CFTC moves to codify protections for non-custodial software developers

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CFTC codifies protections for developers

Highlights

CFTC Chair Michael Selig announced plans to codify current guidance exempting non-custodial crypto wallet developers like Phantom from broker registration requirements.
The March no-action letter clarified that developers providing self-custodial wallet software under specific conditions are not required to register as brokers, supporting further U.S. software innovation.
Selig confirmed the CFTC's exclusive jurisdiction over prediction markets and reiterated ongoing legal action against states—including Wisconsin, Illinois, Arizona, Connecticut, and New York—challenging federal oversight.

Rulemaking plan follows Phantom guidance

The Block reported that CFTC Chair Michael Selig says the agency is considering formal rulemaking to lock in its current position on non-custodial software developers. Speaking on Tuesday at the Consensus Miami conference hosted by CoinDesk, Selig says he prefers rulemaking and that the commission plans to codify the approach in its rules very soon.

The move builds on a no-action letter issued in March, when the CFTC said it would not recommend enforcement action against crypto wallet provider Phantom for failing to register as a broker. Selig says the letter establishes that software developers meeting certain conditions and offering self-custodial wallet software are not required to register as brokers.

Selig, now just over a year into his tenure as chair, says the agency wants to provide clear guidance so firms can continue developing and offering software in the U.S. He describes the process as a gradual effort to move from guidance toward full regulatory codification.

Broader crypto oversight and prediction market enforcement

The CFTC's stance comes as both it and the Securities and Exchange Commission take steps to clarify how software developers are treated under federal rules. Last month, the SEC's Division of Trading and Markets issued a staff statement saying interfaces such as DeFi wallets would generally not be considered brokers, describing that position as an interim step while broader regulatory questions remain under review.

Selig also reiterates that prediction markets fall under the CFTC's exclusive jurisdiction and says the agency will keep suing states that interfere with that authority. Several states have tried to ban prediction markets under local gaming and gambling laws, especially for sports-related contracts, and the CFTC has already sued Wisconsin, Illinois, Arizona, Connecticut and New York.

Our earlier article on the Senate’s timeline for federal crypto legislation explained that the next steps in the Senate Banking Committee could be decisive for whether a broader market structure bill advances. It also highlighted the industry’s push for statutory rules that would bring more permanence than shifting SEC and CFTC guidance, as lawmakers debate how to split oversight and address issues such as stablecoin rewards and illicit-finance concerns.

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