Crypto leverage and derivatives: what's allowed in the US, UK and Canada

Leverage is the part of crypto trading where people lose money fastest. It lets you open a position bigger than the money you put down, so gains and losses are both multiplied. Regulators in the US, the UK and Canada treat it very differently, from a full retail ban to a regulated futures market.

This guide explains how leveraged crypto products work, shows the maths, and sets out the rules in each country.

How leverage works

With leverage, you deposit margin (your own money) and the platform lets you hold a position several times larger. The ratio is the leverage: £1,000 of margin controlling a £10,000 position is 10x.

Your profit or loss is calculated on the full position, but it’s taken from your margin:

Price move	Position (10x on 1,000 margin)	Profit or loss	Margin left
+5%	10,000 → 10,500	+500	1,500 (+50%)
−5%	10,000 → 9,500	−500	500 (−50%)
−10%	10,000 → 9,000	−1,000	0 (−100%)

At 10x, a 10% move against you wipes out your margin, before fees. Crypto prices can move 10% in a day, sometimes within hours.

Liquidation

Platforms don’t wait for your margin to reach zero. When your losses eat into your margin past a set level, often called the maintenance margin, the platform asks you to add money or it closes your position automatically. This is liquidation, and it usually happens before a 100% loss, at the worst point of the move. In a fast market, the close can happen at a worse price than the liquidation level.

The CFTC describes the same mechanism for margined futures. When markets go against customers’ positions, they’re forced to refill their margin accounts or close their positions, and in the end they may lose more than their initial investment.

The main leveraged crypto products

• Futures: contracts to buy or sell an asset at a set price on a future date, traded with margin.
• Perpetual futures (“perps”): in the CFTC’s description, a perpetual contract has no fixed expiration date. Instead, the two sides periodically exchange a funding rate payment, designed to keep the contract’s price close to the spot price. Depending on which side you’re on, funding can cost you money at regular intervals for as long as you hold the position, on top of trading fees.
• Options: the right, but not the obligation, to buy or sell at a set price. Buying options limits your loss to what you paid; selling them can expose you to large losses.
• CFDs (contracts for difference): contracts that pay the difference in price between opening and closing, without owning the asset. They’re common in the UK and Europe.
• Margin trading on spot exchanges: borrowing from the platform to buy or sell more crypto than you hold.

United Kingdom: a retail ban on crypto derivatives

The FCA banned the sale, marketing and distribution to all retail consumers of derivatives (CFDs, options and futures) and exchange-traded notes (ETNs) that reference unregulated transferable cryptoassets, by firms acting in or from the UK. The ban took effect on 6 January 2021.

The FCA’s reasons were that these products can’t be reliably valued by retail consumers because cryptoassets have no reliable basis for valuation; that market abuse and financial crime are prevalent in the secondary market; that price movements are extremely volatile; that retail consumers’ understanding of cryptoassets is inadequate; and that retail consumers have no legitimate investment need for these products.

What changed in 2025: from 8 October 2025, retail consumers can buy crypto ETNs again, as long as they’re traded on an FCA-approved UK investment exchange. Financial promotion rules and the Consumer Duty apply, and there’s no FSCS protection. The FCA said its ban on retail access to crypto derivatives remains in place.

So for a UK retail customer:

• Crypto CFDs, futures and options: not allowed to be sold to you by firms acting in or from the UK.
• Crypto ETNs on a UK recognized investment exchange: allowed since 8 October 2025, without FSCS protection.

If a platform offers you leveraged crypto derivatives as a UK retail customer, it isn’t following the UK rules, and you won’t have UK protections if something goes wrong.

Canada: no leverage from platforms seeking registration

In February 2023, the Canadian Securities Administrators published enhanced commitments for crypto trading platforms that continue operating in Canada while they pursue registration. These pre-registration undertakings include stronger rules on custody and segregation of clients’ crypto and a prohibition on offering margin, credit or other forms of leverage to any Canadian client.

The CSA said that platforms unable or unwilling to give the undertaking should off-board Canadian users and stop them from accessing their products. It also reminded Canadians that crypto trading is generally speculative and may not be suitable for many investors, particularly retail investors.

In practice, a platform offering you leveraged crypto trading as a Canadian resident is a warning sign. Check the CSA’s lists of authorized and banned platforms first: see how to check if a crypto exchange is registered.

United States: CFTC-regulated futures and options

In the US, crypto futures and options fall under the Commodity Futures Trading Commission (CFTC). The CFTC’s advice is direct: if someone tries to sell you options or futures on virtual currencies, including bitcoin, verify that they’re registered with the CFTC.

The CFTC’s customer advisory also makes three points worth remembering:

• Leveraged accounts amplify the risks of trading.
• Profits and losses from crypto’s volatility are amplified in margined futures contracts.
• Most crypto cash markets aren’t regulated or supervised by a government agency and may lack critical safeguards, including customer protections.

In April 2025, CFTC staff asked for public comment on the potential uses, benefits and risks of perpetual contracts in the markets it regulates, including risks to market integrity, customer protection and retail trading. Rules in this area are developing, so check the CFTC’s current position before trading any product described as a US-regulated perpetual.

Before you trade with leverage

1. Do the maths first. Divide 100% by your leverage: that’s roughly the price move against you that wipes out your margin (10% at 10x, 5% at 20x, 1% at 100x).
2. Check the platform’s registration in your country, and whether it’s allowed to offer you leverage at all.
3. Understand liquidation: at what price your position closes automatically, and whether you can lose more than your margin.
4. Count all the costs: trading fees, funding payments on perpetuals, and spreads.
5. Know the tax: gains and losses on derivatives can be taxed differently from spot crypto. Check the tax guidance for your country, or ask a professional.

Leverage turns a volatile asset into a very volatile one. Regulators in all three countries have looked at retail losses on these products and responded with bans, limits or warnings. That alone is worth taking seriously.