CFTC Opens Broker Relief for Passive Crypto Software

Key Insights

• CFTC staff gave qualifying passive software providers conditional relief from introducing broker registration.
• Providers can qualify when users retain direct relationships with CFTC-regulated firms and venues.
• The action followed the SEC’s separate Sept. 17 exemption for certain tokenized stock trading venues.

The Commodity Futures Trading Commission opened a broader regulatory path for passive software providers connecting users with regulated derivatives markets.

The agency’s Market Participants Division issued Staff Letter 26-25 on Sept. 17. The letter states that staff will not recommend enforcement against qualifying providers or relevant personnel for failing to register as introducing brokers or associated persons.

The relief remains conditional and applies only to activities described in the staff letter.

Crypto Regulation: CFTC Opens Passive Software Path

The CFTC said the no-action position applies to providers that offer and market passive software used to facilitate trading with registered futures commission merchants, introducing brokers and designated contract markets.

That means developers can provide interfaces allowing users to access regulated derivatives markets without automatically triggering introducing broker registration.

The relief is not a blanket exemption from the Commodity Exchange Act.

It is a staff-level no-action position, meaning the Market Participants Division agrees not to recommend enforcement when providers remain within the specified conditions.

The position can also be superseded by later Commission rules, guidance or other regulatory action.

Relief Expands Earlier Phantom Framework

Staff Letter 26-25 builds on an earlier CFTC position issued in March.

Staff Letter 26-09 granted similar relief to Phantom Technologies for self-custodial wallet software connecting users with registered derivatives markets.

That March letter applied specifically to Phantom.

The Sept. 17 action makes substantially similar treatment available more broadly to passive software providers that satisfy the required conditions.

The CFTC described the new position as “broadly available” rather than limited to a single requester.

Passive Software Cannot Become a Broker

The distinction between passive software and financial intermediation remains central to the relief.

Qualifying software can present market information and allow users to submit orders to registered firms and venues.

However, providers cannot move beyond that passive role without risking loss of the no-action protection.

Reporting on Staff Letter 26-25 indicates providers cannot take custody or control of assets supporting derivatives positions.

They also cannot generate explicit buy or sell signals or exercise discretion over how customer orders are routed or executed.

Those restrictions keep responsibility for accounts, execution and regulated trading activity with registered market participants.

Users Must Retain Direct Access to Registered Firms

Another condition concerns the relationship between users and regulated entities.

Users must remain direct customers or members of the futures commission merchant, introducing broker or designated contract market handling their trades.

They cannot become customers of the software provider instead.

Users must also retain the ability to access the registered entity without depending entirely on the passive software interface.

That distinction reduces the likelihood that the developer itself functions as an intermediary between the customer and regulated market.

Ten Conditions Limit CFTC Relief

Staff Letter 26-25 contains 10 conditions governing reliance on the no-action position.

Among them, covered providers and personnel cannot be subject to applicable statutory disqualification.

Providers must also file a notice with the CFTC’s Market Participants Division before relying on the relief.

That filing requires the provider to state that it will comply with the conditions and accept CFTC jurisdiction relating to covered activities.

The framework also places limits on marketing and promotional activity.

A provider cannot engage in certain promotional conduct that would require National Futures Association approval if it were operating as a registered introducing broker.

The restrictions are designed to keep passive software providers from performing functions normally associated with registered intermediaries.

Crypto Regulation Relief Is Not Crypto-Specific

Although the action is relevant to crypto wallet developers, the staff position is broader than cryptocurrency.

The CFTC describes Staff Letter 26-25 as covering passive software providers generally.

That means other software developers connecting users to CFTC-regulated derivatives markets may also qualify.

Crypto firms are particularly relevant because software wallets and other interfaces increasingly provide access to perpetual futures, event contracts and other derivatives.

Still, Staff Letter 26-25 does not authorize new products or create new markets.

The underlying derivatives must remain available through firms or venues registered with the CFTC.

CFTC Keeps Fraud and Manipulation Authority

The relief is limited to introducing broker and associated-person registration requirements.

It does not suspend the CFTC’s broader enforcement authority.

Fraud, manipulation, unlawful solicitation and other prohibited conduct remain subject to existing law.

Registered futures commission merchants, introducing brokers and designated contract markets also retain their own regulatory obligations.

A software provider moving outside the passive role described in the letter could lose access to the no-action position.

The framework therefore reduces one registration risk without creating general immunity from CFTC oversight.

SEC Issued Separate Tokenized Stock Relief

The CFTC action came on the same day as a separate securities-market development.

The Securities and Exchange Commission issued its Innovation Exemption on Sept. 17.

That order gives qualifying Tokenized Securities Venues temporary, conditional relief from the Exchange Act definition of an exchange.

The venues can facilitate trading in certain tokenized National Market System stocks through permissioned automated market makers and liquidity pools.

The SEC also granted conditional dealer relief to certain liquidity providers participating in those pools.

Those exemptions expire five years after publication.

The two actions are separate and arise under different statutes, but both show federal regulators using existing authority to accommodate new trading technology.

CLARITY Act Remains Stalled in Senate

The regulatory moves followed the Senate’s failure to advance the CLARITY Act.

On Sept. 15, senators voted 49-50 against invoking cloture on the motion to proceed to H.R. 3633.

The vote fell short of the 60 votes required.

That was a procedural failure rather than final rejection of the legislation.

The bill remains stalled while lawmakers consider whether negotiations can restart.

CFTC Chairman Michael Selig has separately directed staff to explore crypto market-structure rules under existing authority if Congress does not act.

He has also instructed staff to engage with onchain protocol developers on pathways for compliant U.S. activity.

CFTC Builds Regulatory Path Through Existing Authority

Staff Letter 26-25 therefore fits a broader CFTC effort to clarify how developers can connect users with regulated derivatives markets.

The action does not turn passive software companies into unregulated brokers.

Instead, it defines circumstances where CFTC staff will not recommend broker-registration enforcement because the software provider remains outside the core functions of an intermediary.

The next step will depend on whether developers rely on the position and whether the Commission eventually replaces staff-level relief with formal rules or guidance.

For now, qualifying passive software providers have a clearer route to connect users with registered derivatives infrastructure without automatically registering as introducing brokers.

Disclaimer: This article is for informational purposes only and does not constitute legal, financial or investment advice. CFTC no-action positions are conditional staff positions and do not provide blanket exemptions from federal law.