CFTC Expands Relief for Crypto Wallet Providers, Broader Access to Regulated Derivatives
The US Commodity Futures Trading Commission (CFTC) has expanded its relief for crypto wallet providers by exempting them from intermediary broker registration requirements. The move comes after the CFTC's March exemption of Phantom Technologies, a self-custodial wallet provider, which partnered with prediction market operator Kalshi to provide access to regulated derivatives.
The new guidance allows software providers that connect users to registered futures commission merchants (FCMs) and designated contract markets without holding user assets or exercising discretionary authority over orders. This makes it easier for crypto wallets to offer access to regulated products like perpetual futures and prediction markets without becoming CFTC-registered intermediary brokers.
Crypto.com and ProphetX have already adopted similar business models, operating CFTC-registered platforms in the prediction market industry. Aaron Brogan, founder of Brogan Law, which specializes in startups and regulated businesses, believes this could potentially enable prediction markets to be deployed almost anywhere, as long as they operate within the scope of the guidance.
The CFTC's decision follows the US Senate's rejection of the Clarity Act, a bill that would have established a comprehensive regulatory framework for crypto markets. While the defeat is seen as a setback by some, regulators and industry experts believe it shifts leadership in future rulemaking to the CFTC and the US Securities and Exchange Commission (SEC).