What Counts as a 'Passive Software Provider' Under CFTC Rules

A prediction-market contract is only tradable through a chain of CFTC-registered entities: a designated contract market to list it, a futures commission merchant or introducing broker to hold or route customer orders, and often a clearinghouse to settle it. An app that merely connects a user to that chain, without itself being one of those registrants, sits in a gray area the Commodity Exchange Act does not address cleanly.

The Act defines an introducing broker, at 7 U.S.C. Section 1a(31) and 17 CFR Section 1.3, as any person who solicits or accepts orders for a covered contract without itself holding customer funds. Software that surfaces Kalshi's or Polymarket's order books inside a third-party app can look a great deal like that, depending on what the software actually does.

A firm that solicits or accepts customer orders registers as an introducing broker through the National Futures Association, filing Form 7-R for the entity and Form 8-R for each principal, designating a chief compliance officer, and meeting NFA proficiency and supervision requirements. The process is lighter than a full FCM registration, since an IB never holds customer funds itself, but it is still a registration, with its own examinations, recordkeeping obligations, and NFA membership dues.

For a software company whose core product is not brokerage, a self-custodial wallet, a trading terminal, a tribal-nation app building on someone else's exchange, that registration burden can be disproportionate to what the software actually does if it never picks a side of a trade or touches customer assets.

The CFTC's Market Participants Division first addressed this gap narrowly, issuing Staff Letter 26-09 on March 17, 2026 to Phantom Technologies, a self-custodial crypto wallet developer, saying the Division would not recommend enforcement against it for failing to register as an introducing broker over its wallet software's trading functionality. On September 17, 2026, the Division issued Staff Letter 26-25, extending equivalent relief to any qualifying "Passive Software Provider," not just Phantom, after receiving inquiries from other companies' counsel.

To qualify, a provider's software cannot custody customer assets, generate its own buy or sell signals, or exercise discretion over order routing. It must also satisfy ten specified conditions, including a notice filing with the Division and an acknowledgment that the CFTC retains enforcement jurisdiction over the provider regardless of the relief.

The relief covers only the failure to register as an introducing broker or associated person for that specific software function. It says nothing about state gambling law, consumer-protection rules, or any other registration a distributor might separately need.

The clearest public use of Staff Letter 26-25 so far is SaltTrade Derivatives, a subsidiary of the Tunica-Biloxi Tribe of Louisiana, which announced on September 18, 2026 that it would rely on the relief to run the first tribal-nation prediction-market app without registering as its own introducing broker, routing trades to Kalshi's existing DCM infrastructure instead. The letter's broader design, relief for any qualifying provider rather than a company-specific grant, is what made that possible without a bespoke filing.

The same logic applies to any sweepstakes-sportsbook operator, neobroker plug-in, or wallet app that connects a user to an existing DCM's order book without listing contracts itself. The letter gives them a documented compliance path that did not exist in this form before March 2026.

A no-action letter is not a rule and confers no registrant status. CFTC staff can modify, suspend, or terminate the position at any time, and the letter itself says the relief ends if the Commission adopts a formal rule or guidance addressing how introducing-broker registration applies to software developers.

That makes the passive-software category a narrower and more provisional shield than an actual IB or FCM registration, useful for a distribution app that genuinely never touches an order or a customer's funds, but not a permanent substitute for registration if a company's software starts doing more than routing a user to somebody else's regulated venue.