The U.S. Commodity Futures Trading Commission said Tuesday it will not recommend enforcement action against crypto wallet provider Phantom for failing to register as an introducing broker as the company explores adding derivatives trading functionality to its software.
In a staff no-action letter, the CFTC’s Market Participants Division said it would not pursue broker registration requirements tied to Phantom’s planned interface that would allow users to access derivatives markets through the wallet’s software.
Phantom currently offers self-custodial wallet applications that allow users to store and manage digital assets across multiple blockchains.
The company told regulators it plans to expand those capabilities to include a software interface that would allow users to view derivatives market data, track positions, and submit orders to registered exchanges or brokers.
CFTC staff said Phantom’s role would remain limited to providing a front-end interface that lets users transmit trading instructions directly to designated contract markets or registered intermediaries.
The no-action relief is also subject to several conditions. Phantom must provide users with disclosures about potential conflicts of interest and derivatives trading risks, maintain compliance policies governing marketing and communications, and keep records related to its derivatives-related activities.
The decision comes as regulators continue to grapple with how existing financial laws apply to crypto software developers.
The issue has surfaced in several recent cases involving privacy tools and crypto mixers, including the prosecution of Tornado Cash developer Roman Storm and the sentencing of Samourai Wallet co-founder Keonne Rodriguez.
CFTC Chair Michael Selig said earlier this month that the agency is working on guidance clarifying when developers of non-custodial software, such as digital wallets and decentralized finance applications, may fall under intermediary registration requirements.
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