CFTC Letter 26-25: No-Action Relief for Passive Software Providers and Event Contract Apps

On September 17, 2026, the CFTC's Market Participants Division issued Letter No. 26-25. It takes a no-action position the Division granted to one company in March and extends it to any software provider that qualifies. The March letter went to Phantom Technologies, a developer of crypto wallet software. It said Phantom could let users trade event contracts and other CFTC-regulated products through its software without registering as an introducing broker, the registration category for firms that solicit or accept customer orders. That relief came with conditions, and it applied only to Phantom. Letter 26-25 makes the same position available to any software provider that meets those conditions and files a notice with the Division. For the growing number of apps that connect retail traders to event contracts and other regulated derivatives, the question becomes whether the company can live with the terms.

The Phantom Letter and the TSV Precedent

Letter 26-25 builds on CFTC Letter No. 26-09, which the Division issued on March 17, 2026 to Phantom Technologies, Inc., a developer of self-custodial crypto wallet software. In that letter, the Division said it would not recommend enforcement against Phantom for failing to register as an introducing broker, provided Phantom stayed within the stated conditions. No one else could use it. Under CFTC Regulation 140.99(a)(2), only the named beneficiary of a no-action letter may rely on it, which left every other company with a similar product where it started.

The Phantom letter was itself an extension of older staff positions. In a series of letters issued between 2006 and 2008, the Division of Clearing and Intermediary Oversight, a predecessor of today's Market Participants Division, concluded that certain technology service vendors, or TSVs, were not introducing brokers. Those letters rested on a narrow set of facts. Each customer already had an account with a futures commission merchant or introducing broker, the vendor's software produced no buy or sell signals, and the vendor's fees had no connection to trade execution. Phantom's plan did not fit that mold. It intended to introduce users to brokers and exchanges they had no existing relationship with, to take a share of the broker's revenue, and to charge users a transaction fee. That is why Phantom needed a letter of its own rather than a place under the TSV letters.

What Letter 26-25 Changes

Letter 26-25 makes that position available to any company the Division calls a "passive software provider," or PSP. A PSP does not need a letter of its own. It qualifies by meeting ten conditions and filing with the Division a notice and the required undertakings. The letter also states, in a footnote, that PSPs are not limited to providers of crypto-related software. The activities it covers include front-end software through which users view market data and send orders for event contracts, perpetual contracts, and other CFTC-regulated derivatives directly to a registered exchange or broker.

The practical change is in the mechanism. Instead of writing to the CFTC and waiting, a company that fits the profile can file its notice and proceed. The Division says the position will stay in place until the CFTC adopts a rule or guidance addressing how the introducing broker registration requirement applies to software developers.

The Ten Conditions

The conditions are not trivial, and several of them impose obligations that continue for as long as the PSP operates. These are the ones most likely to shape how a PSP works with the exchanges and brokers it partners with, which the letter calls "Registrants":

• The PSP, its principals, and anyone who solicits users on its behalf must be free of statutory disqualification. If that changes, the PSP has to notify the Division.
• Users must receive, and acknowledge, a disclosure of the PSP's relationship with the Registrant, including fees, and a risk disclosure unless the Registrant is already required to provide one.
• Users open their accounts directly with the Registrant, as customers or members, and must remain able to reach the Registrant without going through the PSP's software.
• The PSP must run its marketing and communications as if it were a registered IB, which means the standards of NFA Compliance Rule 2-29 apply, and it cannot run promotions that would need NFA pre-approval.
• The PSP and each Registrant must sign a written undertaking accepting joint and several liability for violations arising from the PSP's covered activities, and file it with the Division.
• A PSP affiliated with a state or tribal government must include a waiver of sovereign immunity sufficient to make its consent to CFTC jurisdiction enforceable.
• The PSP itself files a notice agreeing to the conditions and consenting to the CFTC's jurisdiction.

The remaining conditions cover recordkeeping under CFTC Regulation 1.31 and notice to the Division if the PSP becomes insolvent or enters bankruptcy.

Three Conditions Worth a Closer Look

The joint-and-several undertaking

Condition seven is the one a Registrant's general counsel will read twice. The PSP and each exchange or broker it works with must sign a written undertaking in which both agree to be jointly and severally liable for any violation of the Commodity Exchange Act or CFTC regulations by the PSP or its personnel while engaged in the covered activities with or on behalf of that Registrant. Both parties also consent to the CFTC's jurisdiction to investigate and bring an enforcement action, and the PSP files each undertaking with the Division.

Joint and several liability means the CFTC can look to either party for the whole of a violation, without first sorting out fault between them. A Registrant that signs is standing behind the PSP's marketing, disclosures, and personnel much as a futures commission merchant stands behind a guaranteed introducing broker under a guarantee agreement. The structure is familiar. What is new is that the party on the other end of it is unregistered.

Two consequences follow. The Registrant will want the tools a guarantor FCM has: approval rights over promotional material, access to the PSP's records, the ability to require training and background checks for the PSP's personnel, and a clear right to terminate. The PSP should expect to give them. And because the undertaking is signed with each Registrant separately, a PSP that connects to several exchanges or brokers will have several on file, each with a counterparty deciding for itself how much oversight to impose.

Marketing and compliance as if registered

Conditions five and six place a PSP under the marketing rules of a registered IB without making it one. The PSP must adopt and enforce written policies reasonably designed to comply with the CFTC's antifraud provisions and with NFA Compliance Rule 2-29, the rule that governs members' communications with the public and promotional material. It also may not run any promotion that a registered IB would have to submit to NFA for pre-approval, since a non-member has no way to submit one.

Rule 2-29 asks for more than the absence of fraud. Promotional material may not mention the possibility of profit without an equally prominent discussion of the risk of loss, may not cite past profits without saying that past results are not necessarily indicative of future results, and may use testimonials or hypothetical results only with prescribed disclosures. A supervisory employee other than the author must review and approve each piece of promotional material, in writing, before it is first used. Copies, together with the approval records, must be kept for the period CFTC Regulation 1.31 requires. And the rule's definition of promotional material is broad enough to reach email, text messages, and anything directed to the public over the internet, which is where much of a PSP's marketing is likely to happen.

The pre-approval requirement the letter refers to is Rule 2-29(h). Any audio or video content that makes a specific trading recommendation or refers to past or future profits must go to NFA's Promotional Material Review Team at least ten days before first use. For a PSP, that category of advertising is off the table.

The letter extends these obligations to the PSP's people. A footnote describes the personnel activity it has in mind, demonstrations at industry conferences and promotional statements on social media, and conditions both on the PSP's pre-approval and supervision. A PSP that lets its employees post about the product without review is outside the letter.

The sovereign immunity waiver

A footnote to the tenth condition addresses a kind of PSP the Division apparently expects to see: one affiliated with a state or tribal government. Because such an entity may be protected by sovereign immunity, the letter requires it to include a waiver, "limited or otherwise," wherever a waiver is needed to make its consent to CFTC jurisdiction enforceable. The Division does not say whether immunity would in fact block an enforcement action against a tribal or state affiliate. It puts that question on the PSP and requires the waiver in any case where the answer could be yes.

Anyone who has worked on a tribal gaming compact or a commercial contract with a tribal enterprise will recognize the posture. Limited waivers are common in those settings, and the scope of the waiver is negotiated clause by clause. The waiver the letter calls for is narrow on its face. It concerns the CFTC's authority to investigate and bring enforcement action in connection with the covered activities, not immunity from suit generally. A Registrant that contracts with a tribal or state-affiliated PSP will want its own waiver for disputes between the two of them, and the letter does not address that.

The timing is what makes the footnote worth pausing on. Tribes have appeared in prediction-market litigation mostly as plaintiffs. On September 16, the day before the Division issued Letter 26-25, the Ninth Circuit held in Blue Lake Rancheria v. Kalshi that two California tribes were likely to succeed on claims that Kalshi's sports event contracts are class III gaming under the Indian Gaming Regulatory Act, that the gaming takes place on Indian lands when a user enters the contract from tribal territory, and that neither the Commodity Exchange Act nor the Unlawful Internet Gambling Enforcement Act displaces IGRA. The Ho-Chunk Nation's parallel suit in Wisconsin survived a motion to dismiss on its IGRA claims in May, and on September 11 the district court certified two closely related questions for immediate appeal to the Seventh Circuit and stayed the case pending that appeal.

Letter 26-25 does not mention IGRA. Nothing in it says whether a tribally affiliated front end to a registered exchange changes the IGRA analysis on that tribe's own lands, and nothing in it could. That question turns on the tribe's compact or secretarial procedures and its gaming ordinance, not on anything the CFTC controls. What the footnote does show is that the Division drafted with tribal and state affiliates in mind. Whether any of them take the route is a business and political question, and the litigation described above is part of what they will weigh.

What the Letter Doesn't Do

The letter represents the views of the Division's staff and does not bind the CFTC. The Division also keeps the authority to add conditions, modify the position, suspend it, or withdraw it. By its own terms, it lasts only until the CFTC adopts a rule or guidance on the subject. In other words, it is written to be replaced.

The distinction between a staff position and a rule is more than a formality. Under CFTC Regulation 140.99, a no-action letter is a statement that the issuing Division will not recommend enforcement action, and the regulation itself says the letter binds only that Division, not the CFTC or its other staff. It is not a ruling that the conduct is lawful. The Division also chose this form over an interpretive letter. The older TSV letters concluded that the vendors in question were not introducing brokers. Letters 26-09 and 26-25 conclude nothing of the kind. They say the staff will not recommend enforcement against a PSP that meets the conditions, and they leave open whether a PSP is acting as an IB.

Three things follow for anyone building on the letter. The first is that the position can change. The Division reserves the authority to add conditions, modify, suspend, or terminate it, and staff positions do get withdrawn: on March 28, 2025, CFTC staff withdrew two digital-asset advisories, one dating to 2018, effective immediately. Those withdrawals ran in the industry's favor, but the mechanism runs both ways.

The second is that the position is fact-bound. It applies to the covered activities as described, and the letter warns that different, changed, or omitted facts may render it void. A PSP that starts holding customer funds, generating trade signals, or routing orders with discretion is outside the letter no matter what notice it has filed.

The third is that the position binds no one but the Division. It has no binding effect in a private action or a state proceeding that turns on whether the PSP was acting as an unregistered introducing broker.

The practical response is to build for the day the letter goes away. That means keeping the option of IB registration realistic, in the people the PSP hires and the records it keeps, and addressing in each Registrant agreement what happens if the Division withdraws the position or the CFTC adopts a rule that requires registration.

The letter also does not give a PSP customers of its own. Users open their accounts with the Registrant, so the Registrant holds the customer relationship. What the PSP holds is a software agreement with those users and, if it negotiates one, a share of the Registrant's revenue. A company that expects to grow under its own name will probably treat the PSP route as a way to operate while its own introducing broker registration is pending, and it should decide early how it will convert once that registration is approved.

What This Means in Practice

A software developer that connects users to event contracts or other regulated derivatives no longer has to wait for a letter of its own. It does, however, take on several obligations that look a lot like those of a registered IB. The marketing standards, the disclosure and acknowledgment requirements, and the recordkeeping condition all call for systems and supervision, and the notice filing consents to CFTC jurisdiction over the PSP's conduct.

For an exchange or broker on the other side of one of these arrangements, the decision that matters is the undertaking. Signing it means accepting joint and several liability for what the PSP and its personnel do in the covered activities. That is a question for the firm's own counsel and compliance function, and it deserves attention before the commercial terms are settled.

Two more points are worth noting. For a government-affiliated PSP, the sovereign-immunity waiver condition also comes into play; the letter requires the waiver where it is needed to make the PSP's consent to CFTC jurisdiction enforceable. And for every PSP, the customer question discussed above still applies. The Registrant keeps the customers, so a company that expects to operate under its own name should plan for its own IB registration from the outset rather than treat the notice filing as the end of the process.

This article is part of De Silva Law Offices' ongoing event contracts series. For questions about event contract compliance, CFTC regulatory matters, or prediction market law, contact us at 312-500-8424 or info@desilvalawoffices.com.