The CFTC has expanded regulatory relief for “passive software” providers that connect users to regulated derivatives firms and exchanges, according to a no-action position issued Thursday by the agency’s Market Participants Division. The move follows the CLARITY Act’s Senate failure, and both regulators have signaled they will act under existing authority.
The role involves neglecting to sign up as introducing brokers or associated persons while handling trading for CFTC-registered firms and exchanges. Providers who qualify must satisfy conditions that confine their involvement in deals, among them limits on taking control over users’ orders.
The Phantom Precedent
The move builds on a comparable grant given to Phantom Technologies in March concerning its self-custodial crypto wallet software. That prior ruling permitted Phantom, under specific conditions, to supply and promote software linking users with registered futures brokers and exchanges without having to register as an introducing broker itself.
In July, Phantom and the Hyperliquid Policy Center both pressed for wider safeguards, requesting that the CFTC exempt non-custodial wallet providers from having to meet introducing broker requirements while also seeking clarity on how current regulations apply to blockchain developers and regulated derivatives firms that rely on onchain infrastructure. Neither group was named by the CFTC in its announcement.
The CLARITY Act’s Failure
The day before the CFTC announcement, the Senate rejected the CLARITY Act, with a cloture motion failing to clear its threshold for moving forward. It fell short by 49 votes of the 60 needed to advance to debate.
With the bill dead for now, regulators have turned to their own rulemaking powers. The CFTC’s position applies to derivatives, while the SEC’s move covers tokenized US stocks.
SEC Action on Tokenized Stocks
On Thursday, the SEC gave its approval for a temporary exemption that lets qualifying platforms facilitate limited onchain trading of tokenized US stocks through permissioned automated market makers and liquidity pools.
The two announcements came at the same time. One agency governs derivatives, and another oversees securities.
Regulator Signals
CFTC Chair Michael Selig said in a post on X that “The CFTC is locked in and ready to ship its rules for the new frontier of finance.” SEC Chair Paul Atkins said the SEC would act “with or without legislation” to provide regulatory certainty for digital assets.
The two statements point toward a readiness to act swiftly, without waiting for a new law.
| Regulator | Action | Scope |
|---|---|---|
| CFTC | No-action position on passive software providers | Derivatives trading |
| SEC | Temporary exemption on tokenized US stocks | Securities trading |
What Providers Need to Know
Providers who qualify must satisfy conditions that limit their role in transactions. Among these conditions is a restriction on exercising discretion over users’ orders.
This relief concerns software that links users to CFTC-registered firms and exchanges. The CFTC has taken a no-action position on it, which means the agency will not pursue enforcement against providers that satisfy the stated requirements.
The Bottom Line
The CFTC’s move eases compliance costs for crypto wallets and apps that connect users to regulated derivatives firms. The SEC’s move provides temporary relief for tokenized US stock trading through automated market makers.
Neither regulator waited for the CLARITY Act to pass; both acted under existing authority.
A similar approach to unilateral action is what the temporary exemption from the CFTC’s position extends the relief granted to Phantom Technologies in March. The SEC’s move follows.
Regulators have moved more quickly following the CLARITY Act’s failure. The relief is now official.
The question is whether it will stick.
Where the paper stands
The paper backs the CFTC’s expansion of regulatory relief for passive software providers and is against any approach that hands the market to the incumbents. The relief announced Thursday eases compliance costs for crypto wallets and apps that connect users to regulated derivatives firms, while keeping conditions on how those providers may handle user orders. The CFTC acted under existing authority, just as the SEC did in its separate tokenized stock exemption.
The paper’s concern is concentration of power, and the CLARITY Act’s failure left regulators with room to act without new law. The CFTC’s position is narrow: it targets direct harm by forcing companies to disclose safety failures they hid, and it does not ask software providers to register as introducing brokers when their role is limited. That matches the paper’s preference for rules that protect against actual harm rather than rules that reward size.
The relief is now official, but the question remains whether it will stick. Readers should watch for signs that the relief widens beyond its stated scope, and for any effort by incumbents to use it as cover for conduct that goes beyond the conditions laid down. The paper will continue to track the space closely, with an eye on whether the relief stays narrow and targeted, as it should be.
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