CFTC Opens Door for Crypto Apps to Offer Regulated Derivatives Access

In brief

• The CFTC issued a no-action letter for passive software providers.
• The letter covers software that gives users access to event contracts, perpetual contracts, and other regulated derivatives.
• The position extends earlier Phantom relief to other providers that meet the agency’s conditions.

Crypto apps that want to offer access to regulated derivatives markets got new guidance Thursday from the Commodity Futures Trading Commission.

In the no-action letter, the agency’s Market Participants Division said passive software providers can avoid registering as introducing brokers if they limit their role to front-end software and meet a list of conditions.

That could matter for wallet developers and trading apps because broker registration can bring significant compliance requirements. The CFTC letter gives them a path to connect users to registered derivatives markets without acting as the intermediary handling the trade.

“The Division believes that a no-action position for all [passive software providers] on substantially the same terms as that provided to the software developer in Letter 26-09 is warranted,” the CFTC letter said.

The letter covers software that lets users view market data, product offerings, and position information, and submit orders for CFTC-regulated derivatives, including event contracts and perpetual contracts, directly to registered entities. It extends relief first granted in March to Phantom Technologies, whose self-custody wallet was cleared to connect users to regulated derivatives markets without registering as a broker.