CFTC expands relief for passive wallets linking to derivatives

The Commodity Futures Trading Commission’s Market Participants Division wrote Thursday that it will not recommend enforcement against qualifying “passive software” providers or their personnel for failing to register as introducing brokers or associated persons when the software only connects users to CFTC-registered derivatives firms and exchanges.

The no-action position covers apps such as non-custodial crypto wallets that link users to regulated trading venues for futures, perpetual contracts and prediction markets. The division said providers must meet conditions that limit their role in a transaction, including prohibitions on exercising discretion over users’ orders, no custody of customer funds and connections only to registered brokers and exchanges.

The letter extends a similar no-action stance the division granted in March to Phantom Technologies for its self-custodial wallet software. That earlier letter allowed Phantom, subject to conditions, to provide and market software that connects users with registered futures brokers and exchanges without the wallet maker registering as an introducing broker.

Advocacy groups and companies, including Phantom and the Hyperliquid Policy Center, asked the CFTC in July for broader protections for non-custodial wallet providers and clearer guidance on how existing derivatives rules apply to blockchain developers and regulated firms using on-chain infrastructure. The division’s letter clarifies when software vendors can operate without becoming subject to introducing broker registration.

The division released the letter two days after the CLARITY Act failed to advance in the Senate, where a cloture motion received 49 votes, short of the 60 needed to proceed. After the vote, CFTC Chair Michael Selig posted on X: ‘The CFTC is locked in and ready to ship its rules for the new frontier of finance.’ SEC Chair Paul Atkins wrote on X that the SEC would act ‘with or without legislation’ to provide regulatory certainty for digital assets.

On the same day the SEC approved a temporary exemption that allows qualifying platforms to facilitate limited on-chain trading of tokenized U.S. stocks using permissioned automated market makers and liquidity pools.

The Market Participants Division noted the no-action position does not change statutory registration requirements or create a permanent exemption. The letter communicates staff enforcement intentions for providers that meet the stated conditions; firms relying on the guidance must ensure their software remains passive and non-discretionary to avoid potential enforcement risk.