CFTC clears crypto software path for prediction markets

CFTC crypto guidance gives passive software providers a registration reprieve, opening regulated prediction markets to more than 20 million Phantom wallet users. The agency said Thursday that qualifying firms will not face enforcement action if they remain outside customer custody and partner with regulated entities.

Passive software wins broker relief

The guidance applies to software companies that transmit customer access to regulated trading venues without holding client funds or deciding how trades are placed. The Commodity Futures Trading Commission framed the move as staff guidance, not a permanent rule, and said it will remain in force until a later rulemaking or further agency direction takes effect.

The shift matters because online wallets and other software layers can now connect users to futures and event contracts with less broker-registration risk, provided the regulated trading entity stays at the center of execution. The agency’s position narrows the enforcement exposure for platforms that act as software rails rather than customer-facing brokers.

Phantom sets the template

The immediate model is Phantom Technologies Inc., which received CFTC no-action relief in March for a structure tied to Kalshi. Phantom has said the partnership brings prediction trading access to its more than 20 million crypto wallet holders, a user base that gives the regulatory interpretation a large first test.

Under the older approach described in the guidance, firms that sought or received customer orders, forwarded them to futures commission merchants and earned fees or commissions generally had to register as brokers. The new staff position separates that model from software providers that do not control customer assets and do not exercise discretion over trades.

Phantom Chief Executive Officer Brandon Millman said the company’s model had helped define the path for non-custodial platforms. “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,” Millman said.

Other prediction-market companies have been building around a similar structure. Crypto.com and ProphetX both operate CFTC-registered platforms, which means the new guidance could make third-party software distribution a more important channel for regulated event-contract trading.

Event contracts spread online

Aaron Brogan, founder of Brogan Law, said the guidance could allow prediction markets to appear across a wider range of consumer-facing applications. “You could use this to put a prediction market basically anywhere,” Brogan said.

Brogan said the breadth depends on what can legally trade on a regulated venue. “Anything that can trade on a DCM could, in principle, be covered by this,” he said, using the regulatory abbreviation for designated contract markets.

The timing puts the CFTC’s staff move into a broader Washington fight over digital-asset oversight. A bipartisan group of senators blocked crypto market legislation sought by the industry on Tuesday, leaving regulators to work through agency rules, guidance and enforcement positions rather than a new statute.

CFTC Chairman Michael Selig and Securities and Exchange Commission Chairman Paul Atkins have said they intend to continue rulemaking for digital assets even without legislation. If Congress remains stalled, agencies are likely to shape market structure through narrower decisions such as Thursday’s guidance; if lawmakers restart a bill, the broker-registration issue could be folded into a broader crypto framework.

For Phantom, the clearest near-term test is whether the Kalshi partnership can scale access while keeping custody and trade discretion outside the wallet provider. For prediction-market operators, the guidance may lower distribution friction; for the wider digital-asset sector, it gives software firms a conditional path into regulated finance without turning every interface into a registered broker.