Reinstated Exemptions on the Way Under New CFTC Proposal

The US Commodity Futures Trading Commission (Commission or CFTC) has proposed amendments to the registration exemptions for Commodity Pool Operators and Commodity Trading Advisors under CFTC Rules, with the intent to reduce duplicative compliance burdens for SEC-registered investment advisers (RIAs) and modernize regulatory thresholds appropriate to the current market environment.

KEY TAKEAWAYS

• The Proposed QEP Exemption would provide an exemption from Commodity Pool Operator (CPO) registration for certain RIAs operating commodity pools limited to sophisticated investors known as “qualified eligible persons” (QEPs) and “accredited investors.” This would essentially reinstate Rule 4.13(a)(4), which was rescinded in 2012 (Rescinded Rule 4.13(a)(4)), with two material changes: (i) only RIAs are eligible for the exemption; and (ii) the CPO must file Form PF on behalf of the pool (where applicable).
• If adopted, the Proposed QEP Exemption would supersede related CFTC No-Action Letter 25-50, issued in December 2025 (Letter 25-50),[1] making notable changes in respect of the eligibility of natural persons to participate in exempt pools, making changes to Form PF filing requirements, and adding a requirement to offer a right of redemption to pool participants.
• The proposed amendments would also reinstate the exemption from Commodity Trading Advisor (CTA) registration under Rule 4.14(a)(8), which was previously available to CTAs that advised CPOs of pools that are exempt under Rescinded Rule 4.13(a)(4) (Rescinded Rule 4.14(a)(8)).
• For existing Rule 4.13(a)(2) (Small Pool Exemption), the monetary threshold for exemption eligibility would be increased from managing $400,000 of total capital contributions to $800,000, accounting for inflation.

BACKGROUND

The CFTC’s regulatory framework under the Commodity Exchange Act requires CPOs and CTAs to register with the CFTC as such, unless an exemption from registration applies, with registration triggering significant disclosure and compliance requirements.

The CFTC has continually created new exemptions and issued no-action relief to address evolving market structures. Notably, in 2012, it also rescinded certain registration exemptions, including the CPO exemption under Rescinded Rule 4.13(a)(4) and the corresponding exemption for CTAs under Rescinded Rule 4.14(a)(8) (collectively, the 2012 Amendments).

Prior to rescission, most private funds relying on the Section 3(c)(7) exclusion under the Investment Company Act qualified for these exemptions.

Since rescission, these fund sponsors have frequently relied on either: (i) the CPO registration exemption under Rule 4.13(a)(3)—a more operationally burdensome exemption that is available to pools that trade a de minimis amount of derivatives (the De Minimis Exemption)—and a corresponding exemption under current Rule 4.14(a)(8) for CTAs advising those pools; or (ii) the “registration lite” exemption under Rule 4.7 for certain CPOs of pools offered only to QEPs.

In December 2025, the CFTC’s Market Participants Division issued Letter 25-50, which largely tracks the Rescinded Rule 4.13(a)(4) exemption and provided welcome relief to many fund sponsors relying on the De Minimis Exemption. However, it did not contain a corresponding exemption for CTAs advising pools eligible for relief under Letter 25-50, which limited the utility of the letter. No-action relief does not carry the force of law and can be withdrawn at any time, reducing market certainty.

On August 18, in publishing the Notice of Proposed Rulemaking (NPRM),[2] which would largely undo the 2012 Amendments and codify Letter 25-50, the CFTC stated that its principal objectives are to reduce overlapping compliance burdens for RIAs, modernize regulatory thresholds, and provide greater certainty and efficiency for market participants.

OVERVIEW OF PROPOSED QEP EXEMPTION

A new exemption from CPO registration would be available for RIAs operating commodity pools limited to sophisticated investors who meet specified conditions. The key features of this exemption are as follows.

Limitation to SEC-Registered Investment Advisers

Only CPOs who are RIAs would be eligible, leveraging the existing regulatory regime under the Investment Advisers Act and reducing duplicative compliance requirements.

Participation in Private US Offerings

Interests in exempt pools must be offered in private US offerings, with an exception for pools that are offered in compliance with SEC Rule 506(c).

Pool Participants Are QEPs or Accredited Investors

All pool participants must be either QEPs or accredited investors[3] in order for the pool to qualify for the exemption, with further requirements depending on whether a participant is a natural person or a non-natural person.

Specifically, participation by natural person investors is limited to a subset of QEPs who need not meet a portfolio requirement composed of a monetary threshold of investments to demonstrate the requisite level of sophistication (Portfolio Requirement),[4] while non-natural person investors may either be: (i) any QEPs; or (ii) accredited investors.

Form PF Reporting

Where otherwise required by the US Securities and Exchange Commission (SEC), CPOs would need to file Form PF in respect of the pools for which they are claiming the Proposed QEP Exemption.

SUPERSEDING NO-ACTION RELIEF AND REPLACING RESCINDED RULE 4.13(A)(4)

If adopted, the Proposed QEP Exemption would supersede recently issued Letter 25-50. This is significant because the proposed rule differs from the no-action relief in the following material respects.

Different Participant Base

The Proposed QEP Exemption would define eligible pool participants differently than Letter 25-50, insofar as natural persons must be QEPs who are not subject to the Portfolio Requirement and non-natural persons can also be accredited investors (as compared to a more straightforward QEP requirement for all participants). However, this requirement in the Proposed QEP Exemption tracks the requirement in Rescinded Rule 4.13(a)(4).

The CFTC explains this divergence by stating, “this approach recognizes that non-natural person QEPs typically possess greater financial resources and resilience, sophisticated compliance and risk management regimes with which to evaluate potential investment opportunities, and greater overall experience trading in financial markets, and thus, require less customer protection or intervention from CFTC regulations.”[5]

Form PF Reporting Requirement

A condition of Letter 25-50 is that the CPO must file Form PF in respect of the pool for which it claims relief. The Proposed QEP Exemption would broaden eligibility by providing that a CPO must file Form PF only in circumstances where Form PF filing is otherwise required by SEC rules.

This nuance would fix an issue arising from the SEC and CFTC’s proposal, in an April 2026 joint rulemaking, to raise the filing threshold requirements for Form PF,[6] which would have rendered relief under Letter 25-50 unavailable for funds that were newly excluded from that filing requirement.

Requirement to Offer Pool Redemptions

Letter 25-50 expressly waives compliance with Rule 4.13(e)(2), which requires a registered CPO transitioning to Letter 25-50 to offer participants in an existing pool the right to redeem their interests. By contrast, the redemption requirement would be applicable to registered CPOs transitioning to the Proposed QEP Exemption.

The NPRM notes that CPOs who rely on Letter 25-50 but plan to transition to reliance on the Proposed QEP Exemption after it takes effect would not be subject to retroactive redemption requirements.

While consistent with Letter 25-50 on this point, the Proposed QEP Exemption differs from Rescinded Rule 4.13(a)(4) in one significant respect: the proposed exemption would only be available to RIAs. Under the rescinded rule, other investment advisers were eligible.

Addressing this requirement, the NPRM states that “the Commission preliminarily believes that it is appropriate to rely upon the existing SEC regulatory system applied to RIAs, and that the CFTC can safely reduce duplicative federal regulation of RIAs whose conduct also meets the CPO definition.”[7]

RELATED CTA REGISTRATION EXEMPTION UNDER PROPOSED RULE 4.14(A)(8)

The NPRM would also amend the CTA registration exemption under Rule 4.14(a)(8), which is currently available to persons that are both: (i) SEC- and state-registered investment advisers and persons exempt or excluded from investment adviser registration (among others); and (ii) advising CPOs that claim an exemption under the De Minimis Exemption.

Proposed Rule 4.14(a)(8) would extend the exemption to such CTAs who advise CPOs claiming the Proposed QEP Exemption, thus restoring the integrated exemption regime as it existed prior to the 2012 Amendments.

This goes further than the relief currently available under Letter 25-50, which requires an entity claiming the CTA relief in respect of a pool to be the same entity that is claiming the CPO relief; as discussed above, Proposed Rule 4.14(a)(8) would expand CTA relief availability to entities other than the CPO.

INTERACTION WITH CFTC NO-ACTION LETTER 26-06

CFTC No-Action Letter 26-06 (Letter 26-06), issued in February, effectively reissued Letter 25-50 to include additional relief.[8] Specifically, Letter 26-06 clarified that a CPO who was relying on Letter 14-126,[9] which provides no-action relief from registration to CPOs who delegate their CPO responsibilities to registered CPOs, could still rely on the relief if they delegated their CPO responsibilities to CPOs who are exempt from registration under Letter 25-50.

The NPRM reflects a view that Letter 26-06 will be unaffected by the adoption of Proposed Rule 4.13(a)(3), and states that the relief under Letter 26-06 and Letter 14-126 is only relevant to pools for which a CPO is registered—in other words, if a CPO is relying on the exemption under Proposed Rule 4.13(a)(4), the delegation arrangement provided by Letter 14-126 is not necessary.

However, delegation would not be available to CPOs who are ineligible for their own exemption (e.g., because they are not RIAs), narrowing the relief provided by Letter 26-06.

INFLATION ADJUSTMENT TO THE SMALL POOL EXEMPTION

The Small Pool Exemption currently provides an exemption from CPO registration for operators of small pools, or pools with up to 15 participants, if the total gross capital contributions across all pools operated by that person does not exceed $400,000. The CFTC proposes to increase the total gross capital contributions threshold—which was last updated in 2003, and in 1981 before that—from $400,000 to $800,000, roughly accounting for inflation since the prior update.

IMPLICATIONS

The NPRM reflects the current Commission’s broader priorities of right-sizing regulatory requirements—as Commission Chairman Selig often says, by prescribing the “minimum effective dose” of regulation. The NPRM underscores its intent to harmonize with SEC oversight, minimize unnecessary compliance burdens, and ensure that regulatory thresholds and exemptions remain “fit for purpose” in the contemporary market environment.

For RIAs operating commodity pools, the Proposed QEP Exemption could significantly streamline compliance obligations for pools limited to QEPs that are operated in private offerings. By aligning the eligibility criteria for both the CPO and CTA exemptions and extending the CTA exemption to entities other than a pool’s CPO, the proposal makes significant improvements on the Letter 25-50 relief, especially for advisers who are managing multiple pools or strategies.

The inflation adjustment to the Small Pool Exemption threshold will also provide relief to operators of smaller pools, preserving the intent of the original policy despite the economic changes throughout the last two decades.

Beyond the improvements to the exemption regime, it is important to note that the Proposed QEP Exemption could also pose a challenge for those currently relying on Letter 25-50: for pools with natural person participants who qualify as QEPs on the basis of the Portfolio Requirement, such pools would be ineligible for the Proposed QEP Exemption.

The absence of delegation relief is also a significant drawback because many CPOs who delegate their registration requirements are not RIAs (e.g., a fund’s general partners or directors).

Finally, the obligation to offer participants a chance to redeem may dissuade some registered CPOs from deregistering, insofar as redemption rights may be inconsistent with the economics of the fund.

NEXT STEPS

If adopted, these amendments would provide tangible compliance relief to many market participants, while potentially presenting challenges for some. Firms are advised to review the proposal and assess its potential impact.

Specifically, fund sponsors and advisers relying on Letter 25-50 should not only monitor the rulemaking process and prepare for potential changes to the requirements of the exemptions but also prepare for the possibility that the exemptions will be adopted as proposed, causing some pools that currently rely on Letter 25-50 to be ineligible for continued exemption (as discussed above).

Early engagement with legal counsel and industry associations may help ensure a smooth transition if the proposed amendments are adopted.

The Commission has solicited public comment on all aspects of the proposal, including the appropriateness of the new exemption’s conditions, the inflation adjustment methodology, and the transition from the no-action relief to the rule-based exemptions.

Firms are encouraged to consider participating in the comment process, especially if they were eligible for the Letter 25-50 and/or Letter 26-06 relief but will not be eligible for the rule-based exemption, or if they determine that the relief may lead to unforeseen consequences with other rules (e.g., the aggregation exemption for registered CPOs with respect to position limits). Comments are due October 5, 2026.