CFTC Staff Letter No. 26-25, issued on September 17, 2026, lets any “passive software provider” market and distribute a trading front-end to users of registered futures commission merchants, introducing brokers and designated contract markets without registering as an introducing broker — but only if it stays passive across 10 conditions, and only until the Commission writes the rule that ends the relief.

The Commodity Futures Trading Commission’s Market Participants Division (MPD) will not recommend enforcement against a passive software provider, or its personnel, for failing to register as an introducing broker (IB) under Section 4d(g) of the Commodity Exchange Act, or as an associated person (AP) of an IB under Section 4k(1), solely in relation to providing and marketing software that facilitates users’ trading with registered intermediaries and exchanges. It generalises relief granted in March 2026 to a single firm. This analysis walks through the 10 conditions, the “Covered Activities” perimeter, how three other jurisdictions draw the same line, the enforcement baseline outside it, and what the expiry clause does to anyone building on it.

Key facts

• Instrument and date: CFTC Staff Letter No. 26-25, issued September 17, 2026 by the Market Participants Division and signed by MPD Director DJ Hennes (CFTC Letter 26-25; CFTC Release 9300-26).
• Statutes in scope: IB registration under Section 4d(g) of the Commodity Exchange Act (7 U.S.C. § 6d(g)) and AP registration under Section 4k(1) (7 U.S.C. § 6k(1)) and Commission Regulation 3.12(a).
• Conditions: 10, including a written joint-and-several liability undertaking co-signed by each registrant, and a notice filing consenting to Commission enforcement jurisdiction.
• Origin: generalises Staff Letter 26-09, issued March 17, 2026 to Phantom Technologies, Inc. Under Commission Regulation 140.99(a)(2), only the named beneficiary could rely on that letter.
• Hard perimeter: a provider may never hold, control or take custody of user assets, generate express “buy” or “sell” signals, or exercise discretion over the routing or execution of user orders.
• Expiry: the position runs only until a Commission rulemaking or guidance on IB registration for software developers takes effect, and binds MPD alone — not the Commission (17 CFR 140.99(a)(2)).
• Enforcement baseline: Falcon Labs Ltd. paid $1,179,008 in disgorgement and a $589,504 civil monetary penalty for unregistered intermediation (CFTC Release 8909-24, May 13, 2024).

Methodology and sources

This analysis rests on the primary text of CFTC Staff Letter No. 26-25 (seven pages, 24 footnotes), the underlying Staff Letter 26-09 issued to Phantom Technologies, and CFTC Release 9300-26. Comparative material comes from the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, Directive 2014/65/EU (MiFID II), and Singapore’s Securities and Futures Act 2001. Enforcement figures come from the CFTC’s settlement releases in Falcon Labs Ltd. and Cost Management Solutions, LLC, and policy direction from Chairman Michael Selig’s April 16, 2026 written testimony to the House Committee on Agriculture. The window is March to September 2026, with older technology service vendor letters used as background. Nothing here reflects a Commission-level position: a no-action letter is a staff document, and the letter says so.

What Letter 26-25 actually says

The CFTC has never read “soliciting or accepting orders” narrowly. Its 1983 registration release said the phrase must cover “not just the literal solicitation or acceptance of customers’ orders, but also the solicitation of customers of acceptance of their orders for referral to [a futures commission merchant]” — language Letter 26-25 reproduces in footnote 11. On that reading, an app that introduces users to a futures commission merchant (FCM) and takes a share of the resulting revenue is an IB.

Staff has carved exceptions before. The technology service vendor (TSV) letters — Staff Letters 06-29, 08-07 and 08-12 — found certain vendors were not IBs at all, but leaned on six representations, the first being that every customer already had a relationship with an FCM or IB independent of the vendor. That is fatal to any front-end whose purpose is acquisition, which is why Letter 26-09 took the form of no-action relief rather than an interpretation.

A passive software provider, in the CFTC’s September 2026 formulation, is a firm that develops and distributes front-end interface software letting users review market data and aggregate positions, view product offerings and submit orders for Commission-regulated derivatives — including event contracts and perpetual contracts — directly to registered FCMs, IBs or designated contract markets (DCMs). Its involvement in order submission is limited to supplying software on the user’s device. It may contract with registrants for a share of relevant revenues, charge users a transaction-based fee, market those relationships, and actively solicit users to trade with named registrants. What it may not do is hold or control user assets, generate express “buy” or “sell” signals, or exercise discretion over routing or execution. Users must clear through the DCM’s clearing organisation or a member FCM — the classic custodial structure for exchange-traded derivatives.

The 10 conditions carry the commercial substance. Conditions 1 to 3 cover statutory disqualification, conflicts and fee disclosure, and a risk disclosure statement mirroring Regulation 1.55(b) unless the registrant already supplies one. Condition 4 requires users to be onboarded as direct DCM members or as customers of the FCM or IB, and to keep the ability to reach that registrant independently of the software. Conditions 5 and 6 import National Futures Association (NFA) marketing standards: run policies and procedures as if registered as an IB, and avoid any promotion requiring pre-approval under NFA Compliance Rule 2-29. Condition 7 is the gate: the provider and each registrant must execute a written undertaking making them jointly and severally liable for the provider’s violations. Conditions 8 to 10 cover Regulation 1.31 recordkeeping, insolvency notice, and the filing that switches the relief on.

How four jurisdictions draw the software-versus-broker line

Jurisdiction / Regulator	Effective date	Scope	Key requirement	Penalty / sanction
US (CFTC, Market Participants Division)	September 17, 2026, until a Commission rulemaking or guidance takes effect	Passive software providers routing user orders to registered FCMs, IBs and DCMs; not limited to crypto software (footnote 14)	All 10 conditions of Letter 26-25, including the joint-and-several undertaking with each registrant and a notice filing to MPDLetters@cftc.gov	Outside the relief: unregistered IB activity under Section 4d(g) — $100,000 civil monetary penalty in Cost Management Solutions, LLC (Release 8941-24)
UK (FCA)	December 1, 2001 (Regulated Activities Order commencement)	“Arranging deals in investments” under Article 25(1) and 25(2) of the Regulated Activities Order 2001	Article 27 excludes a person acting “merely by providing means by which one party to a transaction … is able to communicate with other such parties”; Article 33 excludes introducing	Breach of the Section 19 general prohibition is an offence under Section 23 of FSMA 2000 — up to two years’ imprisonment, an unlimited fine, or both on indictment
EU (ESMA and national competent authorities under MiFID II)	January 3, 2018 (MiFID II application date)	“Reception and transmission of orders in relation to one or more financial instruments” — Annex I, Section A(1), Directive 2014/65/EU	Authorisation as an investment firm under Article 5, or appointment as a tied agent under Article 29 with the appointing firm taking unconditional responsibility	Article 70(4)(a) covers services provided without authorisation; Article 70(6)(f) sets maximum fines of at least €5,000,000 or up to 10% of total annual turnover for legal persons
Singapore (MAS)	October 1, 2002 (Securities and Futures Act commencement)	“Dealing in capital markets products”, which captures inducing or attempting to induce a person to enter into a transaction	A Capital Markets Services licence under Section 82 of the Securities and Futures Act 2001, or a prescribed exemption	Fine of up to S$150,000, imprisonment of up to three years, or both, plus up to S$15,000 for each day the offence continues after conviction

Sources: CFTC Staff Letter 26-25; Regulated Activities Order 2001, Article 27; FSMA 2000, Section 23; Directive 2014/65/EU; Securities and Futures Act 2001. Last updated: September 19, 2026.

The four regimes agree on the principle and diverge on the plumbing. Article 27 of the Regulated Activities Order is, in substance, the CFTC’s passivity test written 25 years earlier and without conditions: supply a communication channel and you are not arranging. But the exclusion is narrow, and Article 25 itself has been read broadly, so a firm that solicits, qualifies and hands over users is arranging even when software does the handing over. MiFID II is blunter still: reception and transmission of orders is a full investment service, and the only structured off-ramp is the tied-agent route.

The MiFID II tied-agent regime and the CFTC’s new condition 7 solve the same problem in almost the same way: each makes an authorised intermediary answer for the unregistered front-end. Under Article 29 of Directive 2014/65/EU, an investment firm appointing a tied agent remains fully and unconditionally responsible for the agent’s acts. Under Letter 26-25, the passive software provider and each registrant must sign an undertaking making them jointly and severally liable for the provider’s violations in connection with the covered activities. In both cases the regulator has decided it need not license the software as long as someone it already licenses is on the hook. The practical consequence for vendors is that the registrant’s willingness to sign is now the binding constraint, not the provider’s own compliance build. An FCM that declines joint liability for a third-party app’s marketing ends the analysis before it starts.

“By extending its previous no-action relief to similarly situated passive software providers, the CFTC’s Market Participants Division is taking a more functional approach to regulation—one that looks at what a technology provider actually does rather than treating software itself as a traditional financial intermediary.”

— Summer Mersinger, Chief Executive Officer, Blockchain Association (Decrypt)

Enforcement context: what the perimeter costs when you miss it

Two settled CFTC matters bracket the population Letter 26-25 addresses. In Falcon Labs Ltd. (CFTC Release 8909-24, May 13, 2024), a Seychelles entity was charged with acting as an unregistered FCM. From approximately October 2021 through at least March 27, 2023, it solicited or accepted orders for digital asset derivatives from US customers, opening a main account in its own name and creating sub-accounts beneath it. It collected net fees of roughly $1,179,008, disgorged that sum and paid a $589,504 civil monetary penalty, reduced for cooperation — the agency’s first action against an intermediary for facilitating access to such exchanges.

The second matter sits closer to technology vendors. In Cost Management Solutions, LLC (CFTC Release 8941-24, August 12, 2024), a Texas corporation paid a $100,000 civil monetary penalty for acting as an unregistered IB from at least May 2018. It never touched customer money: it identified counterparties, ran price discovery, and negotiated and executed swaps and options for propane retailers hedging risk. No custody, no proprietary risk, no fraud charge — and still an IB.

Read together, the orders explain the shape of Letter 26-25. Falcon Labs shows the CFTC will charge the intermediary layer, not just the venue; Cost Management Solutions shows absence of custody has never been a defence. The passivity test is therefore doing real work — the first time staff has written down, for an open class of firms, what a software business must give up to sit outside Section 4d(g). The same perimeter question runs through our analysis of where prop firm regulation actually bites.

What this means for platform vendors, prop firms and copy-trading operators

For non-custodial wallet and brokerage front-ends, the letter is close to a licence to build. Revenue sharing with a DCM or FCM is expressly contemplated, as is a transaction-based fee charged directly to users and active solicitation toward named registrants — provided users can always reach the registrant without the app. Embedding the interface inside existing wallet software is permitted if it “clearly and conspicuously” distinguishes Commission-regulated activity. Footnote 14 confirms the class is not limited to crypto software, which matters for the conventional broker-technology stack.

For copy-trading and signal businesses, the analysis fails on the face of the letter. A copy-trading engine replicates a leader’s orders into follower accounts; a signal service publishes express entries and exits. Letter 26-25 bars both an express “buy” or “sell” signal and any discretion over routing or execution, and nothing saves a product whose value proposition is telling users what to trade or trading it for them. Those operators remain where they were: analysing whether they are IBs, commodity trading advisors, or both. Our review of one platform that sells copy trading while forbidding it shows how unsettled that ground already is.

For proprietary trading firms, condition 4 is the obstacle. Covered activities reach only users transacting on a DCM as direct members, or as customers of an FCM or IB that is a member of that DCM, with funds held at the clearing organisation or a member FCM. A simulated-account evaluation model has no such user, account or custody chain. Only firms moving toward live routing through a registered FCM — the direction visible in recent prop-firm technology partnerships — can answer condition 4 at all.

For legal and compliance teams the workload is concrete: negotiate and file the joint-and-several undertaking with every registrant; build marketing policies to NFA Compliance Rule 2-29 standards, including conference demonstrations and personnel social media statements, which footnote 23 brings inside the perimeter; stand up Regulation 1.31 records; run disqualification checks on principals; and file the condition 10 notice, because the relief does not attach until it is filed.

“Today’s action highlights that the CFTC will not hesitate to charge any entities—exchanges or intermediaries—who are providing customers access to digital asset products and services that require registration but have failed to appropriately register.”

— Ian McGinley, Director of Enforcement, Commodity Futures Trading Commission (CFTC Release 8909-24)

What’s next: the forward view

The letter carries its own termination date without naming one. Relief runs “until the effective date of a Commission rulemaking or guidance addressing the application of the IB registration requirement to software developers”, and the Division may condition, modify, suspend or terminate the position at any time. A firm relying on it is building on something that lapses by design, and the letter states plainly that it “binds only the issuing Division … and not the Commission or other Commission staff”.

Chairman Michael Selig, sworn in on December 22, 2025 as the sixteenth chairman of the CFTC, treats the staff position as an interim step. In written testimony to the House Committee on Agriculture on April 16, 2026 he said the agency had “worked quickly to provide clarity concerning tokenized collateral, the capital treatment for payment stablecoins, and the obligations of software developers building in the United States” (House Committee on Agriculture). If a rulemaking later narrows the perimeter, every provider that filed a notice has already consented to Commission jurisdiction and handed staff a record of its activity.

Three things are worth watching into 2027. Whether the Commission converts the conditions into a registration exemption or a definitional carve-out — instruments that survive a change of leadership differently. Whether registrants sign condition 7 undertakings at scale, or whether joint-and-several liability confines the relief to providers with an existing FCM relationship, the very constraint Letter 26-25 was meant to drop. And whether market-structure legislation overtakes the exercise; the same tension ran through the CFTC’s move to end the no-action era for event contracts and its narrower revival of the 4.13(a)(4) exemption this month.

FAQ

Does Letter 26-25 mean software providers never have to register as introducing brokers?

No. It is a staff no-action position, not a rule or an exemption. The Market Participants Division will not recommend enforcement against a passive software provider that satisfies all 10 conditions and stays inside the defined covered activities. The letter states it binds only the issuing Division, is not binding on the Commission, and may be conditioned, modified, suspended or terminated at the Division’s discretion. Registration liability under Section 4d(g) of the Commodity Exchange Act is unchanged.

How does a provider switch the relief on?

Condition 10 requires the provider to file a notice with the Market Participants Division agreeing to satisfy the conditions and consenting to the Commission’s jurisdiction over the covered activities. Condition 7 separately requires a written joint-and-several liability undertaking executed with each registrant, also filed with the Division. Documents go to the MPD Director by email, referencing the letter. Nothing attaches until those filings are made.

Can a copy-trading platform rely on Letter 26-25?

On the text, no. The covered activities expressly exclude generating express “buy” or “sell” signals and exercising discretion over the routing or execution of user orders. A copy-trading engine replicates a signal provider’s orders into follower accounts, which engages both exclusions. A signal or alert service publishes express entries and exits, which engages the first. Those businesses must analyse their status as introducing brokers or commodity trading advisors on ordinary principles, without this position.

Is the relief limited to crypto firms?

No. Footnote 14 of Letter 26-25 states for the avoidance of doubt that passive software providers “are not limited to providers of crypto asset related software”. The original relief in Letter 26-09 went to a self-custodial crypto wallet developer, but the generalised position reaches any front-end letting users submit orders for Commission-regulated derivatives — including event contracts and perpetual contracts — directly to a registered FCM, IB or designated contract market.

What happens to firms relying on the letter when the CFTC writes a rule?

The relief lapses on the effective date of any Commission rulemaking or guidance addressing how the introducing broker registration requirement applies to software developers. There is no grandfathering clause and no transition period in the letter. Firms should treat the position as bridging cover with an unknown end date, maintain the Regulation 1.31 records the conditions require, and model what registration or restructuring would cost if a rule lands narrower than the conditions.

This article is informational analysis only and does not constitute legal, regulatory, tax, or investment advice. Regulatory frameworks change frequently and interpretation depends on facts and circumstances; primary documents and official regulator guidance always supersede summaries. Firms should consult qualified legal counsel and their relevant supervisory authority before taking any action based on the analysis above.