CFTC Extends Phantom No-Action Relief to Eligible Passive Software Providers

The U.S. Commodity Futures Trading Commission has extended a no-action position previously granted to Phantom to certain passive software providers, potentially allowing qualifying applications to provide front-end access to CFTC-regulated derivatives markets.

According to information shared by Wu Blockchain, the CFTC’s Market Participants Division issued Staff Letter 26-25 outlining the expanded relief. The position applies to eligible passive software providers, including companies operating outside the cryptocurrency sector, subject to specified conditions.

Software Providers Can Offer Front-End Market Access

Under the staff letter, qualifying software can function as a front-end interface through which users access registered futures commission merchants, introducing brokers and designated contract markets.

The software may allow users to submit markets orders directly for derivatives regulated by the CFTC. The products covered include event contracts and perpetual contracts, according to the information shared by Wu Blockchain.

The relief concerns the role of software as an interface rather than as a discretionary trading intermediary. Providers that meet the stated requirements can facilitate the technical connection between users and regulated market infrastructure without taking on certain activities that would place them in a different regulatory position.

Conditions Limit the Role of Passive Software

The CFTC’s no-action position comes with specific restrictions on how eligible software can operate.

The software may not custody users’ assets, meaning providers covered by the relief cannot take possession or control of customer funds through the interface. They also cannot generate explicit buy or sell signals for users.

In addition, qualifying software providers must not exercise discretion over order routing or execution. The restrictions distinguish passive interfaces from services that make trading decisions or control how customer orders are executed.

These conditions are central to the relief because they define the operational boundaries within which a software provider can rely on the CFTC staff position.

Relief Extends Beyond Crypto Providers

The staff letter is notable because the expanded no-action position is not limited to cryptocurrency-focused companies. Eligible passive software providers outside the crypto sector may also fall within its scope if they satisfy the specified conditions.

The approach separates the software interface itself from the regulated market participants through which users obtain access to derivatives markets. Registered futures commission merchants, introducing brokers and designated contract markets remain part of the underlying regulated infrastructure.

For software developers, the distinction provides a framework for determining whether a front-end application can facilitate access to CFTC-regulated products without performing activities specifically excluded by the staff letter.

Staff Letter Defines the Scope of the Position

The CFTC’s Market Participants Division issued Staff Letter 26-25 as an extension of the no-action position previously granted to Phantom. The relief does not remove the conditions governing eligible software providers.

Instead, the letter establishes the circumstances under which passive software can provide an interface for users seeking access to regulated derivatives, including event contracts and perpetual contracts.

The specified restrictions on custody, trading signals and discretionary order routing remain central to the framework set out by the CFTC staff.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.