The CFTC’s no-action letter for Phantom signals a more flexible approach to crypto interfaces, a former agency lawyer tells DeFi Rate, with implications for how users access derivatives and prediction markets.
The Commodity Futures Trading Commission (CFTC) on Tuesday has offered one of its clearest signals yet on how it may treat crypto trading interfaces, and the implications could extend well beyond a single wallet provider.
In a no-action letter, the agency said it would not recommend enforcement against the non-custodial wallet, Phantom, as the firm explores adding derivatives trading. In effect, the relief allows the wallet to connect users to regulated derivatives markets and prediction markets without registering as an introducing broker. The notice also directly benefits platforms like Kalshi, which announced a partnership to bring event contracts to Phantom users back in December.
The distinction hinges in part on Phantom’s non-custodial model. Users retain full control over their private keys, and the wallet itself never holds customer funds, positioning it as a software interface rather than a financial intermediary.
Brandon Millman, CEO and co-founder of Phantom, said on Twitter the company hopes the no-action letter can “help shape a long-lasting framework” for the industry and “establish the US as the global leader in responsible crypto innovation.”
CFTC draws a line around crypto trading interfaces
The relief granted to Phantom was already met with a lot of support from key industry players. Kalshi head of crypto, John Wang, called the achievement “monumental,” as it offers an early indication of how the CFTC may approach a growing category of crypto products that sit between pure software and regulated financial services.
In its letter, CFTC staff emphasised that Phantom’s role would remain limited to providing a front-end interface, allowing users to view market data, track positions, and transmit orders directly to registered exchanges or intermediaries. Crucially, the agency stopped short of classifying that activity as broker conduct, provided the company does not handle customer funds or execute trades itself.
Peter Sanchez Guarda, a former CFTC Special Counsel in the markets participants division and founder and principal consultant at TurnKey Family Office, worked on earlier no-action letters cited in the Phantom decision. According to Guarda, the approach reflects a broader willingness within the agency to adapt legacy rules to modern technology.
Guarda explained that traditionally, Future Commission Merchants (FCMs), broker-dealers on the commodity side, would hold customer accounts, while introducing brokers would solicit customers to trade with these FCMs. However, those rules were written in the 1970’s predating high frequency and algorithmic trading.
He added that applying those definitions too literally could lead to unintended outcomes.
“If you want a hyper-technical definition of an introducing broker, well, Google gets paid when they show you ads; so would Google have to register as a CFTC broker?”
Instead, the Phantom no-action letter signals a more pragmatic approach. Speaking with DeFi Rate, Tom Chalmers, the CEO of functionSPACE, said the letter is “directionally in line with a basic truth of modern tech,” referring to the letter’s acknowledgement that the interface is separate from the market.
“[The no-action letter] points toward an open ecosystem where developers can build amazing, integrated user experiences without having to become registered exchange operators themselves.”
Why are prediction markets paying attention?
The CFTC’s position on Phantom could have implications beyond crypto wallets, particularly for regulated prediction market platforms such as Kalshi.
Kalshi operates as a CFTC-regulated exchange offering event contracts, a form of derivatives that allow users to trade on the outcome of real-world events. Like other derivatives platforms, access to these markets has traditionally been mediated through registered intermediaries or tightly controlled user interfaces.
That structure may now be open to change.
FunctionSPACE’s Chalmers highlighted that the current interface of online prediction markets is “bounded and clunky,” requiring users to leave content environments, open separate apps, and fund dedicated accounts before trading.
By signaling that an interface that merely displays data and routes orders to registered venues may not constitute broker activity, the CFTC appears to be opening the door, at least cautiously, to third-party applications that sit on top of regulated markets.
In practice, that could mean wallets or standalone apps aggregating access to platforms like Kalshi, allowing users to discover event contracts and submit trades through a unified interface, without those applications themselves needing to register as intermediaries.
The shift could also have commercial implications. As Guarda noted, much of Kalshi’s current flow comes through Robinhood.
“If people are able to use their wallets and bypass Robinhood, this could make it easier for Kalshi to get new customers, because instead of opening an account and putting money there, you can have your crypto to make a payment…[This] could open up more customers for them.”
At the same time, the framework reinforces the importance of regulated infrastructure. Phantom’s relief is explicitly tied to routing orders to registered exchanges or brokers, suggesting that while the interface layer may sit outside the regulatory perimeter, execution must still occur within it.
CFTC no-action letters are different from the SEC’s
One important limitation of the Phantom decision is that it does not automatically extend to other firms.
Unlike no-action letters issued by the US Securities and Exchange Commission (SEC), which can sometimes be relied upon as precedent in similar cases, CFTC no-action letters are highly specific to the requesting party.
Guarda brought up the Exxon Capital Transaction, a well-established practice that originated from a line of SEC no-action letters in the 1980’s, as a key example. He explained that such cases come up very regularly in securities law, and they all rely on the no-action letter the SEC had issued.
“For 50 years, people have been using this one no-action letter that was achieved by the SEC, but with the CFTC, everyone needs their own. You can’t, even if you have the exact same facts, rely on somebody else’s no-action letter, even if it was issued yesterday.”
Still, it’s a promising development with major implications for the ever-growing distribution channels of regulated prediction market exchanges.
