Staff from the Market Participants Division (MPD) of the Commodity Futures Trading Commission (CFTC or Commission) issued No-Action Letter 26-09 (Letter 26-09), providing significant regulatory relief to a cryptoasset wallet technology service vendor (TSV) seeking to expand its services into CFTC-regulated derivatives. Letter 26-09 expands upon a well-established body of CFTC guidance dating back to 2002, when the Commission first began issuing interpretive letters to TSVs providing that certain passive technology providers need not register as introducing brokers (IBs). The new relief in Letter 26-09 broadens the scope of permissible TSV activities beyond the traditional framework, allowing marketing, user introductions and transaction-based compensation arrangements that would previously have required registration.
Notably, the relief in Letter 26-09 may have far greater impacts beyond cryptoasset custody. In fact, it may be particularly impactful for the prediction markets space, where some companies have structured themselves as TSVs. This approach historically carried significant limitations on compensation arrangements and marketing activities. Letter 26-09 addresses these constraints by permitting transaction-based compensation and more active user introductions under its new framework.
In addition, the letter represents a notable development for the blockchain and digital asset industry, as it creates a pathway for self-custodial wallet TSVs to facilitate user access to derivatives markets — including event contracts and perpetual contracts — without registering as IBs or requiring their personnel to register as associated persons (APs). The relief may have broader implications for decentralized finance (DeFi) applications and front-end interface TSVs seeking to offer access to derivatives and other CFTC-regulated financial products.
The Requesting Company and Its Request
The company requesting relief (Requesting Company) is a TSV that develops and distributes self-custodial cryptoasset wallet software applications for use on several major blockchains, including Bitcoin, Ethereum and Solana. The Requesting Company does not provide custody services for cryptoassets. Rather, akin to a password manager, its software enables users to generate and manage cryptographic credentials for viewing, storing and conducting self-directed cryptoasset transactions. The Requesting Company also provides a user interface for customers to transmit transaction instructions to cryptoasset trading protocols and other decentralized applications.
The Requesting Company proposed to expand its self-custodial wallet offering to enable users to trade CFTC-regulated derivatives. Specifically, it sought to act as a TSV to designated contract markets (DCMs), futures commission merchants (FCMs) or IBs, allowing users to access trading in CFTC-regulated derivatives through the Requesting Company’s front-end interface software. The proposed activities would include developing and distributing software for users to review market data, view product information and submit orders for derivatives products — including event contracts, perpetual contracts and other CFTC-regulated derivatives — directly to collaborating market participants.
Importantly, the Requesting Company’s proposed business model would involve contracting with collaborators (which could be DCMs, FCMs, or IBs) who may agree to share a portion of their relevant revenues with the Requesting Company, and the Requesting Company may also charge transaction-based fees directly to users. The Requesting Company and its personnel would market its services and relationships with collaborators, including promoting the availability of derivatives contracts and introducing users to specific collaborators. However, users would face no contractual or operational restriction from accessing those collaborators directly.
The Relief Granted and Its Conditions
MPD staff granted no-action relief based on the Requesting Company’s limited involvement in the order submission process. MPD staff found that the Requesting Company’s involvement would be limited to passively providing software that enables users to transmit orders directly to collaborators, without any affirmative involvement with particular orders. At no point would the company generate express “buy” or “sell” signals or exercise discretion with respect to the routing or execution of user orders.
The relief in Letter 26-09 is subject to the following 10 conditions.
- The company and its principals must not be subject to statutory disqualification, and must notify the Division if any become disqualified.
- The company must disclose its relationship with collaborators, including potential conflicts of interest and fees, and users must acknowledge receipt.
- The company must provide risk disclosures consistent with CFTC Rule 1.55(b), unless a collaborator already provides them.
- Users must be onboarded directly by the DCM, FCM, or IB and must be able to access that collaborator without the company’s involvement.
- The company must adopt policies to comply with CFTC and NFA rules on public communications and marketing, as if it were a registered IB.
- The company must not engage in advertising that would require NFA pre-approval under NFA Compliance Rule 2-29.
- The company and each collaborator must agree in writing to joint and several liability for any violations of CEA or CFTC regulations, and must consent to the Commission’s enforcement jurisdiction.
- The company must maintain compliance and business records consistent with CFTC Regulation 1.31.
- The company must notify the Division if it becomes insolvent or enters bankruptcy.
- The company must file a notice agreeing to these conditions and consenting to the Commission’s enforcement jurisdiction.
The relief in Letter 26-09 does not have a fixed expiration date. However, MPD explicitly stated that the no-action position will remain in effect “until the effective date of a Commission rulemaking or guidance addressing the application of the IB registration requirement to TSVs.” MPD also retains authority to condition further, modify, suspend, terminate, or otherwise restrict the terms of the position at its discretion.
Relief to TSVs in Derivatives Markets Isn’t New
Letter 26-09 builds upon a well-established body of CFTC guidance regarding TSVs and their regulatory status under the Commodity Exchange Act. Understanding this regulatory history is essential to appreciating the significance of the new relief.
Since 2002, MPD’s predecessor division (the Division of Clearing and Intermediary Oversight (DCIO)) has issued a series of interpretive letters (TSV Letters) establishing a framework for determining whether TSVs facilitating access to FCM order entry systems must register as introducing brokers. In general, these letters established six key factors that, when satisfied, indicate a TSV need not register as an IB (Six Factors).
- Customers must have pre-existing relationships with FCMs or IBs independent of their relationship with the TSV.
- TSVs must not recommend, propose or encourage customers to use any specific FCM or IB, even upon request.
- The TSV’s platform must not produce express “buy” or “sell” signals.
- The TSV must not solicit or accept orders for any commodity interest transactions.
- Fees charged by the TSV must not be related to fees charged by the FCM or IB for executing orders.
- The TSV must not receive compensation from any FCM or IB serving its customers, nor maintain a membership with trading privileges on any DCM.
The CFTC has emphasized that the most critical consideration is whether the TSV’s activities constitute “soliciting or accepting orders.” The regulatory focus has been functional rather than structural, examining what the TSV in practice does rather than how it labels its business.
How Letter 26-09 Expands the Six-Factor Framework
Letter 26-09 represents an important evolution of the TSV framework developed over the last 24 years. The Requesting Company acknowledged that its proposed activities fall outside the traditional Six Factors, most notably, the collaborator and user need not have a pre-existing relationship. Rather than requiring the Requesting Company to restructure its business model to fit within the existing Six Factors, MPD crafted a new set of conditions that preserve regulatory protections while accommodating an innovative business model.
Key departures from the traditional Six Factors include permitting the TSV to market its services and relationships with collaborators, introducing users to specific collaborators, charging transaction-based fees directly to users and receiving revenue-sharing from collaborators. These features would have disqualified a TSV under the original DCIO letters but are now permissible subject to the 10 conditions outlined in Letter 26-09.
This approach reflects the Commission’s regulatory willingness to accommodate technology-driven business models that do not fit neatly into traditional categories. MPD’s position suggests that passive software provision — where the provider does not exercise discretion over order routing or execution and does not generate trading signals — can be distinguished from broker activities requiring registration, even where the provider engages in marketing and receives transaction-linked compensation.
Implications for Prediction Markets
Letter 26-09 may have significant implications for the prediction markets industry. Some entities seeking to enter prediction markets have chosen to structure themselves as TSVs to DCMs. While this TSV approach allowed these companies to focus on entering the space quickly and operate without CFTC registration, it came with meaningful constraints. Under the traditional Six-Factor framework established in the TSV Letters, TSVs could not tie their compensation to customer transactions, could not receive revenue-sharing from the DCM based on trading activity, and could not engage in marketing or introduce users to specific collaborators. These limitations restricted the business models available to prediction market front-end providers.
Letter 26-09 changes this landscape. By permitting TSVs to market their services and relationships with collaborators, introduce users to specific collaborators, charge transaction-based fees directly to users and receive revenue sharing from collaborators, the relief removes key barriers that previously constrained prediction market front-end providers operating under the TSV model. Prediction market operators structured as TSVs may now adopt more flexible, commercially viable business arrangements — including compensation tied to trading volume — without requiring IB registration, provided they satisfy the 10 conditions set forth in Letter 26-09. This represents a potentially transformative development for the prediction markets sector, enabling greater alignment between the economic interests of front-end providers and the platforms they serve.
Implications for Fintech, Digital Assets, Blockchain and DeFi
Letter 26-09 carries significant implications for the broader fintech and digital asset ecosystem. In the fintech industry more broadly, the letter demonstrates the CFTC’s willingness to accommodate innovative business models that do not neatly fit within traditional regulatory categories. By recognizing that passive TSVs performing limited functions can operate without full broker registration, the letter provides a template for technology companies seeking to build bridges between emerging digital asset infrastructure and traditional regulated markets.
For the blockchain and digital asset sector specifically, the letter provides important guidance on how wallet providers and similar software developers can expand their offerings to include regulated financial products. Letter 26-09 validates a business model in which self-custodial wallet software — operating on major blockchains like Bitcoin, Ethereum and Solana — can serve as a front-end interface for accessing derivatives markets while maintaining the user’s direct control over their assets. For example, this addresses a key concern discussed in the blockchain and DeFi communities regarding how self-custody should be treated under existing regulatory frameworks.
The implications for DeFi could be particularly noteworthy. Letter 26-09 provides a potential framework for how front-end interface providers can navigate regulatory requirements, at least in the context of IB registration, by maintaining a passive role that does not involve discretion over order routing or execution.
However, market participants should note important limitations. Letter 26-09 represents the views of MPD only and is not binding on the full Commission. It is based on the specific facts and circumstances presented in Letter 26-09, and different or changed facts could render the position void. Additionally, the relief in Letter 26-09 is limited to IB and AP registration requirements and does not address other potential regulatory considerations, such as DCM or swap execution facility registration, anti-fraud provisions, or other applicable requirements under the CEA.
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Letter 26-09 represents a meaningful step toward regulatory accommodation of innovative fintech business models in the digital asset space. Combined with the broader SEC-CFTC harmonization efforts and the Commission’s stated commitment to innovation-friendly approaches, Letter 26-09 suggests an evolving regulatory landscape that may become increasingly receptive to technology-driven financial services. Fintech companies, digital asset TSVs and DeFi developers should monitor these developments closely as the regulatory framework for TSVs in the derivatives space continues to take shape.
