CFTC Gives Passive Crypto Software Providers No-Action Relief for Regulated Derivatives Access

The Commodity Futures Trading Commission’s Market Participants Division on September 17 issued a broadly available no-action position for passive software providers that connect users with regulated derivatives markets. The move shifts the agency’s approach beyond relief for a single company and sets conditions under which qualifying providers and their personnel will not face a staff recommendation for enforcement over introducing broker registration.

CFTC Letter 26-25 applies to providers that meet its specified conditions and to relevant personnel. The position addresses whether staff would recommend enforcement for failing to register as introducing brokers or associated persons, but does not unconditionally exempt them from the underlying registration framework.

Letter 26-25 broadens relief beyond a single provider

The September action was issued as a generally available position rather than relief confined to one named business, according to the CFTC’s announcement. That structure gives passive software providers a framework for assessing whether their own products and conduct fall within the letter’s scope.

The practical issue is the line between providing software and acting in the role of an intermediary in derivatives trading. Under the letter, a provider that satisfies the conditions can offer a qualifying interface without staff recommending enforcement based on a failure to register as an introducing broker. The same position extends to relevant associated persons, subject to the letter’s conditions.

Its breadth does not remove the need to meet those conditions. The CFTC framed the relief around a passive provider model, with the customer relationship and the regulated trading venue remaining central to the arrangement.

Passive interfaces can connect users to regulated derivatives venues

CFTC Letter 26-25 addresses passive software that displays market data and user positions and transmits orders to registered futures commission merchants, introducing brokers and designated contract markets, including in connection with event contracts, perpetual contracts and other regulated derivatives.

The relief is built around a direct relationship between the user and the regulated entity: users must remain its customers or members. It therefore describes an interface connecting users to regulated counterparties or venues, not a separate unregulated trading channel, while the provider remains subject to CFTC staff’s conditions.

The scope is more specific than a general statement about crypto-wallet functionality. The CFTC’s model keeps the customer relationship and regulated trading venue central to the arrangement.

Non-custodial and non-discretionary boundaries

The letter’s conditions require users to remain direct customers or members of the relevant regulated entity, rather than customers of the software provider in the regulated derivatives relationship.

Providers cannot take custody of user assets. They also cannot generate express buy or sell signals, a restriction that separates the permitted display of market information from explicit directional prompts to trade.

Control over how an order reaches or is carried out at a venue is similarly outside the passive model. The provider cannot exercise discretion over order routing or execution. Taken together, those requirements draw the operational boundary for the no-action position: software can display information and transmit an order directly, but cannot assume custody, offer express trading signals or make discretionary choices about the order.

The Phantom wallet precedent

The broadly available letter follows an earlier company-specific position involving Phantom Technologies. On March 17, the CFTC granted Phantom no-action relief relating to its self-custodial wallet software; The Block reported that the earlier relief allowed a passive interface to connect users with regulated derivatives venues without broker registration.

Letter 26-25 expands that approach from Phantom’s individual circumstances to qualifying passive software providers more broadly. The new framework retains the same core dividing lines: customers or members deal directly with regulated entities, while the software provider stays non-custodial and does not control routing or execution.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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