The Commodity Futures Trading Commission’s (CFTC) staff on Thursday broadened no-action relief to providers of passive trading software, including platforms that can facilitate crypto-derivatives transactions through self-custodial wallets.
The CFTC’s Market Participants Division said it would not recommend enforcement against eligible software providers for failing to register as introducing brokers, or against relevant personnel for failing to register as associated persons of an introducing broker. The relief applies to specified activities involving registered futures commission merchants, introducing brokers and designated contract markets.
The position, issued in CFTC Staff Letter 26-25, expands on relief the division granted to Phantom Technologies in March. Unlike the earlier letter, which applied only to Phantom, the new position is broadly available to similarly situated passive software providers that meet the stated conditions.
Relief covers software, not custody or order discretion
The CFTC’s position is limited to software that passively enables users to access regulated derivatives markets. Covered providers can develop and distribute front-end interfaces that allow users to view market and position information, review products, and submit orders directly to registered market participants. The software can also be offered through a self-custodial crypto wallet.
The provider cannot exercise discretion over how an order is routed or executed, generate express buy or sell signals, or take custody or control of user assets.
Users must transact through a designated contract market directly or through a registered FCM or introducing broker. Funds or other property securing their derivatives positions must remain in custody with the applicable clearing structure rather than with the software provider.
Providers can market specific trading access
The relief is broader than a narrow technology exemption. Eligible providers can market their software and their relationships with registered market participants, including promoting the availability of particular derivatives contracts. They can also introduce users to specific FCMs, IBs or DCMs.
However, users must remain able to access those registered entities without going through the software provider. Providers may also receive compensation from registered counterparties and charge users transaction-based fees, provided the arrangements comply with the conditions of the staff position.
That distinction is important because CFTC rules can treat activities beyond the literal acceptance of an order as solicitation that requires introducing-broker registration.
Ten conditions govern the relief
The no-action position is subject to a set of conditions covering the provider, its personnel, and its relationships with registered entities.
Among other requirements, providers must:
- Ensure the provider, principals, and relevant personnel are not subject to statutory disqualification.
- Disclose relationships with registered counterparties and potential conflicts, including fees.
- Provide applicable risk disclosures and retain evidence that users acknowledged them.
- Ensure users are direct members of a DCM or customers of a registered FCM or IB.
- Maintain policies governing communications and marketing.
- Avoid promotional practices that would require National Futures Association pre-approval if the provider were registered as an IB.
- Enter written agreements with each registered entity covering joint and several liability for violations connected with the covered activities.
- Maintain records consistent with CFTC requirements.
- Notify the CFTC of insolvency or bankruptcy proceedings.
- File a notice agreeing to the conditions and submitting to the agency’s jurisdiction.
The relief applies only to the activities and circumstances described in the letter.
CFTC builds on March Phantom relief
The new position follows Staff Letter 26-09, issued March 17 to Phantom Technologies.
That letter addressed a self-custodial crypto wallet provider seeking to offer software that allowed users to trade Commission-regulated derivatives through registered intermediaries and exchanges. CFTC staff concluded that, subject to conditions, it would not recommend enforcement for failure to register as an IB or for relevant personnel to register as associated persons.
The March letter was limited to Phantom under the CFTC’s rules governing no-action positions. The agency said it subsequently received inquiries from other passive software providers seeking comparable treatment.
Staff Letter 26-25 responds to those requests by extending substantially similar relief to the broader category of eligible providers.
Relief is not a CFTC rule
The position comes from the Market Participants Division and does not represent a binding rule adopted by the full commission.
The letter says the position remains subject to modification, suspension, or termination by the division. It would also end if the CFTC adopts a rule or guidance addressing how introducing-broker registration applies to software developers.
The distinction leaves the underlying registration question unresolved through formal rulemaking. For now, the staff position provides a path for qualifying software providers to offer the specified functionality without registering as introducing brokers.
Move follows Senate CLARITY Act setback
The broader relief arrives two days after the Senate failed to advance the Digital Asset Market CLARITY Act.
The Senate voted 49-50 on September 15 against invoking cloture on the motion to proceed to H.R. 3633, falling short of the 60 votes required under Senate Rule XXII.
CFTC Chairman Michael Selig said after the vote that the agency would use its existing statutory authority to pursue crypto-market rules, while reiterating his view that legislation remains important.
The software relief does not depend on passage of the CLARITY Act. Instead, it uses existing CFTC authority to address the registration question for a specific category of technology providers.
For crypto trading platforms and wallet developers, the immediate change is therefore narrower than a new market-structure regime: qualifying software can facilitate access to regulated derivatives markets under defined conditions without automatically triggering introducing-broker registration.
Also Read: Crypto.com Files With SEC to Trade Perpetual Futures on Individual Stocks
