In brief
- The CFTC issued a no-action letter for passive software providers.
- The letter covers software that gives users access to event contracts, perpetual contracts, and other regulated derivatives.
- The position extends earlier Phantom relief to other providers that meet the agencys conditions.
Crypto apps that want to offer access to regulated derivatives markets got new guidance Thursday from the Commodity Futures Trading Commission.
In the no-action letter, the agencys Market Participants Division said passive software providers can avoid registering as introducing brokers if they limit their role to front-end software and meet a list of conditions.
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That could matter for wallet developers and trading apps because broker registration can bring significant compliance requirements. The CFTC letter gives them a path to connect users to registered derivatives markets without acting as the intermediary handling the trade.
“The Division believes that a no-action position for all [passive software providers] on substantially the same terms as that provided to the software developer in Letter 26-09 is warranted,” the CFTC letter said.
The letter covers software that lets users view market data, product offerings, and position information, and submit orders for CFTC-regulated derivatives, including event contracts and perpetual contracts, directly to registered entities. It extends relief first granted in March to Phantom Technologies, whose self-custody wallet was cleared to connect users to regulated derivatives markets without registering as a broker.
Under Thursday‘s letter, staff will not recommend enforcement against passive software providers, or their relevant personnel, for failing to register as introducing brokers or associated persons if they stay within the covered activities and meet the letter’s conditions. Those conditions include user disclosures about relationships with registered entities, conflicts and fees; marketing policies; recordkeeping; insolvency or bankruptcy notices; and a filing agreeing to the terms.
Industry advocates framed the CFTC letter as providing needed clarity for software developers building tools that connect users to regulated derivatives markets.
“Clarity from the CFTC!” Digital Chamber CEO Cody Carbone wrote on X. “Software providers that build tools connecting users to registered FCMs/DCMs no longer have to register as brokers just for building the interface. This removes a major regulatory ambiguity that's chilled software innovation in derivatives markets.”
That sentiment was echoed by Blockchain Association CEO Summer Mersinger, who said the CFTC staff action provides “important clarity.”
“By extending its previous no-action relief to similarly situated passive software providers, the CFTCs Market Participants Division is taking a more functional approach to regulation—one that looks at what a technology provider actually does rather than treating software itself as a traditional financial intermediary,” Mersinger said.
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The CFTC action came the same day the SEC unveiled an “Innovation Exemption” for tokenized U.S. stocks. Both moves followed the Senates failed vote to advance the Digital Asset Market Clarity Act, which would have created a federal market-structure framework for digital assets and clarified the roles of the CFTC and SEC.
CFTC Chair Michael Selig directed staff in August to explore crypto market-structure rules if Congress did not pass the Clarity Act, including rules for crypto exchanges, leveraged trading, and on-chain finance protocols. SEC Chair Paul Atkins said in July that the SEC was prepared to write crypto rules if the legislation stalled.
Coinbase Vice Chairman Ryan VanGrack described the SEC and CFTC actions as coming “gradually, then suddenly” after years of regulatory standstill.
After years of regulatory standstill, we just saw meaningful relief in a matter of hours: SEC Innovation Exemption and CFTC No-Action Relief,“ VanGrack wrote on X. ”The tide has officially turned.