CFTC Staff Letter 26-07 No-Action Position Regarding Backup Facility Requirements for Coinbase Derivatives LLC

CFTC Letter No. 26-07 No-Action March 03, 2025 Division of Amanda L. Olear Market Oversight Acting Director March 3, 2025 Ms. Jane Downey Chief Regulatory Officer Coinbase Derivatives, LLC 20 N. Wacker Dr., Suite 3000 Chicago, IL 60606 Re: No-Action Position Regarding Systems Safeguards Issue
I. Introduction
The Division of Market Oversight (“Division”) of the Commodity Futures Trading Commission (“Commission”) is issuing this letter in response to a no-action letter request from Coinbase Derivatives, LLC (“COIN”), a designated contract market (“DCM”), 1 submitted pursuant to Commission regulation 140.99. COIN seeks a no-action position with respect to certain requirements under Commodity Exchange Act (“CEA”) Section 5(d)(20), 2 and Commission regulation 38.1051(c) 3 addressing backup facilities.
II. Background
Pursuant to CEA Section 5(d)(20) and Commission regulation 38.1051(c), COIN is, among other things, required to maintain backup facilities sufficient to enable timely recovery and resumption of its operations and resumption of its ongoing fulfillment of its responsibilities and obligations following any disruption of its operations. COIN has maintained a primary data center and a backup data center pursuant to those obligations since its designation. In late January 2025, COIN was notified that it needed to vacate its primary data center location and would no longer able to utilize its primary data center’s facilities beginning on or around February 7, 2025. COIN has identified a new primary data center; however, it is not possible to 1 COIN is a Delaware limited liability company that is a subsidiary of Coinbase Global, Inc., a global cryptocurrency and digital assets financial technology company. On November 23, 2020, LMX Labs LLC (“LMX”) was designated as a DCM. Coinbase Global, Inc. subsequently acquired LMX on January 12, 2022, and later changed its legal name to Coinbase Derivatives, LLC. 2 7 U.S.C. 7(d)(20). 3 17 CFR 38.1051(c). COMMODITY FUTURES TRADING COMMISSION Three Lafayette Centre 1155 21st Street, NW, Washington, DC 20581 Telephone: (202) 418-5000 Facsimile: (202) 418-5521 www.cftc.gov

immediately move its operations to the new primary data center. In addition to establishing network infrastructure, COIN requires time to validate that the equipment in the new primary data center is fully operational before it can be enabled for production use. During this period, COIN is utilizing its current backup data center for data operations as it transitions primary data centers. While COIN will not have a dedicated data center available for use as a backup data center during this period, COIN has represented that it will execute a full failover to Amazon Web Services (“AWS”) 4 to ensure continuity of operations, should the primary data center go down.
III. No-Action Position Requested
By letter dated February 21, 2025, COIN requested a temporary no-action position with respect to the requirements of CEA Section 5(d)(20) and Commission regulation 38.1051(c) addressing backup facilities, in connection with COIN’s use of its backup data center for a limited period as it reestablishes its primary data center at a different location. COIN has represented that its anticipated use of its backup data center for data operations should last until no later than March 31, 2025, after which the backup data center will continue to be used as a backup facility pursuant to CEA Section 5(d)(20) and Commission regulation 38.1051(c). COIN has represented that, if its migration is able to be completed before March 31, 2025, COIN will notify the Division in writing.
IV. No-Action Position
Based on the representations made by COIN to the Division as discussed above, the Division has determined to extend a temporary no-action position to COIN. In connection with COIN’s use of its backup data center for the limited period of time during which it reestablishes its primary data center at a different location, the Division will not recommend that the Commission take enforcement action against COIN with respect to its obligation to maintain a backup facility under CEA Section 5(d)(20) and Commission regulation 38.1501(c), provided that COIN completes its migration to and validates the functionality of its new primary data center by no later than March 31, 2025. This no-action position will expire on the earlier of: (i) March 31, 2025, or (ii) COIN’s written notice to the Division that it has completed its migration to and validated the functionality of its new primary data center.
V. Conclusion
This letter, and the positions taken herein, represent only the views of the Division, and do not necessarily represent the positions or views of the Commission or of any other office or division of the Commission. This letter and the no-action positions taken herein are not binding on the Commission. 5 The positions provided in this letter do not excuse persons relying on it from compliance with any other applicable requirements contained in the CEA, Commission regulations, or any other applicable laws (i.e., securities laws). Further, this letter, and the positions 4 AWS is a cloud-based service. 5 See 17 C.F.R. § 140.99(a)(2) (“A no-action letter binds only the issuing Division… and not the Commission or other Commission staff.”).

taken herein, are based upon the facts and circumstances presented to Division staff. Any different, changed, or omitted material facts or circumstances might render this letter void. Finally, as with all staff letters, the Division retains the authority to condition further, modify, suspend, terminate, or otherwise restrict the terms provided herein, in its discretion. If you have any questions concerning this correspondence, please contact Rebecca Mersand, Special Counsel, Division of Market Oversight, at (202) 941-8910 or rmersand@cftc.gov. Sincerely,

Amanda L. Olear
Acting Director
Division of Market Oversight