America’s top financial watchdogs aren’t waiting on the Clarity Act to bring clarity to onshore crypto markets.
In the wake of yesterday’s SEC unveil of the agency’s new Innovation Exemption for tokenized stocks, the CFTC’s Market Participants Division dropped a companion advance: a no-action letter that takes one wallet’s compliance designation and opens it up to all trading software, i.e. including other crypto projects.
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Recall that back in March 2026, the CFTC granted Phantom, i.e. the wallet, a bespoke no-action position letting it build a frontend that routes users into CFTC-regulated derivatives (like event contracts and perpetuals) without registering as an introducing broker, the CEA’s catch-all term for anyone soliciting or accepting derivatives orders for compensation.
Phantom’s setup, which didn’t require that users have a preexisting broker relationship, didn’t fit the CFTC’s older 2006–2008 “TSV” no-action letters, which were narrower. So the agency wrote Phantom a new one, featuring fresh conditions around disclosures, risk statements, recordkeeping, joint liability if things go sideways, and so forth.
One problem, though. A no-action letter only protects the company it’s addressed to. Nobody else could rely on Phantom’s clarification.
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Thus what changed yesterday was the CFTC’s release of Staff Letter 26-25, which takes Phantom’s exact framework and conditions and opens them to any Passive Software Provider (PSP), i.e. frontends or wallets that route users to a regulated derivatives venue without holding funds, generating buy/sell recommendations, or exercising discretion over orders. Meet the same conditions as Phantom, get the same protections.
Of course, it’s worth noting that this new letter explicitly states that PSPs don’t have to be limited to crypto at all. These conditions can apply to, and work for, any software doing passive trade routing. Yet naturally with the rise of the perps-to-wallets pipeline in crypto over the past year, it’s an extremely relevant greenlight for wallets and DeFi frontends that want to plug users into CFTC-regulated products like perps without becoming a registered broker themselves.
The big picture
Similar to the SEC’s Innovation Exemption, the CFTC’s latest no-action move is a productive step forward for crypto in the U.S., though it’s not a panacea for crypto’s regulatory needs in America.
Remember that a no-action letter is just a promise from staff not to recommend enforcement. It’s not a rule, and it’s only good “until the effective date of a Commission rulemaking,” meaning it can be narrowed or pulled if the agency’s leadership deems it necessary later.
However, that rulemaking may already be moving. Yesterday, the CFTC also filed a new rule, Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets, with the White House’s OIRA wing for review. This push is still at the earliest “prerule” stage, with the agency declining to detail what’s inside for now.
The glaring question, namely whether building noncustodial software can get you criminally prosecuted, is still open. Coin Center published an op-ed yesterday arguing (about AI mostly) that open-source software being “unstoppable” doesn’t protect the humans who write it, as governments will just prosecute the developer instead as we’ve seen in the case of Roman Storm over Tornado Cash.
Indeed, Storm was convicted last year on one count for building a privacy tool, and his retrial on the far more serious money-laundering and sanctions charges recently got pushed to April 2027. In crypto, it’s an outrage that the case still hasn’t been dropped (particularly with the Trump admin’s pro-crypto overtures), which is why Coin Center’s own Michael Lewellen is separately suing the Department of Justice, seeking a declaration that writing noncustodial OSS isn’t a crime to begin with.
To be sure, the CFTC has no say over the DOJ’s business, or the SEC’s, etc. They can’t fix all that ails American crypto on their own. But their advancing forward on protecting passive software creators is uplifting and comforting progress, even if it’s limited to broker regulation and not criminality in general. This progress is worth applauding, but we still need more of it on more fronts before we can truly celebrate.
