CFTC Staff Broadens Passive Software Relief, Drawing Tribal Objections

The Commodity Futures Trading Commission’s Market Participants Division on Sept. 17, 2026, announced a no-action position for providers of “passive software,” extending relief it first granted a single company in March and making it broadly available. Subject to specified conditions, the division will not recommend that the Commission take enforcement action against such providers, or their relevant personnel, for failure to register as an introducing broker or an associated person of one. The Indian Gaming Association condemned the letter the same day as “an affront to Tribal Nations Everywhere,” accusing the agency of favoritism toward the prediction-market industry.

What the no-action position does

CFTC Letter No. 26-25 states that the division will not recommend enforcement against a passive software provider or its personnel for failing to register, solely as a result of their engaging in defined “Covered Activities” — providing and marketing software that facilitates user trading with registered futures commission merchants, introducing brokers, and designated contract markets. The relief runs only until a Commission rulemaking or guidance addressing the introducing-broker registration requirement for software developers takes effect.

The letter builds on Staff Letter 26-09, issued March 17, 2026, to Phantom Technologies, Inc., a developer of applications that passively enable trading in Commission-regulated derivatives, including through self-custodial crypto asset wallet software. Because only a letter’s beneficiary may rely on it, no other provider could use Letter 26-09; the division said it later received inquiries from similarly situated providers and concluded a position “on substantially the same terms” should be available to all of them. The letter adds that passive software providers “are not limited to providers of crypto asset related software.”

Covered activities and ten conditions

Covered Activities include developing and distributing front-end interface software through which users review market data and aggregated position information, view product offerings, and submit orders for Commission-regulated derivatives — expressly including event contracts and perpetual contracts — directly to registered firms. The provider’s role is limited to software on the user’s device, with no “affirmative involvement” in any particular order.

Providers may share in a portion of the registered firms’ relevant revenues, charge users a transaction-based fee, market their services, promote particular contracts, and introduce or solicit users to specific registered firms — so long as users face no contractual or operational restriction on accessing those firms directly. The letter describes a “custodial” model: users trade on a designated contract market as members or as customers of a member firm, funds held at a clearing organization or futures commission merchant, while the provider never holds, controls, or takes custody of user assets, generates express “buy” or “sell” signals, or exercises discretion over order routing or execution.

Relief is conditioned on ten requirements, including conflict-of-interest and risk disclosures that users must acknowledge; onboarding users as direct members or customers who keep independent access to the registered firm; and maintaining compliance policies for public communications and marketing as if the provider were a registered introducing broker. Under condition seven, the provider and each registered firm must sign a written undertaking — filed with the division — making them jointly and severally liable for violations of the Commodity Exchange Act or CFTC regulations by the provider or its personnel in connection with the Covered Activities, and consenting to CFTC jurisdiction to investigate and bring enforcement action. A provider affiliated with a state or tribal government must include a waiver of sovereign immunity, “limited or otherwise,” if needed to make that consent enforceable.

A staff-level position, not Commission policy

The letter states that it represents the views of the Market Participants Division only, is “not binding on the Commission,” and could be rendered void by different or changed material facts. The division retains discretion to further condition, modify, suspend, or terminate the position. It is signed by DJ Hennes, the division’s director.

Indian Gaming Association’s response

In a statement issued the same day, IGA Chairman David Z. Bean said the CFTC “continues to tilt the playing field for the Prediction Market Industry.” The association said the letter is intended to benefit crypto wallet providers and to blur the line between traditional introducing brokers and passive software providers, making it easier for prediction markets to gather customers through agents that would not have to register as licensed brokers under the Commodity Exchange Act. The letter does expressly cover software used to submit orders for event contracts.

“Commissioner Selig is acting alone to gut the Commodity Exchange Act and disregard the protections Congress enacted for America’s agricultural community,” Bean said, adding that there is nothing in the letter “that would benefit tribal economies” and that it “would only benefit crypto wallets, Kalshi and other Prediction Market companies’ bottom lines.” That framing is the IGA’s characterization: the letter is signed by the division’s director and states that it reflects the division’s views only.

Bean said tribal organizations met with the CFTC earlier in the week and that Chairman Selig “sat mostly silent and refused to discuss his proposed rule.” He urged the agency to “postpone the proposed rule, withdraw this unlawful Letter that violates the CEA and CFTC’s own regulations, and engage Tribal Nations with meaningful government to government consultation” — the “unlawful” label being the association’s position. Bean placed the letter against what he described as mounting prediction-market losses in federal court, growing state and tribal pushback, the previous day’s Ninth Circuit ruling, and the Senate’s failure to advance H.R. 3633, the Digital Asset Market Clarity Act — a bill the IGA said prediction markets tried to use as a “backdoor mechanism” to keep operating if they lose in the Supreme Court.

Backdrop: Ninth Circuit rulings and a contested roundtable

On Sept. 16, one day before the letter, a Ninth Circuit panel ruled in Blue Lake Rancheria v. Kalshi that two federally recognized tribes are likely to succeed on claims that Kalshi’s sports event contracts offered on tribal lands violate the Indian Gaming Regulatory Act and the tribes’ gaming ordinances. The panel held the contracts constitute class III gaming and are located on Indian lands when users enter into them from tribal territory, and that IGRA is not displaced by the Unlawful Internet Gambling Enforcement Act or by the CEA’s exclusive jurisdiction. It reversed in part the denial of a preliminary injunction and remanded for the district court to weigh the remaining injunction factors — a likelihood-of-success ruling, not a final judgment. Defendants are Kalshi Inc., KalshiEX LLC, Robinhood Markets, Inc., and Robinhood Derivatives, LLC.

The IGA hailed the decision as “an important victory for Tribal sovereignty,” saying it establishes that “companies cannot enter Tribal lands through an app and conduct gaming outside the laws and agreements that govern gaming there.”

On Aug. 28, a different Ninth Circuit panel held in KalshiEX v. Assad that Kalshi’s sports event contracts are likely not “swaps” under the CEA and that the CEA likely does not preempt Nevada’s gaming regulations as applied to them, affirming the dissolution of Kalshi’s preliminary injunction and remanding for the district court to consider Nevada’s challenges to Kalshi’s election contracts. The opinion noted the CFTC has proposed revising 17 C.F.R. § 40.11 — the regulation barring gaming-related contracts from being listed on a designated contract market — but that the existing regulation controls for now.

And on Sept. 15, the National Congress of American Indians and the IGA said sports-event contracts offered by prediction-market platforms are “illegal gaming” and demanded formal government-to-government consultation following a private, invitation-only CFTC roundtable. “A roundtable is not consultation,” NCAI President Mark Macarro said.