Key Insights
- US CFTC news today focuses on conditional broker-registration relief for qualifying passive software.
- SEC separately grants temporary conditional relief for certain tokenized stock trading.
- The Senate failed to advance the CLARITY Act after a 49-50 cloture vote.
The latest US CFTC news gives qualifying passive software providers a broader route to avoid introducing crypto broker registration under specified conditions. The Commodity Futures Trading Commission’s Market Participants Division issued the no-action position on September 17.
Staff said it would not recommend enforcement over certain crypto broker registration requirements for eligible providers. The relief covers software facilitating user trading with regulated futures intermediaries and designated contract markets.
The development expands an approach the CFTC previously applied to self-custodial wallet software. Meanwhile, the SEC separately issued temporary relief for certain tokenized stock trading venues on the same day. Both actions followed the Senate’s failure to advance federal digital asset market-structure legislation earlier in the week.
US CFTC News: Crypto Regulation Expands Software Relief
The CFTC’s Market Participants Division said the new position broadly covers providers of passive software. However, providers must satisfy the conditions specified in the staff letter.
Under the position, division staff will not recommend enforcement for failing to register as an introducing broker. The same position covers relevant personnel who otherwise could face associated-person registration requirements.
However, the relief applies only to the software activities identified by the division. Providers may facilitate trading between users and registered futures commission merchants, introducing brokers, and designated contract markets.
The latest CFTC crypto regulation follows earlier relief granted to Phantom Technologies in March. Phantom develops self-custodial crypto asset wallet software.
In that earlier case, Phantom proposed software connecting users with registered futures firms and designated contract markets. CFTC staff granted conditional no-action relief from introducing broker and associated-person registration for those activities.
The September action now makes similar treatment available more broadly to qualifying passive software providers. However, the staff position remains subject to the conditions set by the division.
US SEC Issues Separate Innovation Exemption
Meanwhile, the Securities and Exchange Commission issued its own regulatory action hours earlier. The SEC granted temporary, conditional relief for Tokenized Securities Venues, known as TSVs.
The exemption allows qualifying TSVs to trade tokenized National Market System stocks through permissioned automated market makers and liquidity pools. It temporarily exempts eligible venues from the Exchange Act definition of an exchange.
However, the SEC attached several operating conditions to the exemption. Tokenized stocks face limits on symbols and trading volume under the framework.
TSVs must also verify that tokenized shares provide the same rights as equivalent traditional NMS stocks. Additionally, issuers can object when an unaffiliated third party tokenizes their securities.
The SEC also requires public and auditable smart contracts deployed on public, permissionless distributed ledgers. Trading must stop when the underlying stock stops trading on its primary exchange.
SEC Chairman Paul Atkins described the measure as temporary while the Commission evaluates further rulemaking. Trading and Markets Director Jamie Selway said the division would work with parties seeking to operate TSVs.
US CFTC News: Agencies Act After CLARITY Vote
The two agency actions followed a Senate procedural vote on federal crypto market-structure legislation. On September 15, senators voted 49-50 against invoking cloture on the motion to proceed to H.R. 3633.
The measure needed 60 votes to clear that procedural hurdle. As a result, the Senate did not advance the bill at that stage.
After the vote, Atkins said the SEC would continue acting within its existing statutory authority. His September 17 statement also linked the Innovation Exemption to Congress’s unsuccessful effort to advance the CLARITY Act.
CFTC Chair Mike Selig similarly said his agency planned to continue rulemaking under its existing statutory authorities. Meanwhile, the latest passive-software relief focuses specifically on qualifying providers and their crypto broker registration obligations.
