CFTC Does Not Enforce Against Passive Software Providers for Not Registering as Introducing Brokers
The U.S. Commodity Futures Trading Commission's Market Participants Division issued a no-action position: under certain conditions, it does not recommend enforcement actions against passive software providers and their related personnel for not registering as introducing brokers or associated persons.
The position only covers the provision and marketing of such software when connecting users to registered futures commission merchants, introducing brokers, and designated contract markets. Staff letter 26-25, signed by the division head, extends the March letter 26-09 to Phantom Technologies to be generally applicable to qualified entities, noting it is not limited to crypto-related software.
Covered activities include developing and distributing front-end interfaces for users to view market data and positions, browse products, and submit regulated derivatives orders directly to registered entities, including event contracts and perpetual contracts; providers do not actively intervene in specific orders, and the software remains on user devices. User assets must not be held in custody. Conditions such as disclosure and policy procedures must be met.
This move aligns with the SEC's innovation exemption issued on the same day: the futures side opens pathways for software connecting to licensed venues, while the securities side provides a temporary opening for tokenized stock venues. Chairman Selig continues to emphasize advancing access to crypto and prediction markets using existing powers after the market structure bill failed to pass the Senate.
Mechanically, this retracts registration obligations from the interface level back to the licensed intermediary level. Beneficiaries are wallets and market data front-ends, which can direct users to FCMs and contract markets without first obtaining introducing broker licenses; the pressured parties are traditional introducing brokers that rely on licensing barriers to block front-end diversion. Funds and orders remain within the registered clearing chain, with the change being that customer acquisition interfaces do not need to hold licenses themselves.
Source: Public Information
ABAB AI Insight
Once the definition of introducing brokers is tied to "facilitating account opening and order placement," all wallets and aggregation front-ends could be classified as intermediaries. Phantom received a case letter first because self-custody wallets need to access derivatives without touching client funds. After generalization, enforcement defaults from "if you create an interface, you must register" to "if you do not hold assets, do not have discretion, and only connect to licensed counterparties, you can observe." The conditions list makes the term passive an auditable clause rather than just a slogan.
The capital path separates front-end customer acquisition from back-end clearing. Software companies sell distribution and experience, FCMs sell margin and compliance, and contract markets sell matching. Prediction markets and crypto perpetuals can thus thrive on existing designated contract market accounts without needing to establish a new broker for every wallet. In contrast to the SEC excluding unlicensed peer-to-peer from exemptions, the CFTC regulates commodity derivatives, hence the opening is on "connecting to registered persons."
This is analogous to the SEC's long-standing no-action letters for broker-tech companies that only provide trading interfaces, and the argument that open-source developers should not automatically become exchanges: the tool layer and intermediary layer are being redefined. The industry is in a phase of interface commoditization and license centralization.
Structural judgments belong to regulatory changes. The mechanism is that registration enforcement follows custody and order decision rights, not code distribution; as long as passive software retains decision rights with users and keeps accounts at registered entities, it does not enter the introducing broker licensing tax. Whoever controls the FCM and contract market entry receives the order flow sent by the front end.
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If you do not touch assets and do not alter orders, the interface does not need to first become a broker.
Once the case letter is generalized, the tool layer is truly separated from licensing.
Regulatory openings are directed at connecting to licensed counterparties, not at ungoverned protocols.