The Commodity Futures Trading Commission said Thursday it will not pursue enforcement against developers of passive trading software for failing to register as introducing brokers, extending a privilege once reserved for a single wallet company to the entire industry. The Market Participants Division issued Staff Letter 26-25, which makes conditional no-action relief broadly available to any provider whose software lets users trade with registered futures commission merchants, introducing brokers and designated contract markets.
The relief applies to software that passes users through to regulated venues without acting like a broker itself. To qualify, the software must not custody assets, generate buy or sell signals, or exercise routing discretion. Providers must meet ten conditions, including maintaining written compliance policies, delivering risk disclosures to users, filing a notice with the division and accepting CFTC enforcement jurisdiction.
From one letter to an industry
The new letter builds on Staff Letter 26-09, issued March 17 to Phantom Technologies, the developer of a self-custodial crypto wallet that wanted to connect its users to derivatives trading. Because only the named beneficiary of a no-action letter may rely on it, Phantom’s relief could not be used by any other firm. The division issued the broader letter after receiving inquiries from other providers and their counsel, and said it considers equivalent relief warranted for all similarly situated “Passive Software Providers.”
The practical effect is that wallets, DeFi interfaces and other non-custodial apps can offer access to regulated derivatives, including perpetual contracts and prediction markets, without becoming CFTC-regulated introducing brokers themselves. Bloomberg reported that the change will expand crypto and prediction market trading through online platforms. Phantom, which has a partnership with prediction market platform Kalshi, provides trading access to more than 20 million wallet users.
Phantom co-founder and chief executive Brandon Millman called the extension a win for the industry. “In March, Phantom became the first passive software provider to receive no-action relief from the CFTC,” he wrote on X. “Now the CFTC has opened that same path to other software providers, and that’s a win for the whole industry. This is how it should work: software built to protect consumers, paired with regulated partners, giving more people safe access to the financial services they want.”
Regulators move after the CLARITY setback
The letter landed hours after the SEC approved its own “innovation exemption” for tokenized stock trading, and two days after the Senate failed to advance the Digital Asset Market Clarity Act in a 49-50 procedural vote. CFTC Chairman Michael Selig signaled the pace would continue. “The CFTC is locked in and ready to ship its rules for the new frontier of finance,” he posted on X.
Consensys, the company behind the MetaMask wallet, had asked the CFTC in an April comment letter to convert the Phantom relief into a general rule establishing that non-custodial wallet interfaces are not introducing brokers under certain conditions. MetaMask Predict, launched in December, offers users outside the United States access to prediction market trading through direct wallet integration. Thursday’s letter delivers much of what that comment requested, though as staff relief rather than a rule.
The push for broader protection did not come only from one company. Phantom and the Hyperliquid Policy Center filed a joint request in July asking the CFTC to shield non-custodial wallet providers from introducing-broker requirements. The division’s letter answers that request directly, applying the same framework to any provider that meets the ten conditions.
The limits of no-action
No-action positions are narrower than rules. The letter binds only the issuing division, not the full commission, and it lasts until the effective date of a commission rulemaking or guidance addressing the registration requirement for software developers. A change in the commission’s composition or policy direction could see it withdrawn. Chairman Selig said in May he intended to turn the Phantom position into a formal rule, but no follow-up steps have been announced.
The relief also covers only the provision and marketing of software that facilitates trading with registered intermediaries. It does not shield providers from other obligations under the Commodity Exchange Act, and it does not address questions about non-derivatives software, which analysts at TFTC argued may still matter in future enforcement theories.
For wallet users, the change is mostly invisible at first. The software itself works the same way. What changes is the legal posture of the company behind it, which no longer has to weigh whether connecting a self-custody wallet to a registered derivatives venue could itself be treated as unregistered brokerage activity. That question had kept several wallets from adding trading features at all, and others confined them to offshore versions.
For prediction market platforms, the letter widens the funnel. Kalshi and Polymarket both operate as designated contract markets under CFTC oversight, and both have pushed distribution through third-party apps. A wallet that embeds event contract trading no longer needs its own broker registration to do so, provided it stays passive. The division’s letter states the relief covers software that merely assists users in trading with registered intermediaries, and does not extend to platforms that solicit orders, set prices or hold funds.
Enforcement risk has not disappeared. The letter states the division will not recommend that the commission commence an enforcement action against a qualifying provider for failure to register as an introducing broker or an associated person of one, in relation to their provision and marketing of the software. Firms that want the protection must file a notice agreeing to the conditions and consenting to the commission’s jurisdiction to investigate and take enforcement action for violations connected to the covered activities. A provider that starts custodying assets or steering orders loses the shield.
The letter is effective immediately and available on the CFTC’s website alongside the press release.