CFTC staff will not recommend enforcement against qualifying passive software providers for failure to register as introducing brokers or associated persons, subject to specified conditions. The letter is not a universal software safe harbor.
Updated September 26, 2026: This article retains its complete original text, with researched updates integrated into the relevant sections.
On September 17, 2026, the Commodity Futures Trading Commission’s Market Participants Division issued a broadly available no-action position for certain providers of “passive software.” The position matters because software can do more than display information. A product that introduces users to a derivatives venue, promotes particular contracts, and earns transaction-based compensation can implicate the Commodity Exchange Act’s introducing-broker framework even when no employee takes an order by telephone.
The operative document is CFTC Staff Letter 26-25, not merely the accompanying press release. The letter extends, on substantially the same terms, the fact-specific position that staff gave Phantom Technologies in Staff Letter 26-09. It is a staff enforcement position, not a Commission rule, statutory exemption, registration category, or conclusion that every front-end provider falls outside the introducing-broker definition.
The registration issue is functional
The Commodity Exchange Act and CFTC Regulation 1.3 generally define an introducing broker by reference to solicitation or acceptance of orders for specified commodity-interest transactions, for compensation or profit, without accepting customer money or property to margin or secure those transactions. The associated-person provisions reach individuals engaged in solicitation and their supervisors. The definition therefore turns on conduct and economics, not on whether a company calls itself a wallet, application, interface, or technology vendor.
Letter 26-25 recognizes that the covered provider may market its service and its relationships with registered entities, promote the availability of particular derivatives contracts, introduce users to specific registrants, and receive revenue sharing or a transaction-based fee. Those features make the letter commercially meaningful. They also explain why relying on the word “passive” alone would be a mistake.
The covered activities remain tightly described. The provider develops and distributes front-end software through which users review market and position information, see product offerings, and transmit their own orders directly to registered entities. The provider has no affirmative involvement in a particular order. Users trade on a designated contract market directly as members or through a registered futures commission merchant or introducing broker. Assets securing positions remain with the derivatives clearing organization and/or an FCM. The provider does not hold or control user assets, generate express buy or sell signals, or exercise discretion over order routing or execution.
The relief is not limited to crypto-asset software. The Division expressly states that qualifying passive software providers may operate outside the crypto context, provided their activities fit the letter’s Covered Activities and conditions.
The software may be a standalone product or embedded in an existing wallet. If embedded, the interface must clearly distinguish Commission-regulated activity from other activity. Users also must be able to access the relevant registrant independently. A product that blocks direct access, chooses routing, provides trade signals, or takes custody has departed from material facts supporting the position.
CFTC Staff Letter 26-25 addresses a recurring derivatives-market question:
When does software remain technology, and when does it become regulated intermediation?
The answer in the letter is conditional.
The relief is a staff no-action position
The Market Participants Division issued Letter 26-25 on September 17, 2026.
Subject to the letter's specified conditions, staff will not recommend that the Commission bring an enforcement action against a qualifying passive software provider or relevant personnel for failing to register as:
- an introducing broker; or
- an associated person of an introducing broker.
That procedural status matters.
A no-action letter reflects an enforcement position by staff based on described facts.
It does not rewrite the Commodity Exchange Act.
Counterparties matter
The relief concerns software facilitating trading with specified registered market participants and designated contract markets.
A provider should document:
- which FCMs are connected;
- which IBs are connected;
- which DCMs are connected;
- the role of each counterparty;
- how users are onboarded; and
- what the provider does and does not control.
A change in market structure can change the legal analysis.
Relief can end or change
The letter is subject to its own conditions and endpoint.
Staff no-action relief also can be modified, withdrawn, superseded, or overtaken by Commission rulemaking.
A provider relying on the letter should maintain a current compliance file rather than treat the 2026 analysis as permanent.
Ten conditions turn a product description into a compliance program
Relief is subject to ten specified conditions. First, the provider, its principals, and soliciting personnel may not be subject to statutory disqualification absent a Division waiver, and later disqualification must be reported. Second, users must receive and acknowledge disclosures concerning the provider’s relationships with registrants and potential conflicts, including fees. Third, the provider must deliver and retain acknowledgment of an appropriate risk disclosure addressing Regulation 1.55 risks, unless a registered entity already has that obligation.
Fourth, users must be onboarded as direct DCM members or customers of registered FCMs or IBs, with independent access to the registrant. Fifth, the provider must adopt and enforce public-communications and marketing procedures as if it were a registered IB. Sixth, it may not engage in advertising or promotions that would require NFA preapproval under NFA Compliance Rule 2-29 if it were registered.
Seventh, the provider and each of its Registrants must execute and file an undertaking under which they accept joint and several liability for Commodity Exchange Act or CFTC regulation violations by the provider or its personnel when engaging in Covered Activities with or on behalf of that Registrant, and consent to Commission investigative and enforcement jurisdiction. Eighth, the provider must maintain compliance and Commission-regulated business records consistently with Regulation 1.31. Ninth, it must notify the Division of insolvency or bankruptcy. Tenth, it must file a notice agreeing to the conditions and consenting to jurisdiction. Required submissions go to the MPD Director at the address identified in the letter and must reference Letter 26-25.
These are not minor onboarding tasks. Product, legal, compliance, marketing, finance, and registered partners need a shared view of the operating model. A fee change, new recommendation feature, smart-routing tool, custody integration, or marketing campaign can alter the analysis.
A defensible reliance file should track the product as it changes
Before relying on the letter, a provider should map each production feature and revenue stream to the covered-activities description. The file should identify every registered counterparty, the path of an order, who controls routing, where collateral sits, what users can do without the provider, and how the interface separates regulated derivatives from other products.
The same file should contain executed undertakings, filed notices, user disclosures and acknowledgments, disqualification checks, marketing approvals, record-retention controls, and incident escalation procedures. Product-change review should ask whether a proposed feature introduces a recommendation, discretion, custody, or a new form of compensation. Testing should verify what the interface actually does, rather than relying only on policy language.
Letter 26-25 remains effective only until the effective date of a Commission rulemaking or guidance addressing IB registration for software developers. It reflects the Division’s views, does not bind the Commission, depends on the stated facts, and may be modified, suspended, conditioned, or terminated. That status favors a monitored reliance analysis rather than a one-time legal memo.
The practical line is not “software versus broker.” It is the line between a particular passive interface operating under ten conditions and a product whose conduct, compensation, custody, recommendations, or discretion materially differs.
Building software that connects users to derivatives markets? Contact Braeden Anderson to assess whether your product and business model fit the staff relief and where registration or other compliance obligations may remain. Review your trading-software model.
The software must remain passive
The central compliance issue is function, not branding.
A provider should test whether it remains within the operating model described by the letter or has moved into activities such as:
- soliciting customers;
- recommending transactions;
- exercising discretion;
- negotiating transaction terms;
- handling customer property;
- controlling or materially influencing transaction decisions; or
- performing other intermediary functions.
Calling a product “software” does not resolve the registration analysis.
September 2026 researched developments
September 26, 2026 researched update: The following developments supplement the original article where the current research did not map cleanly to an existing section.
Compensation should be monitored
A provider should understand exactly how it is paid.
Relevant features can include:
- referral fees;
- revenue sharing;
- transaction-linked compensation;
- subscription fees;
- routing economics; and
- incentives tied to trading volume.
A commercial-model change should trigger a new registration analysis.
Automation can still influence a trading decision
A system does not become passive merely because no employee speaks to the user.
Algorithmic prompts, ranking, routing, default settings, or transaction suggestions can affect the functional analysis.
Providers should document whether automated features:
- recommend;
- prioritize;
- select;
- route;
- filter; or
- otherwise influence trading activity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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