The Commodity Futures Trading Commission is considering new rules that would protect some non-custodial crypto software developers from broker registration duties.
Summary
- CFTC may turn its Phantom no-action stance into rules for non-custodial crypto software developers soon.
- The Phantom letter said some self-custody wallet providers may avoid broker registration under stated conditions.
- Selig also said CFTC will keep suing states over prediction market rules it says breach federal authority.
CFTC Chair Michael Selig said the agency wants to turn its March no-action position for Phantom Technologies into formal rules. The move could give wallet builders clearer treatment under U.S. derivatives laws.
Selig said the agency prefers rulemaking over one-off staff relief. Speaking on Tuesday at Consensus Miami, a conference hosted by CoinDesk, Selig said the CFTC wants to codify the Phantom position “very soon” and give firms clearer guidance.
Selig said rulemaking remains his preferred approach. He said the agency plans to move in stages, giving companies clearer direction as they build and offer software in the U.S.
The plan follows the CFTC’s March 17 no-action letter for Phantom Technologies. The agency said its Market Participants Division would not recommend enforcement against Phantom for failing to register as an introducing broker or associated person, if it meets stated conditions.
The letter covered Phantom’s plan to provide self-custodial wallet software that helps users trade with registered futures commission merchants, introducing brokers, and designated contract markets.
Phantom letter shapes wallet policy
The Phantom letter gave non-custodial wallet providers a clearer path, but it did not create a full market-wide rule. No-action relief usually applies to the facts in one request.
In related coverage by crypto.news, the Phantom decision was described as the CFTC’s first no-action letter for a self-custodial crypto wallet provider. The report noted that Phantom could help users access derivatives trading without broker registration, as long as it did not hold customer funds.
That distinction matters for developers building wallets, front ends, and trading interfaces. The CFTC appears to be drawing a line between neutral software and firms that control customer assets or act as financial middlemen.
The agency has not released the proposed rule text. Any formal rule would likely need public comment before adoption.
SEC guidance adds pressure for clear rules
The Securities and Exchange Commission has also moved toward clearer treatment for crypto interfaces. On April 13, SEC staff issued guidance on broker-dealer registration for user interfaces tied to crypto asset securities.
The SEC said the statement was an interim step while the commission reviews broader crypto market issues. It also said the statement would be withdrawn after five years unless the commission acts before then.
As featured in recent coverage, DeFi groups including the DeFi Education Fund, Aave Labs, Uniswap Labs, Paradigm, and Andreessen Horowitz urged the SEC to turn that temporary position into binding rules.
Those groups backed the view that non-custodial user interfaces should not be treated as brokers when they only translate user instructions into blockchain commands.
Prediction markets remain in federal fight
Selig also said prediction markets fall under the CFTC’s federal authority. He said the agency will keep suing states that try to block federally regulated markets.
As crypto.news reported, the CFTC has already sued Arizona, Connecticut, and Illinois over state actions against CFTC-registered event markets. The agency said Congress chose a national framework for these markets instead of separate state rules.
The CFTC also sued New York on April 24, seeking to stop the state from applying gambling laws against federally registered contract markets. Selig said the agency would not allow states to weaken its authority over prediction markets.
