Regulators keep moving on crypto: CFTC follows SEC with developer-friendly no-action stance

Software developers who build crypto trading tools just got some breathing room from federal regulators. 

The Commodity Futures Trading Commission issued a "no-action position" for software developers on Thursday, saying it would not recommend enforcement action against them for not registering as introducing brokers if certain conditions are met.

This comes months after the CFTC issued a no-action letter to crypto wallet provider Phantom as the company sought to add derivatives trading functionality to its software. Thursday's announcement expands that no-action letter to software developers who act as a pipeline to designated contract markets, if those developers provide certain disclosures, adopt policies and procedures, among other criteria. 

The no-action letter could also expand beyond "crypto asset related software," according to a footnote in the agency's no-action position on Thursday. 

"This is a significant step forward because it takes what was previously Phantom-specific relief and turns it into a framework that other software providers can build around," Solana Policy Institute General Counsel Patrick Wilson told The Block. "That gives builders more clarity about how they can connect users to regulated derivatives markets without being treated as introducing brokers."

The Digital Chamber CEO Cody Carbone also cheered the CFTC's latest stance. 

"This removes a major regulatory ambiguity that's chilled software innovation in derivatives markets," Carbone said in a post on X. 

This comes just hours after the SEC released its long-anticipated "innovation exemption" to make room for the onchain trading of tokenized stocks. Both the SEC and CFTC have said they would move forward with their own regulatory agendas after the Senate failed in a procedural vote to advance the Clarity Act, which would regulate the digital asset industry comprehensively for the first time at the federal level. 

Industry sources wanted the legislation because it offers a level of permanence that federal regulators can't easily guarantee on their own.

However, no action letters can be undone in a future administration, a crypto industry source said on Thursday. 

"It is great news that this is expanding and getting better, but there is still some potential risk of having these things undone in the future by a future commission," the source said. "I do think the more people who adopt this and the more people who operate within this framework, the stickier it becomes, the harder it is to yank that rug in the future." 

In May, CFTC Chair Michael Selig alluded to cementing its Phantom no-action letter into rulemaking, but that hasn't come to fruition yet.