Securities Regulation Daily Wrap Up, DERIVATIVES—No-action relief from dormancy extended for Kraken’s DCM, (Jul 28, 2026)

By Rebecca E. Hoffman, J.D.

The CFTC granted relief originally in December 2025, to expire in October, but will now extend to August 2027.

The Division of Market Oversight issued a no-action letter to Kraken Derivatives Exchange Inc. (f/k/a Small Exchange, Inc.), a designated contract market (DCM), extending no-action relief relating to dormancy.

In the original letter, No. 25-46, Small Exchange was granted relief from being designated as “dormant” under CFTC Regulation 40.1 as of January 10, 2026, following one year of inactivity.

Regulation 40.1 provides that a DCM will become officially dormant when there has been no trading for 365 days (“provided, however, no derivatives clearing organization shall be considered dormant if its initial and original Commission order of registration was issued within the preceding 1,095 days”), after which it will have to apply for reinstatement. “The Commission adopted the dormancy framework for registered entities to address potential compliance drift that may arise from an extended period of inactivity.”

The Division’s no-action position was set to expire on October 10, 2026. Kraken (f/k/a Payward, Inc., KDE’s parent) asked the Division to extend the no-action position, explaining that it was in the process of reworking its business strategy and had plans for KDE, which would be thwarted if the earlier relief were to expire and dormancy to set in before Kraken can complete its process of setting up partnerships and other opportunities.

The Division determined that KDE will be permitted to list products for trading without having to officially reinstate its designation, until August 10, 2027, or until a trade is executed on or pursuant to the rules of KDE, whichever is earlier, and any trade that takes place will restart the 365-day timing.

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