SEC Staff Carves Out a Path: Crypto Interface Providers May Not Be Broker-Dealers

The Guidance addresses broker-dealer registration under Section 15(a) of the Securities Exchange Act of 1934 for CUI Providers: persons that create, offer, or operate interfaces that facilitate user-initiated crypto asset securities transactions. A CUI is an interface provided by a website, browser extension, or other software application (e.g., a mobile app) that helps users build and submit transactions on blockchain protocols using a self-custodial wallet. The Guidance provides that the Staff will not recommend enforcement action against a CUI Provider that meets certain conditions set forth in the Statement. This marks a significant change from prior Commission and Staff positions relating to broker-dealer status under Section 15(a), but is strictly limited to CUI Providers.

Key Requirements

As described in the Guidance, to be eligible for the no-action relief from broker-dealer registration, however, a CUI Provider must adhere strictly to the following conditions:

Allow users to customize default transaction parameters and provide educational materials to users to help them do so.

Connect to one or more default trading venues or distributed ledger trading systems with which users can interact.

• If the trading venue or system is provided by the CUI Provider or an affiliate, the affiliation must be disclosed, and access to that venue or system must be on the same terms and conditions as those for any unaffiliated CUI.
• If only one execution route is provided by the CUI, it must provide the user with the ability to see additional routes.
• If more than one execution route is displayed to a user, the CUI must make available filtering or sorting tools to enable users to sort based on objective factors.

Provide no commentary on any displayed potential execution routes (e.g., it cannot say that a particular execution venue is better than any other or offers the "best price").

With respect to users' trading instructions and the display of market data on execution routes, utilize only software that operates on predisclosed and objective parameters that are independently verifiable.

Establish policies, procedures, and controls reasonably designed to, among other things, evaluate and audit the trading venues and systems connected to the CUI for market data based on objective factors (e.g., liquidity, latency, security) and evaluate and periodically reassess default transaction parameters based on objective factors and address any conflicts of interest relating thereto.

Disclose, among other things, all material conflicts, fees, cybersecurity policies, confidentiality, and MEV-related protections, as well as information concerning the CUI Provider's role relating to the CUI, a disclaimer that the CUI Provider is not registered as a broker-dealer, and an explanation of fees for use of the CUI.

Charge users only "fixed charges" that do not vary by product, route, execution venue, or counterparty.

• These charges can be per-transaction fees or a flat fee, based on objective factors, applied consistently.
• Notably, a uniform percentage of each transaction qualifies as a "fixed charge" as long as the rate is applied consistently and does not vary by asset or route.
• The CUI Provider cannot receive any compensation based on the size, value, or success of a securities transaction from any person other than the user, meaning it cannot receive any payment for order flow from any trading venue or system.

A percentage-based fee has traditionally not been considered a "fixed fee" but rather has been considered to be transaction-related. Allowing CUI Providers to receive what is essentially transaction-based compensation (i.e., compensation based on the size or success of a securities transaction) is a significant divergence from the traditional analysis applied by the SEC and its Staff to determine broker-dealer status, under which receipt of such compensation has been considered a hallmark of a broker-dealer/customer relationship. This exception for CUI Providers, if extended to other types of entities, could have broader implications on the test for determining broker-dealer status and the regulatory purposes behind requiring registration.

It is important to note that the Guidance's no-action relief is not available to any CUI Provider that engages in or holds itself out as providing or engaging in any of the following activities: (i) negotiating terms of any user transactions; (ii) soliciting specific crypto asset securities transactions; (iii) making investment recommendations or providing advice; (iv) arranging for financing; (v) processing trade documentation; (vi) conducting independent asset valuations; (vii) holding or having access to handling or managing user funds, securities, or stablecoins; (viii) executing or settling transactions; or (ix) taking or routing orders. While the Guidance offers more flexibility regarding permissible compensation types for CUI Providers to avoid broker-dealer registration, its prohibitions on involvement by unregistered entities in the activities listed above are consistent with the traditional broker-dealer analysis generally applied by the Commission and its Staff in other contexts.

Importantly, the Guidance applies only where neither the wallet provider nor the CUI has custody of, or access to, the user's private key.

Operators of DeFi front ends, wallet-embedded trading tools, and similar products should evaluate these conditions carefully to determine whether they can operate without registration.

The Latest in a Series of Staff Crypto-Related Guidance

The Guidance is the latest in a series of Staff-level guidance issued since the SEC's Crypto Task Force was established in January 2025 and follows prior guidance addressing meme coins, stablecoins, proof-of-work mining, protocol staking, and tokenized securities, among others. It is also the first Staff guidance to specifically address the broker-dealer registration status of DeFi interface providers for self-custodial wallet users. Notably, the Guidance is effective for a period of five years and will be withdrawn as of April 13, 2031, absent intervening action by the Commission.

The Staff has invited public comment on the Guidance; industry participants should monitor the comment process for further developments, including Commission rulemaking in the area.