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CFTC extends Phantom-style broker exemption to crypto software makers meeting strict conditions

Two days after the Senate stalled the CLARITY Act, the CFTC's Market Participants Division opened Phantom's March no-action position to any software provider that stays clear of custody and order routing, on ten conditions.

The Investor · Invest desk

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What happened

  • CFTC Staff Letter 26-25, signed by Market Participants Division director DJ Hennes, says staff will not recommend enforcement against eligible passive software providers that do not register as introducing brokers.
  • Phantom Technologies got the same treatment in March, but only Phantom was covered and other developers had to file their own requests; the new letter offers substantially the same terms to any qualifying provider.
  • Eligible providers cannot decide how orders are routed or executed, cannot issue express buy or sell signals and cannot take custody, and money backing a derivatives position must sit with the clearing structure.
  • The conditions include conflict and fee disclosures, evidence that users acknowledged risk warnings, notice to the CFTC of any insolvency, and a filing in which the provider accepts the agency's jurisdiction.
  • The letter came two days after the Senate blocked the CLARITY Act, and the SEC released its long-awaited innovation exemption the same day.

Why it matters

  • Who's exposed exposure Joint and several liability with every registered partner puts the software firm's own balance sheet behind a registered firm's obligations, and contract liability is not something CFTC staff can suspend later.
  • What it limits constraint Keeping the relief means leaving users a way to the venue that bypasses the app, so a provider cannot build the exclusive funnel a per-transaction fee would otherwise be charged against.
  • Who has to decide decision Anyone weighing introducing-broker registration against the free relief is choosing between a registration it keeps and a permission one division can end at its discretion.
  • What it sets up precedent The CFTC has shown it will hand out in pieces, under existing authority, what the Senate declined to legislate, so the next perimeter question for crypto software is likelier to arrive as a staff letter than as a rule.

The condition that costs money is the written agreement each provider has to sign with every registered partner, covering joint and several liability [9][10]. So a wallet maker that never registers, never holds customer funds and never decides how an order is routed agrees in writing to stand behind obligations alongside the registered firm [6][10]. It also files a notice accepting the CFTC's jurisdiction, and it has to tell the agency if it becomes insolvent [12].

What it gets back is a position staff can withdraw. The division wrote that its view does "not necessarily represent the position or view of the Commission or of any other office or division of the Commission", and the letter does not bind the CFTC [13]. Staff may modify, suspend or end the relief, and it lapses if the Commission adopts formal guidance on how broker registration applies to software developers [14]. Chair Michael Selig said in May at Consensus Miami that he wanted the Phantom position codified into rules "very soon", calling the sequence "crawl, walk, run"; the rulemaking has not arrived [15].

The revenue side comes through intact. A provider can advertise its ties to registered firms, promote specific derivatives contracts, steer users toward particular venues, collect fees from registered counterparties and charge users per transaction [16]. It cannot be the only way in: users must be able to reach a designated contract market, futures commission merchant or introducing broker without passing through the software at all [7]. The per-transaction fee therefore sits on a route the user is entitled to bypass.

The legislative alternative did not fail by a hair. Cloture on the Digital Asset Market CLARITY Act went down 49 to 50, eleven short of the 60 needed, which accounts for 99 recorded votes [17][21]. Four Republicans voted no and no Democrat voted yes [20]. Flip those four and cloture stands at 53, seven short [22].

I think the letter is worth more to a developer that could not have afforded to file its own request than to anyone underwriting years of order flow on it, because the liability agreements run with the contracts while the cover behind them can be pulled by a division [1][2][10][14]. The counter-case is plain enough: registering as an introducing broker costs money this avoids entirely, and a compliant wallet discloses its fees and conflicts anyway [4][10]. Three ways it goes differently. The Commission writes the rule Selig described and the staff position gives way to guidance [15]; another division or the Commission takes a different view, as the letter says it may [13]; or CLARITY comes back and the whole file is moot [17]. Selig, writing on X after the vote, said the CFTC would help President Trump deliver "a future-proof crypto asset regulatory market structure", adding, "One way or the other, and we will help him get the job done using our existing statutory authorities." [19]

What to watch

  • Whether futures commission merchants and introducing brokers will actually sign the joint and several liability agreements the relief requires.
  • Whether any named developer publicly claims cover under 26-25, which would show how wide the class really is.
  • How far the SEC's innovation exemption, released the same day, overlaps with the firms relying on the CFTC letter.

Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.

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  1. [1]

    The same treatment was given to a single company, Phantom Technologies, in March, but that position bound only Phantom, and other developers wanting the same cover had to file their own requests.

    Reported SupportedView cited source
  2. [2]

    Staff Letter 26-25 lifts that limit, offering the relief on substantially the same terms to any passive software provider that meets the conditions.

    Reported SupportedView cited source
  3. [3]

    The CFTC's Market Participants Division extended no-action relief to providers of passive crypto-trading software, sparing them from registering as brokers, two days after the Senate blocked the CLARITY Act.

    Reported SupportedView cited source
  4. [4]

    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.

    Reported SupportedView cited source
  5. [5]

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

    Reported SupportedView cited source
  6. [6]

    Under the conditions a provider cannot decide how an order is routed or executed, cannot throw off express buy or sell signals and cannot take custody of user funds, and money backing a derivatives position has to sit with the clearing structure rather than the software maker.

    Reported SupportedView cited source
  7. [7]

    Users must be able to reach a designated contract market, futures commission merchant or introducing broker without passing through the software at all.

    Reported SupportedView cited source
  8. [8]

    The relief is set out in CFTC Staff Letter 26-25, signed by Market Participants Division director DJ Hennes.

    Reported SupportedView cited source
  9. [9]

    The CFTC staff letter detailed ten covered activities and their limits, among them that a provider and its principal are not subject to statutory disqualification.

    Reported SupportedView cited source
  10. [10]

    Providers have to disclose conflicts and fees, must keep evidence that users acknowledged risk disclosures, and must sign written agreements with each registered partner covering joint and several liability.

    Reported SupportedView cited source
  11. [11]

    The SEC moved on the same day, releasing a long-awaited innovation exemption.

    Reported SupportedView cited source
  12. [12]

    Providers also have to notify the CFTC of any insolvency and file a notice accepting the agency's jurisdiction.

    Reported SupportedView cited source
  13. [13]

    The Market Participants Division wrote that its position does "not necessarily represent the position or view of the Commission or of any other office or division of the Commission", so it is not binding on the CFTC.

    Reported SupportedView cited source
  14. [14]

    The letter states that the division has discretion to modify, suspend or end the cover, and that it would lapse if the CFTC ever adopts formal guidance on how broker registration applies to software developers.

    Reported SupportedView cited source
  15. [15]

    CFTC Chair Michael Selig said in May, at Consensus Miami, that he wanted to codify the Phantom position into rules "very soon", calling the sequence "crawl, walk, run"; to date that rulemaking has not arrived.

    Reported SupportedView cited source
  16. [16]

    Eligible providers can advertise their software and their ties to registered firms, promote specific derivatives contracts, steer users toward particular venues, collect fees from registered counterparties and charge users per transaction.

    Reported SupportedView cited source
  17. [17]

    The US Senate rejected cloture on the Digital Asset Market CLARITY Act by a vote of 49 to 50, eleven short of the 60 needed.

    Reported SupportedView cited source
  18. [18]

    Selig said the outcome of the vote was unfortunate, sharing on X: "Americans deserve regulatory clarity, legal certainty, and consumer protections in crypto asset markets."

    Reported SupportedView cited source
  19. [19]

    Selig said the CFTC was locked in to help President Trump deliver his promise of "a future-proof crypto asset regulatory market structure", writing, "One way or the other, and we will help him get the job done using our existing statutory authorities."

    Reported SupportedView cited source
  20. [20]

    Four Republicans were among the no votes, and no Democrat voted in favor.

    Reported SupportedView cited source
  21. [21]

    The recorded cloture tally accounts for 99 votes, and the 49 in favour were 11 short of the 60-vote threshold.

    Derived Supported
  22. [22]

    Had the four Republican no votes gone the other way, cloture would have stood at 53, still seven short of 60.

    Derived Supported

Sources

5 independent publishers whose own reporting we read for this story.

  1. bankless.com

    1 article · September 18, 2026

    The CFTC Extended a Crypto Compliance Win to the Whole Industry
  2. cointelegraph.com

    2 articles · September 17, 2026

    CFTC expands regulatory relief for passive trading software providers
  3. cryptopolitan.com

    1 article · September 17, 2026

    CFTC, SEC deliver on regulatory promise with exemptions despite stalled CLARITY Act
  4. decrypt.co

    1 article · September 17, 2026

    CFTC Opens Door for Crypto Apps to Offer Regulated Derivatives Access
  5. unchainedcrypto.com

    1 article · September 17, 2026

    Wallets Can Offer Regulated Perps Without a Broker License, CFTC Staff Says - Unchained

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