CFTC Extends No-Action Relief on IB and AP Registration to All Passive Software Providers

Key Takeaways

• CFTC Letter 26-25 extends the no-action position first granted to Phantom Technologies in Letter 26-09 to all passive software providers (PSPs) that enable trading in CFTC-regulated derivatives.
• PSPs will not face a staff recommendation for enforcement for failing to register as introducing brokers (IBs) or associated persons (APs), provided they meet ten conditions.
• Compliance teams at PSPs and at the DCMs, FCMs, and IBs that work with them need to assess eligibility and put the required documentation in place.

Deep Dive

CFTC Letter 26-25 extends the no-action position first granted to Phantom Technologies in Letter 26-09 to all passive software providers (PSPs) that enable trading in CFTC-regulated derivatives. PSPs will not face a staff recommendation for enforcement for failing to register as introducing brokers (IBs) or associated persons (APs), provided they meet ten conditions. Compliance teams at PSPs and at the DCMs, FCMs, and IBs that work with them need to assess eligibility and put the required documentation in place.

Letter 26-25, issued September 17, 2026 by the Market Participants Division (MPD), applies to any PSP and is not limited to crypto asset software. Letter 26-09 could be relied on only by its named beneficiary, Phantom, under 17 CFR 140.99(a)(2). The new letter removes the need for other providers to request individual relief. The relief covers Section 4d(g) IB registration and Section 4k(1) AP registration, and applies solely to the defined "Covered Activities." It stays in place until a Commission rulemaking or guidance on applying IB registration to software developers takes effect. The legacy technology service vendor (TSV) letters did not fit this model. They required a pre-existing customer relationship with an FCM or IB and prohibited recommending any particular FCM or IB. Covered Activities, by contrast, permit PSPs to market, introduce, and solicit Users to specific Registrants.

Covered Activities are narrow. The PSP supplies front-end software that lets Users view market data, aggregate positions, and submit orders directly to Registrants, including for event contracts and perpetual contracts. The PSP may receive revenue share from Registrants and may charge Users transaction-based fees. Its personnel may promote the service at conferences and on social media, subject to pre-approval and supervision. Relief applies only to a custodial model in which Users trade on a DCM, directly or through an FCM or IB, and funds are held with the DCO or an FCM. The PSP may not hold or control User assets, generate buy or sell signals, or exercise discretion over order routing or execution. Where the interface is embedded in wallet software, it must clearly distinguish regulated from unregulated activity. Users must remain able to access Registrants independently of the PSP.

The ten conditions carry the main compliance burden:
- No statutory disqualification of the PSP, its principals, or its soliciting individuals, with prompt notice to the Division if one arises.
- Conflict-of-interest and fee disclosures, plus a risk disclosure statement modeled on Regulation 1.55(b), with User acknowledgment records. The risk disclosure is not required where a registered Registrant must already provide one.
- Policies and procedures for CFTC and NFA communications and marketing rules as if the PSP were an IB, and no advertising that would need NFA Rule 2-29 pre-approval.
- A written undertaking with each Registrant establishing joint and several liability and consent to CFTC jurisdiction, filed with the Division.
- Recordkeeping consistent with Regulation 1.31, and notice to the Division of insolvency or bankruptcy.
- A notice filed with the Division agreeing to the conditions and consenting to CFTC jurisdiction, including a sovereign immunity waiver where needed.
All submissions go to MPDLetters@cftc.gov and must reference the letter. The letter sets no compliance deadline, but a PSP should not rely on the relief until it has satisfied the conditions, including filing its notice.

PSPs should run a gap analysis against the Covered Activities definition and all ten conditions, and confirm that no feature involves custody, signals, order discretion, or non-DCM venues. They should also draft the disclosures and acknowledgment capture, build a marketing review process covering social media and event statements, and prepare the notice filing. Registrants (DCMs, FCMs, and IBs) should decide whether to engage PSPs, negotiate the joint and several liability undertakings, and carry out third-party due diligence. Legal teams should monitor for the pending rulemaking or guidance, since the relief is temporary.

Risk implications: this is staff-level relief only. It does not bind the Commission, it can be modified, suspended, or terminated at any time, and different or omitted material facts may void it. The joint and several liability undertaking significantly increases Registrant exposure for PSP conduct. A PSP that deviates from the conditions or from Covered Activities loses protection and risks unregistered IB activity. Marketing statements and fee disclosures are the most likely areas of examination or enforcement focus.

Source: Commodity Futures Trading Commission