CFTC advances targeted crypto regulatory relief as CLARITY Act stalls

• The CFTC extended no-action relief to eligible passive software providers, allowing them to facilitate futures market access without registering as brokers.
• The relief covers passive software that connects users with registered futures commission merchants, introducing brokers, and designated contract markets.
• The action offers targeted regulatory relief after Congress failed to progress in the CLARITY Act.

The Commodity Futures Trading Commission (CFTC) is taking targeted steps to accommodate financial technology innovation as broader digital asset market-structure legislation remains stalled in Congress.

CFTC expands relief for passive trading software providers

The Commission's Market Participants Division issued a no-action position on Thursday, extending relief to eligible providers of passive software that facilitates access to regulated futures markets.

The position is broadly available to providers that meet the specified conditions. Under the letter, the division will not recommend enforcement action against eligible providers or their relevant personnel solely for failing to register as an introducing broker or as an associated person of an introducing broker.

The relief applies specifically to the provision and marketing of passive software that allows users to trade through registered futures commission merchants.

The CFTC's action provides regulatory relief for technology companies whose software facilitates access to regulated futures markets without directly participating in transactions in a way that would traditionally require registration.

By distinguishing passive technology providers from regulated intermediaries, the no-action position creates a pathway for eligible software providers to support trading activity while keeping regulatory oversight focused on the firms and venues directly involved in executing and intermediating transactions.

Providers seeking to rely on the relief will need to assess the conditions outlined by the CFTC and maintain compliance with the requirements for the duration of their reliance on the no-action position.

SEC provides temporary relief for tokenized stock trading

The CFTC's move comes alongside a separate SEC initiative to accommodate innovation in tokenized securities markets.

The Commission approved a temporary, conditional Innovation Exemption allowing limited trading of tokenized NMS stocks on certain on-chain venues known as Tokenized Securities Venues (TSVs).

The temporary exemption will allow the SEC to observe how these venues operate and gather information that could inform future regulatory policy.

The relief addresses the possibility that TSVs could be treated as exchanges under the Exchange Act when they make tokenized NMS stocks available for permissioned trading through automated market makers and liquidity pools.

TSVs relying on the exemption must comply with several conditions, including requirements covering public notice, transaction transparency, coordination of trading stoppages, books and records, and technology safeguards.

The regulatory developments come shortly after the US Senate failed to advance the Digital Asset Market Clarity Act, or CLARITY Act. The measure fell short of the 60 votes required to advance in a procedural vote on Tuesday, with the motion to proceed failing 49-50.

The Senate setback leaves the legislation stalled as Congress approaches its recess ahead of the November midterm elections, creating uncertainty around the timing of further market-structure negotiations.

Against that backdrop, the latest actions from the CFTC and SEC demonstrate how the agencies can provide regulatory relief under their existing authorities while Congress remains divided over comprehensive legislation.

However, the measures do not replace a federal market-structure framework.