceased all essential managerial effort that it represented or promised it would engage in under the covered investment contract and is not making and does not intend to make any new representations or promises to engage in essential managerial efforts with respect to the underlying crypto assets; and
• made a public filing certifying that it has satisfied the conditions of the safe harbor and providing an analysis supporting that certification.

If the conditions are satisfied, a crypto asset would be deemed not to be subject to an investment contract for purposes of those definitions.

Chairman Atkins framed the trigger in terms drawn directly from the Commission's earlier interpretive guidance: the safe harbor would become available once an issuer has completed, or permanently ceased, all essential managerial efforts it represented or promised it would undertake under the investment contract. This is, in substance, a regulatory codification of the “sufficient decentralization” concept that has floated through staff speeches since the Hinman era, which is anchored to the Howey “efforts of others” prong rather than to network metrics. Once the promised managerial efforts are done (or abandoned), the asset sheds its investment-contract character.

The jurisdictional implication creates real question: does an asset that exits “security” status presumptively lands in the CFTC's commodity lane? If so, that makes the safe harbor a de facto transfer mechanism between regulators and puts a premium on the pending Clarity Act to define what awaits on the other side.

State Securities Laws

The rules would preempt state securities law registration and qualification requirements for offers and sales made under a Regulation Crypto Assets exemption. The proposed rule would treat offerees and purchasers in Reg CA offerings as “qualified purchasers,” meaning covered investment contracts under Reg CA would be “covered securities” and therefore exempt from state “blue sky” requirements. The proposed rule extends the covered-security treatment into secondary trading, which is a meaningful expansion that state regulators can be expected to contest in the comment file.

Comment Period

The comment period runs 60 days from publication in the Federal Register. Expect the fight to center on the safe harbor's conditions, and the definition of "essential managerial efforts" will determine whether this is a workable off-ramp or a dead letter.

Barrett Morris | Email

Compute Derivatives Gaining Momentum; When, Not If

The MVA Derivatives and Trading team is at the forefront of the development of OTC compute derivatives, we have been tracking the nascent compute futures markets here on The Desk and advised on the first OTC compute derivative executed in the market. Many bank and institutional clients are preparing for the launch of compute futures on Designated Contract Markets (“DCMs”) to enable offering compute derivatives to clients.

We know what a derivative is, but what is compute? It used to be the computational power or resources necessary for a computer or program to function. Now, “compute” refers to processing power to train large language models and other AI systems. Compute futures will create a market that will enable a broader array of hedge providers to offer a variety of products that hedge compute price risk; however, much like when derivatives on cryptocurrencies came into being, the CFTC first has questions.

On August 19, 2026, the Commodity Futures Trading Commission (the “CFTC” or “Commission”) issued a Request for Comment (“RFC”) to better inform its understanding and oversight of derivatives markets in compute. Comments are due by October 20, 2026.

The RFC addresses four areas: (1) compute cash market characteristics, (2) susceptibility to manipulation, (3) customer protection concerns, and (4) perpetual futures structures. Chairman Michael S. Selig frames compute derivatives as critical to U.S. competitiveness in the AI race, describing compute as “digital oil” and linking the RFC to the White House AI Action Plan.

1. Compute Cash Markets: Size, Liquidity, and Other Considerations

The CFTC seeks comments on the fundamentals of the compute cash market, including:

• Data on compute-market size, liquidity, transaction volume, participant mix, supplier concentration, price behavior, and the share of publicly disclosed versus non-public bilateral transactions.

• Whether derivatives settlement should be based on price data the CFTC cannot observe, verify, or surveil, and what methodology should be used to estimate deliverable supply for position limits or accountability levels under DCM Core Principle 5.

• The potential effects of listing and trading compute derivatives on the cash market, including liquidity, transparency, and market development.

2. Market Oversight and Susceptibility to Manipulation

As with the first listed cryptocurrency futures and swaps contracts, the RFC raises significant concerns regarding the integrity of compute price formation and the potential for manipulation:

• Under Core Principle 3, contracts must not be readily susceptible to manipulation; concerns include provider-administered rates, concentration among compute venues and providers, and suppliers’ potential influence over settlement prices.

• The RFC asks how to prevent manipulation through changes to posted rates, capacity allocation, or transactions during observation windows, and what surveillance capabilities DCMs can feasibly maintain under Core Principle 4.

• It also asks whether DCMs should maintain information-sharing arrangements with compute venues and providers and whether current cash prices are reliable, acceptable, publicly available, and timely.

3. Customer Protection of Market Participants

The RFC addresses heightened customer protection concerns in this nascent market:

• Heightened KYC/AML concerns, including challenges for IBs and FCMs

• The RFC asks about appropriate disclosures for derivatives tied to a geopolitically sensitive commodity, including retail disclosures and contract terms addressing idiosyncratic risks.

• It asks whether the novel underlying commodity warrants protections specifically tailored to retail users.

4. Perpetual Compute Futures

The RFC specifically solicits views on perpetual futures structures for compute derivatives:

• Whether perpetual futures offer advantages over traditionally settled futures and provide commercial risk-management features unavailable with existing products.
• It asks what unique risks perpetual structures may pose for market participants or broader markets, and whether safeguards beyond those applicable to traditional futures are needed.

The RFC comes amid a wave of exchange activity regarding compute derivatives:

• CME Group: Plans to list two futures contracts track Silicon Data indexes measuring hourly GPU rental costs, for Nvidia H100 and Nvidia Blackwell B200 hardware, respectively. Silicon Data raised $30.5 million in a Series A round led by Valor Atreides AI Fund, with investors including CME Ventures, DRW and others.
• ICE: plans to launch futures contracts based on Ornn’s Compute Price Index
• Kalshi: offers contracts based on Nvidia compute prices

Exchanges and market participants are lining up, waiting for the gates to open, seeking a first mover advantage in this new market. Swap dealers, introducing brokers, futures commission merchants and non-registrants that want to participate in these developing markets will need to monitor these developments and be prepared and ready to go to market.

The Derivatives and Trading team advises clients on navigating all aspects of exchange traded and OTC compute derivatives (including structuring, documentation, risk and compliance and other considerations).

Barrett Morris and Stuart Armstrong | Email

CFTC to Codify CPO/CTA Registration Relief

On August 18, 2026, the CFTC published a Notice of Proposed Rulemaking (“NPRM”) seeking public comments on amendments to Part 4 of the CFTC's regulations governing registration requirements for commodity pool operators ("CPOs") and commodity trading advisors ("CTAs"). Comments are due by October 5, 2026.

The NPRM aims to reduce duplicative and overlapping regulation for market participants.

Key Provisions

The NPRM addresses three proposed changes to the CPO/CTA registration framework:

1. New CPO Registration Exemption for SEC-Registered Investment Advisers. The CFTC would add a new paragraph (a)(4) to Regulation 4.13, creating a pool-by-pool CPO registration exemption for investment advisers registered with the SEC ("RIAs") that operate commodity pools offered exclusively to certain sophisticated investors (qualified eligible persons, or "QEPs"). Key conditions include that pool interests must be exempt from Securities Act registration, the pool must not be publicly marketed (except under Rule 506(c)), and the adviser must be an SEC-registered investment adviser. The proposed exemption would largely codify the no-action relief previously granted in CFTC Staff Letter 25-50.
2. CTA Registration Exemption. The NPRM would restore a revive an exemption from CTA registration under Regulation 4.14(a)(8) for advisors to pools whose CPOs rely on the new Regulation 4.13(a)(4).
3. Inflation Adjustment to Small Pool Exemption. The aggregate gross capital contributions threshold for the small pool exemption under Regulation 4.13(a)(2) would increase from $400,000 to $800,000, reflecting cumulative inflation since the threshold was last adjusted in 2003. The existing 15-participant-per-pool limit would remain unchanged.

Key Takeaways

Fund managers and investment advisers currently registered as CPOs, relying on on Staff Letter 25-50, or seeking to create new funds, should evaluate the proposed rule's implications for their existing and planned fund structures. CPOs operating pools with aggregate gross capital contributions between $400,000 and $800,000 may become newly eligible for the small pool exemption.

Stuart Armstrong and Barrett Morris | Email

CFTC to Remove Order Book Requirement for On-SEF Permitted Transactions

On August 20, 2026, the CFTC published an NPRM to amend Commission regulation § 37.3(a)(2) to remove the requirement that swap execution facilities ("SEFs") offer an order book for permitted transactions. The proposed rule would not affect the existing order book requirement for required transactions. Comments are due September 25, 2026

Background

Under the current regulatory framework, SEFs must offer an order book as part of their minimum trading functionality for all swaps listed for trading — both "required transactions" (those subject to the CEA § 2(h)(8) trade execution requirement) and "permitted transactions" (those that are not). The CFTC has observed that order books for permitted transactions have been "rarely used by market participants" despite their mandatory availability.

In 2025, the Division of Market Oversight issued No-Action Letter No. 25-24 providing relief from this requirement; the proposed rule would codify that staff position.

Key Takeaway

If finalized, SEFs would no longer be required to maintain an orderbook for permitted transactions under § 37.9(c)(2), potentially reducing operational and technology costs associated with maintaining unused order book infrastructure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.