CFTC widens no-action relief for passive trading software providers

CFTC eases registration path for passive trading apps

The US Commodity Futures Trading Commission (CFTC) has expanded regulatory relief for “passive software” providers that connect users to regulated derivatives firms and exchanges.

In a no-action position issued Thursday, the agency’s Market Participants Division said it would not recommend enforcement against qualifying providers or their personnel for failing to register as introducing brokers or associated persons when they help users trade with CFTC-registered firms and exchanges.

According to the agency, the position could make it easier for crypto wallets and other apps to offer access to regulated derivatives, including perpetual contracts and prediction markets, without becoming CFTC-regulated introducing brokers themselves.

Key points from the CFTC notice

• The relief is a no-action position, meaning CFTC staff said they would not recommend enforcement against qualifying providers.
• It covers the failure to register as an introducing broker or an associated person. An introducing broker is a registration category for firms that handle customer business with regulated exchanges.
• Providers must meet conditions that limit their role in transactions, including restrictions on exercising discretion over users’ orders.
• The CFTC said the change could make it easier for wallets and apps to offer regulated derivatives such as perpetual contracts and prediction markets. Perpetual contracts are derivatives that track an asset’s price without a set expiry date.

What the Market Participants Division said

The division said it would not recommend enforcement against qualifying providers or their personnel for not registering when they facilitate trading with CFTC-registered firms and exchanges.

The relief comes with conditions. Providers must limit their role in transactions, and the CFTC singled out restrictions on exercising discretion over users’ orders as one of those conditions.

Relief builds on a March letter for Phantom’s wallet

The new position extends a similar one granted to Phantom Technologies in March for its self-custodial crypto wallet software, meaning software where users hold their own keys.

That earlier letter allowed Phantom, subject to certain conditions, to provide and market software connecting users with registered futures brokers and exchanges without registering as an introducing broker.

In July, Phantom and the Hyperliquid Policy Center pushed for broader protections. They asked the CFTC to shield non-custodial wallet providers from introducing broker requirements and to clarify how existing rules apply to blockchain developers and regulated derivatives firms using onchain infrastructure.

Timing follows the CLARITY Act’s Senate setback

The CFTC move came two days after the CLARITY Act failed to advance in the Senate. A cloture motion received 49 votes, short of the 60 needed to proceed to debate.

After that vote, CFTC Chair Michael Selig and Securities and Exchange Commission Chair Paul Atkins signaled on Wednesday that their agencies would keep moving forward on crypto regulation using their existing authority.

“The CFTC is locked in and ready to ship its rules for the new frontier of finance,” Selig said in a post on X. Atkins said the SEC would act “with or without legislation” to provide regulatory certainty for digital assets.

On Thursday, the agencies began following through. Alongside the CFTC’s no-action position, the SEC approved a temporary exemption allowing qualifying platforms to facilitate limited onchain trading of tokenized US stocks through permissioned automated market makers and liquidity pools.

What is confirmed

• The CFTC’s Market Participants Division issued a no-action position on Thursday.
• Staff said they would not recommend enforcement against qualifying passive software providers or their personnel for failing to register as introducing brokers or associated persons when facilitating trading with CFTC-registered firms and exchanges.
• Providers must meet conditions, including limits on discretion over users’ orders.
• The position extends a March relief letter for Phantom Technologies.
• The CLARITY Act failed to advance in the Senate two days earlier, with a cloture motion drawing 49 votes against the 60 needed.
• The SEC approved a temporary exemption for limited onchain trading of tokenized US stocks on the same day.

What is still unclear

The CFTC notice described the effect on wallets and apps in terms of what “could” happen, so it is not confirmed that specific products will launch or expand as a result. The reporting also does not list which providers qualify or detail the full set of conditions beyond the restriction on exercising discretion over user orders.

Why the change matters for wallets and apps

Under the relief, software that simply passes user orders to CFTC-registered firms and exchanges may avoid having to register as an introducing broker itself. That registration step is what the CFTC relief addresses. The agency frames the change as a way to make it easier for wallets and other apps to offer access to regulated derivatives offerings.

Sources

• Cointelegraph