CFTC Paves the Way for Derivatives Market Makers in Crypto
The U.S. Commodity Futures Trading Commission (CFTC) has opened a regulatory side door for software developers, allowing them to market derivatives and collect trading fees without registering as brokers.
This new relief is based on a framework originally granted to Phantom Technologies in March and now extended to a broader group of 'passive software' providers. As long as the software stays within its lane, it can connect users with registered markets and pass along their orders, but it cannot hold customer funds or exercise discretion over routing or execution.
The CFTC's Market Participants Division issued Conditional No-Action Relief on September 17, which lasts until formal rules or guidance replace the temporary staff position. This move comes after the U.S. Securities and Exchange Commission gave tokenized stocks the green light to trade through onchain automated market makers and liquidity pools.
The CFTC is drawing a line between building the road and driving the car, allowing software developers to build platforms that connect users with registered derivatives markets without turning them into brokers. This means that self-custodial wallets could theoretically display regulated event contracts or other CFTC-regulated derivatives beside a user's crypto holdings and get paid when customers trade them.