Passive Crypto Software Gains Broader CFTC Registration Relief

The CFTC‘s Market Participants Division has extended no-action relief to any qualifying provider of passive crypto-trading software, sparing eligible firms from registering as introducing brokers. The relief also covers their personnel, who no longer need to register as associated persons of an introducing broker, provided the software stays non-custodial and non-discretionary.

CFTC Staff Letter 26-25 expands relief for passive crypto software

The relief is set out in CFTC Staff Letter 26-25, signed by division director DJ Hennes. Division staff said they will not recommend enforcement against eligible software providers that fail to register as introducing brokers, nor against their personnel for not registering as associated persons of an introducing broker.

The same treatment was given to a single company, Phantom Technologies, in March, but that earlier position bound only Phantom. Other developers seeking the same cover had to file their own individual requests. Staff Letter 26-25 removes that limit, offering relief on substantially the same terms to any passive software provider that meets the conditions, a shift that lands roughly two days after the Senate blocked the CLARITY Act.

What qualifies as software rather than a broker

The relief only reaches software that passively connects users to regulated markets. A provider can build and distribute interfaces that let users check market data, review products, and send orders straight to registered venues, and it can bundle that functionality into a self-custodial wallet.

The cover disappears once brokerage enters the picture. Under the conditions, a provider cannot decide how an order is routed or executed, cannot issue express buy or sell signals, and cannot take custody of user funds – money backing a derivatives position has to sit with the clearing structure, not the software maker.

Users must also be able to reach a designated contract market, futures commission merchant, or introducing broker without passing through the software at all. Within those limits, eligible providers can still advertise their software and ties to registered firms, promote specific derivatives contracts, steer users toward particular venues, collect fees from registered counterparties, and charge users per transaction.

Ten conditions and the limits of staff-level relief

The staff letter details ten covered activities and their limits. Among them, a provider and its principal cannot be subject to statutory disqualification, and providers have to disclose conflicts and fees while keeping evidence that users acknowledged risk disclosures.

Providers must also sign written agreements with each registered partner covering joint and several liability, notify the CFTC of any insolvency, and file a notice accepting the agency’s jurisdiction. That last requirement matters: this is staff-level cover, not a Commission rule, and the Market Participants Division was explicit that its position does “not necessarily represent the position or view of the Commission or of any other office or division of the Commission.”

The division retains discretion to modify, suspend, or end the relief at any point. It would also lapse automatically if the CFTC ever adopts formal guidance on how broker registration applies to software developers – meaning the current framework is a bridge, not a destination.

A workaround while CLARITY remains stalled

The staff letter follows the US Senate’s rejection of cloture on the Digital Asset Market CLARITY Act by a vote of 49 to 50, eleven short of the 60 needed to advance. Four Republicans voted no, and no Democrat voted in favor.

Reacting to the vote, CFTC Chair Michael Selig called the outcome unfortunate, according to his statement, and said Americans deserve regulatory clarity, legal certainty, and consumer protections in crypto asset markets. He indicated the CFTC intends to keep working with the administration’s crypto market-structure goals using its existing statutory authorities rather than waiting on Congress.

The SEC moved on the same day, releasing a long-awaited innovation exemption tied to blockchain-based regulatory modernization. Uniswap founder Hayden Adams pointed on X to an accompanying comment letter from SEC Commissioner Hester Peirce, who suggested that truly decentralized systems driven by autonomous software do not need an exemption in the first place – a distinction that underscores how both agencies are drawing separate lines around where software ends and regulated intermediation begins.

What comes next for crypto software providers

Selig said in May at Consensus Miami that he wanted to codify the Phantom position into formal rules “very soon,” describing the process as a “crawl, walk, run” sequence. As of this letter’s publication, that rulemaking has not arrived, leaving the broadened staff relief as the operative framework for now.

That framework remains conditional in every sense: modifiable by the division, dependent on ten compliance conditions, and set to expire the moment the Commission issues formal guidance on broker registration for software developers. With the CLARITY Act’s path through the Senate still unresolved, this staff letter is the clearest signal yet that the CFTC intends to keep building its crypto framework letter by letter rather than waiting for legislation.

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