Tag: Regulation & Policy

The Commodity Futures Trading Commission (CFTC) has issued an expanded no-action position, offering regulatory relief to passive software providers connecting users to regulated derivatives and prediction markets. Announced on Thursday, this move extends previous guidance and aims to clarify the regulatory path for certain technology platforms operating in the U.S.

The CFTC’s Market Participants Division stated it would not recommend enforcement against qualifying passive software providers for failing to register as introducing brokers or associated persons. This relief is contingent upon providers meeting specific conditions that limit their role in transactions, notably prohibiting them from exercising discretion over users’ orders. This action builds upon a similar no-action position initially granted to Phantom Technologies in March.

This development follows the failure of the CLARITY Act, a bill intended to provide regulatory certainty for digital assets, to advance in the Senate earlier this week. A cloture motion for the bill received 49 votes, falling short of the 60 votes required to proceed to debate. In the wake of this legislative setback, CFTC Chair Michael Selig and Securities and Exchange Commission (SEC) Chair Paul Atkins indicated that their respective agencies would continue to pursue crypto regulation under their existing authorities.

CFTC Chair Michael Selig has expressed a proactive stance, stating, “The CFTC is locked in and ready to ship its rules for the new frontier of finance.” Similarly, SEC Chair Paul Atkins has signaled the SEC’s intent to act “with or without legislation” to provide regulatory certainty for digital assets. In a related development, the SEC approved a temporary exemption on Thursday for qualifying platforms to facilitate limited onchain trading of tokenized U.S. stocks.

Implications for Market Access

The CFTC’s expanded relief could simplify regulatory compliance for crypto wallets and similar applications seeking to offer access to regulated derivatives, including perpetual contracts, and prediction markets. Without this relief, such providers might have been required to register as CFTC-regulated introducing brokers themselves. The current position aims to allow these providers to operate without such registration, provided they adhere to the stipulated conditions.

Remaining Uncertainties

However, uncertainties remain regarding the precise conditions under which providers will qualify for this expanded relief and the full scope of ‘passive software’ providers that may benefit. The CFTC’s action, while providing a clearer regulatory framework for certain activities, underscores the agencies’ approach to shaping the digital asset and derivatives landscape through administrative actions rather than solely relying on new legislation.

This regulatory step by the CFTC, alongside the SEC’s actions, suggests a continued focus on establishing regulatory clarity for digital assets and related financial products, even in the absence of comprehensive legislative action from Congress.

Broader Context

Source materials place the factual news in this context: The move from the US regulator comes two days after the CLARITY Act failed to advance in the Senate, with a cloture motion receiving 49 votes, short of the 60 needed to proceed to debate.

The Commodity Futures Trading Commission (CFTC) has issued guidance aimed at providing clearer regulatory pathways for crypto software providers, outlining conditions under which they can offer access to regulated derivatives markets without the necessity of broker registration. This guidance, delivered via a no-action letter from the CFTC’s Market Participants Division, seeks to alleviate compliance burdens and potentially stimulate innovation within the digital asset derivatives sector.

Key Guidance for Software Providers
The central tenet of the CFTC’s guidance is that passive software providers can facilitate user connections to regulated derivatives markets without registering as introducing brokers, provided they adhere to specific conditions. This relief builds upon previous guidance and addresses a significant regulatory ambiguity that has historically tempered software innovation in these markets. According to the CFTC, its staff will refrain from recommending enforcement actions against passive software providers who comply with the outlined conditions and operate within the defined scope of covered activities.

Conditions for Compliance
To benefit from this no-action relief, passive software providers must satisfy several requirements. These include ensuring users receive clear disclosures, implementing appropriate marketing policies, maintaining adequate records, providing insolvency notices, and obtaining user agreement to specified terms. The guidance specifically applies to software that allows users to view market data, product offerings, position information, and submit orders for CFTC-regulated derivatives.

Industry Reaction and Innovation Potential
Industry advocates have characterized the CFTC letter as a source of much-needed clarity for software developers. Cody Carbone noted on X that this action removes a significant regulatory ambiguity. The CFTC’s Market Participants Division’s functional approach to regulation—focusing on the actual activities of a technology provider rather than classifying the software itself as a traditional financial intermediary—is viewed by some as a positive step toward practical regulatory solutions.

Broader Regulatory Context
The CFTC’s action occurred on the same day the Securities and Exchange Commission (SEC) introduced an “Innovation Exemption” for tokenized U.S. stocks. These developments follow a period of regulatory standstill and the unsuccessful Senate vote on the Digital Asset Market Clarity Act, which proposed a federal market-structure framework for digital assets. In August, CFTC Chair Michael Selig had directed staff to explore crypto market-structure rules in the absence of congressional action. Similarly, SEC Chair Paul Atkins indicated in July that the SEC was prepared to draft crypto rules if legislative efforts stalled.

Remaining Uncertainties
Despite the clarity provided, certain uncertainties persist. The full market impact of the CFTC’s no-action letter on the crypto derivatives landscape remains to be seen. It is also unclear whether similar relief will be extended to other types of software providers or markets, and the precise details and conditions that all passive software providers must meet will require careful attention.

Why This Matters

The materials describe a narrow update: The CFTC’s Market Participants Division issued a no-action letter providing guidance that passive software providers can connect users to regulated derivatives markets without registering as introducing brokers, provided they meet specific conditions. The full impact of the CFTC’s no-action letter on the crypto derivatives market.

Broader Context

Source materials place the factual news in this context: The CFTC action came the same day the SEC unveiled an “Innovation Exemption” for tokenized U.S. stocks.

The U.S. Securities and Exchange Commission (SEC) has announced a temporary five-year Innovation Exemption that permits the trading of tokenized versions of U.S. equities on blockchain-based platforms. This exemption allows designated Tokenized Securities Venues (TSVs) to facilitate onchain trading of National Market System stocks without requiring registration as traditional exchanges.

The exemption, announced on September 17, enables TSVs to list tokenized equities from the Russell 1000 index and certain Exchange Traded Funds (ETFs), provided these digital assets carry identical rights to their traditional counterparts, including dividends and voting rights. The SEC is currently soliciting public commentary to inform future rulemaking.

This move comes after the CLARITY Act, which aimed to establish a comprehensive market structure framework for digital assets, failed to advance in the Senate earlier this year. SEC Chairman Paul S. Atkins characterized the exemption as a “crucial step toward modernizing capital markets,” suggesting it fills a regulatory vacuum left by legislative inaction.

The Innovation Exemption builds upon earlier regulatory steps, including the SEC’s approval of Nasdaq’s rule changes related to tokenized trading in 2026. This suggests that the infrastructure for blockchain-based equity markets was already under development.

Under the exemption, TSVs must adhere to requirements such as U.S. person verification, sanctions screening, and public reporting. Additionally, liquidity providers operating on these venues are exempt from dealer registration requirements. Corporate issuers also retain the ability to block the tokenization and listing of their own securities on TSVs.

For retail investors, tokenized securities could offer benefits such as fractional ownership and self-custody options, which are not always easily accessible through traditional brokerage accounts. Institutional investors may benefit from blockchain settlement, which could compress the trade lifecycle from the current T+1 standard to near-instantaneous finality, potentially freeing up capital currently held in clearing and margin requirements.

However, uncertainties remain regarding the long-term impact and adoption rate of this Innovation Exemption, as well as the specific outcomes of the public commentary period. It is also unclear whether this administrative action will ultimately lead to permanent legislative changes.

Why This Matters

The materials describe a narrow update: The SEC announced a temporary five-year Innovation Exemption that permits the trading of tokenized versions of US equities on blockchain-based platforms. The long-term impact and adoption rate of the Innovation Exemption.

Broader Context

Source materials place the factual news in this context: The CLARITY Act, which aimed to create a comprehensive market structure framework for digital assets, recently failed to advance in the Senate.

The Commodity Futures Trading Commission (CFTC) has issued staff guidance that provides a regulatory pathway for non-custodial crypto wallets to connect users to regulated derivatives markets, provided the wallet providers maintain a strictly passive role. This development, detailed in Staff Letter No. 26-09, offers clarity for certain fintech products operating at the intersection of digital assets and traditional finance.

Conditions for Passive Access
The guidance, initially issued on March 17, 2026, to Phantom Technologies, grants formal relief from registering as an introducing broker or having its staff enrolled as associated persons. The core condition for this relief is that the non-custodial wallet must remain passive. This means the wallet provider cannot hold customer assets, generate trading signals, or exercise any discretion over trade execution. Instead, users interact directly with registered entities, such as designated contract markets and futures commission merchants, on the other side of the trade. Phantom Technologies, according to the letter, must make specific disclosures to users, ensuring they understand the regulated counterparties involved.

In September 2026, CFTC staff expanded this no-action relief to other passive technology service vendors that meet the same criteria. These criteria closely mirror those applied to Phantom Technologies: no custody of customer funds, no discretionary control over trade execution, no generation of trading signals, and the maintenance of direct user relationships with the registered exchange or merchant.

Regulatory Boundaries and Exclusions
This regulatory move signals a deliberate distinction drawn by the commission between regulated derivatives access and the broader decentralized finance (DeFi) ecosystem. Activities related to DeFi protocols and unregistered prediction markets are explicitly excluded from this exemption, indicating that the CFTC is carefully defining the boundaries of its current regulatory approach.

Broader Regulatory Context and Future Outlook
The guidance does not exist in isolation. The Securities and Exchange Commission (SEC) has reportedly undertaken parallel thinking regarding non-custodial interfaces for securities. This suggests the emergence of a dual regulatory track for fintech products that interact with both the commodities and securities markets, potentially paving the way for integrated financial platforms.

Industry participants have discussed the concept of a “super app,” where a single wallet could eventually serve as a user’s interface for spot markets, derivatives, lending, and payments simultaneously. This CFTC guidance offers a potential regulatory framework for such integrated services, provided they adhere to the strict conditions of passive operation and direct user relationships with regulated entities.

However, several uncertainties remain. The full scope and long-term implications of this guidance for the broader DeFi ecosystem are yet to be determined. Furthermore, the evolution of the SEC’s parallel thinking on non-custodial securities interfaces will be closely watched. The potential for “super app” wallets to integrate various financial services while strictly adhering to regulatory requirements presents both opportunities and challenges for innovation in the fintech space.

Why This Matters

The materials describe a narrow update: The CFTC provided no-action relief to Phantom Technologies, a non-custodial wallet provider, allowing it to facilitate user access to regulated crypto derivatives markets without requiring the wallet provider to register as an introducing broker. The full scope and long-term implications of this regulatory clarity for the broader DeFi ecosystem.

Broader Context

Source materials place the factual news in this context: The Commodity Futures Trading Commission has quietly redrawn one of the more contested lines in crypto regulation.

SEC Opens Door for Tokenized Stocks in U.

S. Equity Market

The U.S. Securities and Exchange Commission (SEC) has formally paved the way for tokenized stocks to enter the American equity market. On September 17, the agency unveiled a temporary “Innovation Exemption,” granting five years of regulatory relief to Tokenized Securities Venues. This exemption permits these venues to facilitate trades of tokenized National Market System stocks using permissioned automated market maker liquidity pools on public blockchains.

In simpler terms, qualified platforms can now connect buyers and sellers of actual stock tokens, which carry full shareholder rights, on open blockchain infrastructure. Crucially, these platforms will not be classified as exchanges under the Securities Exchange Act of 1934.

This new regulatory framework establishes a specific, albeit limited, pathway for operation. Tokenized Securities Venues (TSVs) are authorized to run permissioned automated market maker (AMM) liquidity pools on public, permissionless blockchains. The defining characteristic is “permissioned”: while the underlying blockchain is open, only pre-approved participants are allowed to provide liquidity or engage in trading. The exemption mandates that smart contracts must be auditable, and public transaction data, including price, size, time, and volume statistics, must be disclosed regularly.

The tokens themselves must grant the exact same shareholder rights as their traditional stock counterparts. This includes dividends, voting rights, and entitlements to corporate actions, all of which are transferred with the token. The exemption explicitly prohibits synthetic or derivative tokens that merely track price without conferring these ownership rights.

Furthermore, certain liquidity providers will be relieved from classification as dealers. These providers must be U.S.-based entities and operate within strict volume limitations tied to predefined criteria.

The timing of this announcement is significant. Congress recently failed to pass the CLARITY Act, legislation intended to establish a more permanent statutory framework for digital asset classification. With legislative clarity absent, the SEC has opted for this temporary relief measure. This allows the market to test tokenized equity trading while the agency gathers data for potential future rulemaking.

Commissioner Mark T. Uyeda voiced support for the exemption, highlighting tokenization’s potential to lower costs, enhance transparency, and boost liquidity, particularly for less liquid assets.

Chairman Paul S. Atkins and Director Jamie Selway underscored the SEC’s commitment to its dual mandate: safeguarding investors while fostering innovation within on-chain capital markets. The stringent conditions attached to the exemption, such as permissioning requirements, auditable smart contracts, and transparency mandates, are designed to prevent the opacity that has previously affected segments of the decentralized finance ecosystem, thereby prioritizing investor protection.

This exemption also builds upon previous internal SEC initiatives. The agency’s “Project Crypto” has been assessing various tokenization pilot programs, and major exchanges like Nasdaq and the NYSE have been exploring the issuance of tokenized stocks.

The prohibition on synthetic tokens represents a deliberate policy decision. It clearly distinguishes between tokenized equity, where a token signifies genuine ownership of a share, and synthetic exposure products that have become prevalent on offshore platforms.

The five-year duration of the exemption provides the SEC with ample opportunity to observe the performance of these venues under real-world market conditions. This will inform the agency’s decision on whether to make the framework permanent, amend it, or allow it to expire.

Seven Democratic senators are signaling a willingness to re-engage in bipartisan negotiations to advance the CLARITY Act before the end of the year, following a recent procedural vote failure in the U.S. Senate. This renewed effort suggests that legislative attempts to establish a framework for stablecoin interest rate mechanisms and clarify the tax classification of digital assets like Bitcoin and Ether are not entirely stalled.

The CLARITY Act faced a setback on September 16th when it failed a procedural vote with a 49-50 margin, delaying its progression to full Senate debate. Despite this outcome, a group of Democratic senators, including Kirsten Gillibrand, Mark Warner, Ruben Gallego, and Angela Alsobrooks, are reportedly in early discussions to explore the feasibility of reviving the bill. Their commitment to working in a bipartisan manner underscores a desire to find common ground on digital asset regulation.

Industry figures have reacted to the vote failure with a mix of disappointment and cautious optimism. Ripple CEO Brad Garlinghouse described the result as “heartbreaking,” while Galaxy CEO Mike Novogratz pointed to “ethical differences” as a contributing factor. Senator John Kennedy acknowledged that the vote failure was “not surprising” but emphasized that the bill is “not necessarily dead.”

The U.S. Senate is set to enter a lame-duck session following the November presidential election, a period often characterized by increased legislative activity. This timeframe presents a narrow window for senators to revise, negotiate, and vote on the CLARITY Act, with the end of 2026 as the target for potential passage. The success of these renewed efforts hinges on the ability of lawmakers to overcome existing hurdles and establish a revised legislative approach.

If passed by year-end, the CLARITY Act could establish the interest rate mechanism for USD stablecoins, potentially impacting the cost of dollar funding. Furthermore, it aims to clarify the tax classification of Bitcoin and Ether in the U.S., which could lead to corresponding adjustments in compliance rules for Asian exchanges. However, the full impact of such regulatory certainty may not be felt by market participants until the first quarter of the following year, drawing a parallel to Taiwan’s experience with implementing its crypto regulations, which took nearly a year after their announcement.

Significant uncertainties remain regarding the CLARITY Act’s future. It is unclear whether bipartisan negotiations will successfully restart or what specific ‘repackaged’ approach the bill might take if it is advanced. The exact timeline for the implementation of its provisions, even if passed by year-end, is also uncertain. Additionally, the SEC has indicated it may proceed with its regulatory framework regardless of the CLARITY Act’s passage, adding another layer of complexity to the evolving regulatory landscape for digital assets.

While the renewed commitment from Democratic senators offers a potential path forward, the legislative process remains challenging. The limited time remaining in the current session and the need for bipartisan consensus mean that the CLARITY Act’s ultimate fate is still undetermined.

Why This Matters

The materials describe a narrow update: Following a failed procedural vote on the CLARITY Act in the Senate, seven Democratic senators have expressed their commitment to working in a bipartisan manner to pass the bill by year-end. Whether bipartisan negotiations will successfully restart.

Broader Context

Source materials place the factual news in this context: CLARITY Act vote failure in the Senate was postponed until September.