SEC Crypto Relief, Polymarket Inquiry, CFTC Task Force Updates
Summary
SEC Trading and Markets staff issued a conditional five-year no-action letter relieving certain crypto trading interface providers from broker-dealer registration under Section 15 of the Securities Exchange Act of 1934, provided they do not take custody of customer assets, execute trades on users' behalf, or provide investment advice. Senator Blumenthal sent a letter to Polymarket's CEO requesting information on national security trading and insider trading by April 24, 2026. Multiple additional developments are covered including CFTC task force formation, state prediction market litigation, and CFTC motions against state-level gambling enforcement.
“The relief applies to certain crypto trading interfaces, such as non-custodial wallets or front ends to blockchain-enabled software applications, provided they do not take custody of customer assets, execute trades on a user's behalf, or provide investment advice.”
Broker-dealers providing crypto trading interfaces should map their specific services against the three conditions in the no-action letter (no custody, no trade execution, no investment advice) before relying on the five-year relief. Any platform whose service model does not fit squarely within all three conditions may still require broker-dealer registration and should seek separate legal guidance.
What changed
SEC Trading and Markets staff issued a conditional five-year no-action letter providing relief from broker-dealer registration under Section 15 of the Securities Exchange Act of 1934 for certain crypto trading interface providers. The relief applies to non-custodial wallets or front ends to blockchain-enabled software applications, provided providers do not take custody of customer assets, execute trades on a user's behalf, or provide investment advice.
Broker-dealers and crypto trading platform operators should review the no-action letter conditions to determine whether their services qualify. Platforms that do not meet all conditions remain subject to broker-dealer registration requirements. Senator Blumenthal's letter to Polymarket on national security trading and insider trading is also noted, with a requested response by April 24, 2026.
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Apr 20, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
April 20, 2026
MoFo's Financial Markets & Innovation #9
Please see below for this week’s Financial Markets & Innovation Weekly Update from Morrison Foerster, tracking how emerging technologies are reshaping financial markets and how U.S. and global regulators are responding. Covering developments across digital assets, prediction markets, artificial intelligence, and next-generation trading infrastructure, this update highlights key regulatory actions, enforcement activity, policy signals, and related market structure implications.
SEC Trading and Markets Staff Provides Conditional No-Action Relief for Certain Crypto Trading Interfaces
On April 13, staff in the SEC’s Division of Trading and Markets issued a statement providing conditional, five-year no-action relief from broker-dealer registration under Section 15 of the Securities Exchange Act of 1934 for certain Covered User Interface Providers offering crypto asset services. The relief applies to certain crypto trading interfaces, such as non-custodial wallets or front ends to blockchain-enabled software applications, provided they do not take custody of customer assets, execute trades on a user’s behalf, or provide investment advice.
Senator Blumenthal Requests Information on National Security Trading from Large Prediction Market
On April 9, Senator Blumenthal sent a letter to the CEO of Polymarket regarding potential insider trading on their prediction markets. The letter alleges that new users placed large and specific bets prior to significant action in Venezuela and Iran earlier this year, which Blumenthal believes may indicate some users are trading on national security secrets. Since the actions in Venezuela and Iran, Polymarket has announced additional rules to combat the use of confidential information in trading. The Senator requests additional information on death wagers, national security information, and insider trading by April 24, 2026.
Update on State Prediction Market Treatment
Following the CFTC-DOJ joint filing against Arizona, Connecticut, and Illinois last week, discussed in last week’s Financial Markets & Innovation Weekly Update from Morrison Foerster, the CFTC filed a motion on April 9 requesting the halt of Arizona’s application of state laws to CFTC-registered prediction markets. The U.S. District Court of Arizona granted their request for a temporary restraining order on April 10. In the same vein, Kalshi filed suit against Montana officials on April 13 for their application of state gambling laws to the CFTC-registered prediction market. This recent suit against Montana comes after multiple cease-and-desist letters and an agreement between Kalshi attorneys and Montana regulators.
CFTC Announces Members of Innovation Task Force
On April 10, the CFTC announced members of its Innovation Task Force, which include attorneys from large law firms, consultants, and CFTC staff members. The Innovation Task Force will focus on regulatory clarity for digital assets, AI, and prediction markets, and will be led by Michael K. Passalacqua.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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