CFTC Exempts Crypto and Prediction Markets Software Providers From Broker Classification

The US Commodity Futures Trading Commission (CFTC) has issued a no-action letter, exempting eligible crypto and prediction markets software providers from broker registration requirements.Importantly, a “no-action” position is an official statement from a regulator that it will not pursue enforcement actions against an individual or entity for a specific action.Crypto and prediction market developer freedomsAccording to the announcement made today, the relief applies to developers partnering with regulated platforms under the following conditions:The developer has to maintain zero discretion over trades, meaning the user maintains absolute control over every trade.The developer never assumes custody of users’ assets.The developer never takes up volume-based dynamic commissions. This means they are banned from taking a “cut” of the trading volume passing through the software.Before this official statement, the CFTC had set a precedent for this kind of developer regulation by granting a no-action position to Phantom Technologies in March. The Phantom Wallet provider now continues to partner with Kalshi prediction markets as a non-custodial passive interface provider, without needing to register as an introducing broker.On X, Phantom CEO Brandon Millman praised today’s development while highlighting how its no-action letter laid the groundwork for safe, compliant, and non-custodial consumer financial access.In March, Phantom became the first passive software provider to receive no-action relief from the CFTC. We're grateful to the CFTC for working with us to chart a new path for non-custodial software providers to connect people with regulated markets, all while the provider never… Prediction market players like Crypto.com and ProphetX have adopted similar models, expanding their reach all while operating within legal provisions.Recent regulatory developmentsDespite the Clarity Act failing to secure majority votes on the Senate floor this week, regulatory agencies have continued to guide the crypto ecosystem – reducing regulatory murkiness while encouraging adoption.Just today, the US Securities and Exchange Commission (SEC) introduced the “Innovation Exemption” rule, permitting the on-chain trading of certain tokenized stocks.Meanwhile, the UK Financial Conduct Authority (FCA) recently clarified which crypto activities require authorization.