Summary
- The CFTC has issued a no-action letter for passive software providers.
- This letter applies to software that allows access to event contracts, perpetual contracts, and other regulated derivatives.
- The guidance expands previous relief granted to Phantom Technologies to additional providers that comply with the agency's requirements.
On Thursday, the Commodity Futures Trading Commission (CFTC) offered new guidance for cryptocurrency applications aiming to provide access to regulated derivatives markets.
The no-action letter from the CFTC's Market Participants Division indicates that passive software providers can sidestep the need to register as introducing brokers if they restrict their functions to front-end software and adhere to specified conditions.
Myriad: What will be Solana's next move? Make your prediction here.This guidance is significant for wallet developers and trading applications, as broker registration entails substantial compliance obligations. The CFTC's letter provides a pathway for these developers to link users to registered derivatives markets without acting as the intermediary for trades.
The CFTC letter stated, “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 letter encompasses software that enables users to access market data, product options, and position details, along with submitting orders for CFTC-regulated derivatives, such as event contracts and perpetual contracts, directly to registered entities. It extends the relief initially granted to Phantom Technologies, whose self-custody wallet was authorized to connect users to regulated derivatives markets without needing to register as a broker.
According to the letter issued on Thursday, the CFTC staff will not pursue enforcement actions against passive software providers or their relevant personnel for not registering as introducing brokers or associated persons, provided they operate within the defined activities and meet the stipulated conditions. These conditions include user disclosures regarding relationships with registered entities, potential conflicts and fees; marketing practices; recordkeeping; notifications regarding insolvency or bankruptcy; and an agreement to the terms.
Advocates in the industry view the CFTC's letter as a vital clarification for software developers creating tools that connect users to regulated derivatives markets.
“Clarity from the CFTC!” Digital Chamber CEO Cody Carbone commented on X. “Software providers that develop tools linking users to registered FCMs/DCMs will no longer need to register as brokers just to create the interface. This alleviates a significant regulatory uncertainty that has hindered software innovation in the derivatives sector.”
This perspective was shared by Blockchain Association CEO Summer Mersinger, who remarked that the CFTC staff's action delivers “important clarity.”
“By extending its earlier no-action relief to similarly positioned passive software providers, the CFTC’s Market Participants Division is adopting a more functional regulatory approach—one that assesses what a technology provider actually does instead of categorizing software as a traditional financial intermediary,” Mersinger stated.
The CFTC's decision coincided with the SEC's announcement of an “Innovation Exemption” for tokenized U.S. stocks. Both developments followed the Senate's unsuccessful attempt to advance the Digital Asset Market Clarity Act, which sought to establish a federal market structure framework for digital assets and clarify the roles of the CFTC and SEC.
CFTC Chair Michael Selig instructed staff in August to explore crypto market structure regulations if Congress did not pass the Clarity Act, including rules concerning crypto exchanges, leveraged trading, and on-chain finance protocols. SEC Chair Paul Atkins indicated in July that the SEC was prepared to develop crypto regulations if the legislation faltered.
Coinbase Vice Chairman Ryan VanGrack described the actions of the SEC and CFTC as occurring “gradually, then suddenly” after a prolonged period of regulatory inertia.
“After years of regulatory standstill, we just witnessed significant relief in a matter of hours: SEC Innovation Exemption and CFTC No-Action Relief,” VanGrack remarked on X. “The tide has officially turned.”