CFTC to Codify Phantom No-Action for Non-Custodial Software

At Consensus Miami, Mike Selig, chair of the Commodity Futures Trading Commission, announced plans to turn the commission’s March no-action position for Phantom Technologies into formal rulemaking. The agency intends the rules to apply to non-custodial software providers that meet specified conditions and to remove the need for individual no-action requests.

The March staff letter from the CFTC’s Market Participants Division said it would not recommend enforcement against Phantom for failing to register as an introducing broker, or against certain Phantom personnel for failing to register as associated persons, so long as Phantom remains strictly non-custodial. The company does not accept or hold customer funds or digital assets, does not act as a counterparty, does not guarantee execution, does not solicit or accept futures or swaps orders, and does not receive transaction-based compensation tied to trading activity. Its activities are limited to providing user interfaces and software tools and to facilitating connections with CFTC-registered entities such as futures commission merchants, introducing brokers and designated contract markets.

Under the proposed rule, those limitations would be written into agency rules and would apply automatically to any non-custodial software provider that satisfies the conditions. The change is intended to make the relief available across firms without separate filings and to make it more durable across future commissions. Selig characterized the rollout as a “crawl, walk, run” process and said the agency plans to issue guidance in stages.

SEC staff have taken a parallel position that providing infrastructure or technology alone does not, by itself, constitute acting as a broker in securities transactions. The two agencies signed a March 11 memorandum of understanding to coordinate oversight and listed crypto as a priority workstream. Many non-custodial wallet makers and software developers operate where derivatives, securities and prediction markets overlap; regulators say aligned positions reduce legal uncertainty for those firms.

Separately, the CFTC has filed lawsuits against Wisconsin, Illinois, Arizona, Connecticut and New York over state laws that restrict or ban event contracts under state gambling statutes. The agency argues federal law preempts state limits on certain event contracts. Selig expects some of those cases to reach the Supreme Court and indicated the commission will sue when state actions appear to encroach on its jurisdiction.

The next formal step for the Phantom protections is a Notice of Proposed Rulemaking followed by a public comment period. No firm timeline was given beyond an expectation the agency will act “very soon.”