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The no-action relief confirms that PSPs facilitating access to CFTC-regulated derivatives trading need not register as introducing brokers, provided they satisfy certain conditions.

By Yvette D. Valdez, Douglas K. Yatter, Adam Bruce Fovent, Mia Stefanou, and Deric Behar

Key Points:

  • The Division extended relief previously granted to Phantom, a self-custodial wallet provider, to all passive software providers and expressly confirmed it is not limited to cryptoasset-related software providers.
  • Passive software providers may earn transaction-based compensation through revenue sharing with CFTC-registered entities and through direct fees charged to users, without triggering IB registration.
  • The relief does not extend to unregistered derivatives platforms, and as a result it would not currently be applicable to DeFi derivatives trading or transactions outside currently CFTC-regulated platforms.

On September 17, 2026, the Commodity Futures Trading Commission (CFTC or Commission) Market Participants Division (the Division) issued CFTC Letter No. 26-25, confirming that the Division will not recommend enforcement action against a passive software provider (PSP) for failure to register as an introducing broker (IB),1 or against a PSP’s relevant personnel for failure to register as associated persons (APs),2 in connection with providing passive software that facilitates access to trading in CFTC-regulated derivatives provided certain conditions are met (the PSP Relief).

The PSP Relief builds on relief issued by the Division earlier this year in CFTC Letter No. 26-09 (discussed in our prior Latham blog post), in which the Division confirmed it would not recommend enforcement action against Phantom for failure to register as an IB in connection with its provision of self-custody wallet and front-end interface software through which users could access trading in CFTC-regulated derivatives. However, this relief was issued to Phantom alone as the named recipient.

The PSP Relief extends substantively the same relief from IB and AP registration status to all market participants satisfying the conditions of the relief. Importantly, in doing so, the PSP Relief goes beyond the historical no-action positions of CFTC staff regarding “independent software vendors” more generally in that it confirms the ability of PSPs to receive true transaction-based compensation.

The PSP Relief and Covered Activities

The Division determined that a no-action position was warranted for all PSPs on “substantially the same terms” as that provided to Phantom. In doing so, the Division confirmed that it will not recommend enforcement against a PSP for failure to register as an IB or against any relevant personnel of a PSP for failure to register as an AP of an IB, solely as a result of their engaging in the “Covered Activities.”

As defined in the PSP Relief, Covered Activities encompassed by the relief are as follows:

  • The PSP develops and distributes front-end interface software for users to review market data, aggregate position information, view product offerings, and submit orders for CFTC-regulated derivatives directly to CFTC-regulated designated contract markets, futures commission merchants, or IBs (collectively, Registrants).
  • The PSP’s role must be limited to providing software on the user’s device that enables the user to transmit orders directly to Registrants. The PSP cannot have any affirmative involvement with any particular orders.
  • The PSP will offer this access by contracting with one or more Registrants, who may agree to share relevant revenues with the PSP. The PSP will also contract with users for their use of the software (e.g., through terms of use), and these contractual terms may provide for transaction-based fees to be paid by the user.
  • The PSP and its personnel may market its services and relationships with relevant Registrants, including promoting the availability of particular derivatives contracts.
  • The interface software may be offered on a standalone basis or embedded in existing software (such as wallet software), but in the latter case, the interface must “clearly and conspicuously distinguish when a user is engaging in CFTC-regulated activity or not.”

Consistent with the Phantom letter, “Covered Activities” as defined in the PSP Relief are limited to a “custodial” model consistent with the existing market structure for CFTC-regulated derivatives. In particular, users must transact on a designated contract market (DCM) either directly as a member or indirectly as a customer of a futures commission merchant (FCM) or IB that is a member. Users must also maintain the funds or property securing their derivatives positions in custody with the DCM’s relevant derivatives clearing organization (DCO) or an FCM that is a member of such DCO.

Importantly, the Division expressly noted that PSPs covered by the PSP Relief are “not limited to providers of crypto asset related software.” The relief is therefore available to PSPs providing software facilitating access to CFTC-regulated derivatives markets more generally, regardless of whether their software involves digital assets, self-custody wallets, or traditional financial products.

As with the Phantom letter, users need not have a pre-existing relationship with the relevant registrant, but must face “no contractual or operational restriction from accessing those Registrants directly, without the PSP’s involvement.”

Conditions of the Relief

The PSP Relief is subject to substantially the same 10 conditions as the Phantom letter:

  • The PSP, its principals, and any individual engaged in soliciting users must not be subject to statutory disqualification under the Commodity Exchange Act (absent a Division waiver).
  • The PSP must provide, and users must acknowledge receipt of, disclosures regarding the PSP’s relationship with the relevant Registrants, including potential conflicts of interest and fees.
  • To the extent relevant to the trading activity it facilitates, the PSP must provide users (and users must acknowledge receipt of) a prescribed CFTC risk disclosure statement regarding futures trading risks as required under the CFTC’s regulation of FCMs,3 unless the Registrant is already obligated to provide such disclosure.
  • Users must be onboarded as direct members of the relevant DCM or as customers of the FCM or IB, and must retain the ability to access the Registrant independently of the PSP.
  • The PSP must adopt policies and procedures reasonably designed to ensure compliance with CFTC and National Futures Association (NFA) rules regarding communications with the public and marketing, as if the PSP were a registered IB.
  • The PSP may not engage in advertising or promotions that would require pre-approval by the NFA if the PSP were a registered IB (for example, certain mass media and audio/visual advertising).
  • The PSP and each Registrant must execute a written undertaking agreeing to be jointly and severally liable for any CFTC violations in connection with the Covered Activities, and must consent to the CFTC’s jurisdiction for investigation and enforcement.
  • The PSP must maintain records consistent with CFTC Regulation 1.31 relating to compliance with these conditions and its CFTC-regulated business activity.
  • The PSP must notify the Division if it becomes insolvent or enters bankruptcy.
  • The PSP must file a notice with the Division agreeing to satisfy the conditions and consenting to jurisdiction. Any PSP affiliated with a state or tribal government must include a waiver of sovereign immunity to make enforceable the PSP’s consent to the Commission’s jurisdiction.4

Practical Implications and Limitations

By making the Phantom relief broadly available, the Division has removed a barrier for technology service vendors seeking to facilitate access to CFTC-regulated derivatives markets without triggering IB registration. The express confirmation of transaction-based compensation models (via both revenue sharing agreements with CFTC Registrants and direct user fees imposed by the PSP) is a significant development and provides much-needed clarity on what has been a source of uncertainty and risk for software providers structuring compensation models for software offerings providing access to CFTC-regulated products.5

The Division’s decision to extend the relief beyond cryptoasset software providers also may reflect a broader recognition by the Commission of the role financial technologies such as passive software models play in integrating market activity.

With that said, the PSP Relief retains the same limitations as the Phantom letter. In particular, it is important to emphasize that the relief does not extend to unregistered derivatives platforms, and as a result would not currently be applicable to DeFi derivatives trading or transactions outside currently CFTC-regulated platforms. The relief remains effective only until the Commission issues rulemaking or guidance on the application of the IB registration requirement to software developers. And while the letter reflects the views of the Division, it does not bind the Commission.

Follow this and other critical developments on Latham’s US Crypto Policy Tracker.

  1. The Commodity Exchange Act (CEA) and CFTC Regulation 1.3 define an IB as “Any person who, for compensation or profit, whether direct or indirect: (i) Is engaged in soliciting or in accepting orders (other than in a clerical capacity) for the purchase or sale of any commodity for future delivery, security futures product, or swap; any agreement, contract or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i) of the Act; any commodity option transaction authorized under section 4c; or any leverage transaction authorized under section 19; or who is registered with the Commission as an introducing broker; and (ii) Does not accept any money, securities, or property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom.” ↩︎
  2. An AP of an IB is defined as a natural person associated with an IB as a partner, officer, employee, or agent (or similar status) involved in solicitation or acceptance of customers’ orders (other than in a clerical capacity) or the supervision of persons so engaged. ↩︎
  3. This is a specific, prescribed risk disclosure statement set out in the CFTC’s regulations. See 17 C.F.R. § 1.55. ↩︎
  4. This condition was not present in the Phantom letter. ↩︎
  5. Staff also reiterated the CFTC’s longstanding position that “persons who are currently compensated on a per-trade basis or by a referral fee” for referring customers to registrants may fall within the definition of an introducing broker. This interpretation provides some insight into how the Division views the outer boundaries of the IB definition under CEA Section 4d(g) and Commission Regulation 1.3, particularly given that such a broad reading of “soliciting or … accepting orders” has been disputed by defendants in court. See, e.g., CFTC v. Mass Media Marketing, Inc., 156 F. Supp. 2d 1323 (S.D. Fla. 2001) (holding that advertisers who generated leads for registered IBs, but did not solicit or accept commodity orders, were not themselves required to register as IBs), available at https://law.justia.com/cases/federal/district-courts/FSupp2/156/1323/2318363/.  ↩︎