The Commodity Futures Trading Commission is preparing to formalize its position on crypto software developers, a move that could reshape how non-custodial wallet providers operate under U.S. law.
CFTC signals shift from guidance to formal rules
Speaking at the Consensus Miami conference, CFTC Chair Michael Selig confirmed that the agency plans to convert its March no-action position into formal rulemaking. The effort marks a transition from case-specific relief toward broader regulatory clarity.
"As I said before, I prefer rulemaking, and so we're going to work to codify that and get it in rules very soon," Selig said.
He described the process as incremental rather than immediate.
"But as a start, it's kind of a crawl, walk, run. We want to get some clear guidance out there to help these firms start to develop and offer their software in the U.S."
The proposal builds on a March 17 no-action letter issued to Phantom Technologies Inc.. In that letter, the CFTC’s Market Participants Division stated it would not recommend enforcement action against the company for failing to register as an introducing broker, provided certain conditions are met.
Phantom case defines the boundary
The Phantom letter established a narrow but influential framework. The company provides self-custodial wallet software that enables users to interact with registered market participants. It does not take custody of user funds, does not act as a counterparty, and does not execute or guarantee trades.
It also avoids transaction-based compensation tied to trading activity and limits its role to software interfaces. These constraints shaped the agency’s view that Phantom does not perform traditional broker functions.
The distinction has practical consequences. Developers who remain within the boundaries of neutral software infrastructure may avoid broker registration requirements. Firms that move closer to handling assets or facilitating trades directly may face different obligations.
No-action letters, however, apply only to specific cases. Other developers must submit separate requests and demonstrate similar conditions to receive comparable treatment. Formal rulemaking would remove that barrier by extending protections across the market to qualifying firms.
SEC alignment reduces regulatory gaps
The Securities and Exchange Commission has taken a similar position. Its Division of Trading and Markets issued a staff statement that user interfaces, including DeFi wallets, generally do not qualify as brokers when they only provide infrastructure.
The statement described this approach as an interim step while broader regulatory questions remain under review. Even so, the alignment between the CFTC and SEC addresses a long-standing issue for developers who operate across overlapping jurisdictions.
Many crypto applications intersect with derivatives, securities, and emerging products such as prediction markets. Diverging interpretations between agencies would have created compliance risks even for firms that limit their role to software provision.
The coordinated direction suggests both regulators aim to define a consistent boundary between neutral technology providers and financial intermediaries.
Federal authority battle over prediction markets
Alongside the rulemaking effort, the CFTC continues to defend its authority over prediction markets. Selig stated that the agency will pursue legal action against states that attempt to restrict these markets under local gambling laws.
"We'll continue to bring lawsuits whenever we see these impinge on our authority," he said.
The agency has already filed cases against several states, including Wisconsin, Illinois, Arizona, Connecticut, and New York. These disputes center on whether federally regulated event contracts fall exclusively under CFTC jurisdiction.
Selig indicated that the legal conflict could escalate.
"We expect these matters to go up to the Supreme Court. We'll continue to bring lawsuits whenever we see these impinge on our authority."
A dual-track regulatory strategy
The CFTC’s approach now follows two parallel tracks. One focuses on providing certainty to developers through codified rules for non-custodial software. The other defends federal jurisdiction over emerging markets such as event-based contracts.
Both efforts rely on a consistent principle. The agency seeks to define where software ends and financial intermediation begins, while reinforcing its role as the primary regulator in that space.
The next step in the rulemaking process would likely involve a Notice of Proposed Rulemaking, followed by a public comment period. Selig has not provided a specific timeline beyond stating that action will come "very soon."
For developers, the outcome could determine whether innovation in wallet software and trading interfaces remains viable within the U.S. regulatory framework or continues to depend on case-by-case approvals.
Anastasiia G
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