What the guidance changes
The CFTC's staff guidance, published Thursday, outlines that software providers categorized as passive and working with regulated firms will not be pursued for broker registration when they avoid taking possession of customer funds. The carveout hinges on a clear condition: providers must at no point hold users' assets.
How we got here
Traditionally, companies that solicited or took in trade orders, sent those orders to futures commission merchants, and earned fees or commissions had to register as brokers. In March, Phantom Technologies Inc. received a no-action letter that lifted that requirement for its model. Phantom, which partners with Kalshi, now facilitates predictions trading for a wallets audience topping 20 million. CEO Brandon Millman said Phantom helped set the stage for platforms that do not take custody or make trading decisions, adding, "This is how it should work: software built to protect consumers, paired with regulated partners, giving more people safe access to the financial services they want."
Who else is using this model and what's next
Others in the prediction market space have also embraced this approach, including Crypto.com and ProphetX, both running platforms registered with the CFTC. Aaron Brogan of Brogan Law, a firm that advises emerging and regulated businesses, said, "You could use this to put a prediction market basically anywhere." "Anything that can trade on a DCM could, in principle, be covered by this," he noted, referring to designated contract markets. The agency said the guidance will remain in effect until a formal rulemaking or further guidance kicks in. The timing also matters: a bipartisan group of senators just halted industry-sought crypto legislation, and CFTC Chairman Michael Selig along with SEC Chairman Paul Atkins have pledged to advance digital asset rules without waiting on Congress.
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Why this matters for your money
If you have been curious about prediction markets or crypto-linked trading tools but wary of custody risks, this opens a path where the software never touches your funds and the trading venue is regulated. More mainstream, plug-in access could mean a wider array of markets showing up inside apps you already use. The big caveat is that these are still derivatives and prediction markets, so how they roll out will depend on ongoing rulemaking and partnerships with registered platforms.
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