The U.S. Securities and Exchange Commission (SEC) has proposed amending an existing rule to include certain debt obligations issued directly by the European Union, potentially allowing futures contracts tied to that debt to trade in the United States under the Commodity Futures Trading Commission’s (CFTC) exclusive jurisdiction.
The proposal, announced on August 28, would amend Exchange Act Rule 3a12-8, which already covers debt issued by several foreign governments, including 11 European Union (EU) member states. The EU member states are Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Portugal, and Spain.
The SEC said the change would align the treatment of debt issued directly by the European Union with the treatment already provided to debt issued by certain member states. The agency will accept public comments for 60 days after the proposal is published in the Federal Register.
What the SEC proposal would change
Under the proposed amendment, certain debt obligations issued by the European Commission on behalf of the European Union could qualify as “exempted securities” for the limited purpose of marketing, offering, selling or confirming futures contracts tied to those obligations.
The proposed definition would cover debt where the borrowing represents a direct and unconditional obligation of the European Union. The European Commission would carry out the issuance, while the European Union would remain the issuer and obligor.
Importantly, the proposal would not create a broad exemption for EU bonds from U.S. securities regulations. The underlying debt offerings would continue to be subject to federal securities laws.
Instead, the proposed change is focused specifically on futures contracts linked to qualifying EU debt. If adopted, those futures would fall under the CFTC’s exclusive jurisdiction rather than being treated as security futures under the Exchange Act. The SEC also said the existing substantive requirements of Rule 3a12-8 would remain unchanged.
SEC aims to close regulatory gap
The European Union has remained outside Rule 3a12-8 partly because the rule has historically applied to debt issued by foreign governments rather than international institutions. At the same time, the SEC said the EU has distinct economic and institutional characteristics and that its debt has increasingly been treated by market participants as comparable to sovereign obligations.
SEC Chairman Paul Atkins said the existing framework created an inconsistency because debt from several EU member states was already covered while debt issued directly by the European Union was not.
“For too long, gaps like this one—where the debt of several EU member states was covered but debt of the European Union itself was not—have created exactly the kind of inconsistency that breeds confusion rather than confidence in the markets,” Atkins said.
Atkins described the proposal as “harmonization in practice” and said it builds on the SEC’s work with the CFTC to preserve investor protection while addressing regulatory gaps.
Rule 3a12-8 dates back to 1984
Rule 3a12-8 was created in 1984 and initially covered debt issued by the governments of the United Kingdom and Canada. The SEC later expanded the rule to include additional foreign governments, allowing U.S. investors to access futures tied to overseas government debt without treating each contract as a security future.
The current framework covers debt from 11 EU member states, as well as governments including Japan and Australia. However, debt issued directly by the European Union remains outside the rule.
The proposed amendment would add EU debt obligations to the definition of designated foreign government securities without changing the conditions already applicable to other governments covered by the rule. That means market participants would still have to satisfy the existing requirements when marketing or trading qualifying EU debt futures in the United States.
CFTC to oversee EU debt futures
If the SEC adopts the amendment, qualifying futures tied to EU debt would not be classified as security futures under the Exchange Act. Instead, they would fall under the CFTC’s exclusive authority under the Commodity Exchange Act. The SEC said the change could provide U.S. market participants with a defined route to access EU debt futures for hedging and risk-management purposes.
Such contracts would still need to satisfy the existing requirements under Rule 3a12-8, including conditions concerning trading on a board of trade and foreign delivery, clearing and offset arrangements.
The proposal therefore does not remove regulatory requirements for these contracts. Rather, it establishes which regulator would have primary and exclusive jurisdiction over qualifying futures.
The distinction between an underlying asset and a derivative based on that asset has also become relevant in U.S. crypto markets. Regulators have been examining jurisdictional questions surrounding derivatives tied to digital assets, including Bitcoin-related contracts.
However, the EU debt proposal represents a separate legal issue. In this case, the SEC is specifically proposing a limited exemption for the underlying EU debt for futures-related purposes while assigning qualifying futures to the CFTC.
SEC expands digital asset rulemaking
The proposal comes as the SEC continues work on several separate initiatives involving digital assets and financial markets. On August 25, the agency sent proposed amendments concerning crypto custody requirements to the White House Office of Management and Budget for review.
The custody project would address how registered investment advisers and investment companies hold client and fund assets, including cryptocurrencies. The full requirements are expected to become public after the White House review and the SEC’s subsequent consideration of the proposal. The SEC has also included crypto offerings, broker-dealer requirements and digital asset market structure among its 2026 regulatory priorities.
On August 18, the agency published its 402-page Regulation Crypto Assets proposal. The proposal includes a startup exemption that would cover up to $5 million over four years and a fundraising exemption of up to $75 million during a rolling 12-month period.
The SEC also proposed a separate safe harbor under which certain tokens could lose their investment-contract status after an issuer permanently stops performing essential managerial activities it had promised to provide.
These initiatives are part of the agency’s broader effort to establish clearer regulatory frameworks for digital assets and other financial products.
60-day comment period ahead
The next step for the EU debt proposal is publication in the Federal Register. Once published, the SEC will accept public comments for 60 days.
The agency has asked market participants to provide feedback on issues including whether the proposed treatment would improve access to EU debt futures, the availability of investor information, potential costs and whether Rule 3a12-8 should eventually cover debt issued by additional governments or institutions.
The proposed amendment will not take effect immediately. It must go through the SEC’s rulemaking process, including consideration of public comments, before any final amendment can be adopted.
For crypto markets, the proposal is relevant mainly as part of the SEC’s broader effort to clarify the boundary between securities regulation and CFTC-regulated derivatives. It does not itself change the regulatory treatment of crypto assets or crypto derivatives.
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