CFTC Exempts Crypto and Prediction Market Software Developers from Broker Classification
The U.S. Commodity Futures Trading Commission (CFTC) has issued a no-action letter, exempting eligible crypto and prediction market software providers from broker registration requirements under specific conditions. This regulatory relief allows qualifying providers to offer non-custodial connectivity to regulated platforms without needing to register as brokers, provided they maintain zero trade discretion and zero volume-based commissions.
A “no-action” position is an official statement from a regulator indicating that it will not pursue enforcement actions against an individual or entity for a particular activity.
The exemption applies to developers who partner with regulated platforms and meet the outlined conditions. This move follows a precedent set by the CFTC in March when it granted a similar no-action position to Phantom Technologies. The Phantom Wallet provider has since continued its partnership with Kalshi prediction markets as a non-custodial passive interface provider, without the necessity of registering as an introducing broker.
Brandon Millman, CEO of Phantom, lauded the development on X, emphasizing how the company’s initial no-action letter paved the way for secure, compliant, and non-custodial consumer access to financial markets. He stated, “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 participants such as Crypto.com and ProphetX have adopted comparable models, expanding their reach while operating within existing legal frameworks.
This announcement comes amidst ongoing efforts by regulatory bodies to provide clarity to the cryptocurrency ecosystem, even after the recent rejection of the Clarity Act in the Senate. Despite the legislative setback, agencies are continuing to issue guidance to reduce regulatory ambiguity and encourage broader adoption.
Earlier today, the U.S. Securities and Exchange Commission (SEC) introduced the “Innovation Exemption” rule, which permits the on-chain trading of certain tokenized stocks. Concurrently, the UK’s Financial Conduct Authority (FCA) recently clarified which cryptocurrency activities necessitate authorization.
