CFTC clears path for crypto and prediction markets with developer exemption

On Thursday, the Commodity Futures Trading Commission cleared a major hurdle for cryptocurrency wallets and prediction platforms by extending an enforcement exemption to software developers.

The agency's Market Participants Division issued a staff letter stating it would not recommend enforcement action against "passive software" providers who fail to register as introducing brokers. The relief applies to firms that write and market software helping users trade directly with registered futures commission merchants, introducing brokers, and designated contract markets.

The decision broadens a policy first tested in March, when the regulator granted a temporary "no-action" position to Phantom Technologies, a self-custodial crypto wallet. Under older guidelines, software companies that routed user trade orders to futures merchants and collected fees risked being classified as brokers, requiring them to undergo a complex and expensive registration process.

By extending the policy, the regulator is acknowledging that software developers who do not hold customer funds or make trading decisions should not be treated like traditional brokers.

"Now the CFTC has opened that same path to other software providers, and that’s a win for the whole industry," said Brandon Millman, Phantom’s chief executive and co-founder, in a post on X. Millman added that the approach pairs consumer-protection software with regulated partners, giving users safer access to financial services.

The shift is expected to accelerate the integration of regulated trading features into third-party apps and websites, particularly in the fast-growing areas of crypto assets and event-based prediction markets.

The move was welcomed by industry executives who have long complained about regulatory overreach in the United States. Ryan VanGrack, the vice chair of Coinbase, linked the CFTC's letter to a separate "innovation exemption" issued by the Securities and Exchange Commission.

"After years of regulatory standstill, we just saw meaningful relief in a matter of hours," VanGrack wrote on X. "The tide has officially turned."