CFTC expands regulatory relief for passive trading software providers

The Commodity Futures Trading Commission's Market Participants Division said Thursday it would not recommend enforcement against certain "passive software" providers that connect end users to CFTC-registered firms and exchanges if those providers meet prescribed limits on their role. Under the no-action position, qualifying software makers and their personnel would not be required to register as introducing brokers or associated persons when facilitating access to regulated derivatives venues. The agency framed the relief around conditions that restrict the provider's involvement in client transactions, notably prohibitions on exercising discretion over users' orders. The change could make it simpler for non-custodial crypto wallets and other applications to offer routes into regulated derivatives markets — including perpetual contracts and prediction markets — without themselves becoming introducing brokers under CFTC rules. This action builds on a March letter that granted similar treatment to Phantom Technologies for its self-custodial wallet software, which was allowed, subject to conditions, to connect users with registered futures brokers and exchanges without registering as an introducing broker. Industry groups and firms, including Phantom and the Hyperliquid Policy Center, had urged the CFTC in July for broader guidance and protections for non-custodial wallet providers and clearer rules for blockchain developers and regulated firms using onchain infrastructure. The CFTC move came two days after the CLARITY Act failed to clear a Senate cloture vote, receiving 49 votes when 60 were required to proceed. In the wake of that setback, CFTC Chair Michael Selig and SEC Chair Paul Atkins publicly said their agencies would continue to pursue regulatory action under existing authority. The SEC simultaneously approved a temporary exemption to let qualifying platforms facilitate limited onchain trading of tokenized U.S. stocks through permissioned automated market makers and liquidity pools.