THE CFTC SAYS A DEVELOPER NEED NOT REGISTER AS A BROKER — CONDITION SEVEN IS JOINT LIABILITY AND WRITTEN CONSENT TO ITS JURISDICTION — AND IN SEVEN PAGES IT NEVER SAYS FIRST AMENDMENT

The CFTC’s Market Participants Division issued Letter 26-25 on Thursday. A developer who ships front-end software that lets a user send orders to a registered exchange does not have to register as an introducing broker.

Ten conditions come with it.

Condition seven: the developer and the exchange “execute in writing an undertaking by which they each agree to be jointly and severally liable,” and both “consent to the jurisdiction of the Commission to investigate and take enforcement action.” Condition ten requires a filed notice consenting to the same. Footnote 22 tells a developer tied to a state or a tribe to waive sovereign immunity if that is what makes the consent stick.

Conditions five and six cover speech. Follow the NFA rules on communications with the public “as if the PSP were registered as an IB.” Run no promotion that would need NFA pre-approval. Footnote 23 reaches conference talks and “promotional statements on social media,” each “subject to the PSP’s pre-approval and supervision.”

The Sixth Circuit held in 2000 that source code is protected by the First Amendment. The Second Circuit held in 2001 that code is speech and that its function can still be regulated. Letter 26-25 never says the words. It runs on section 4d(g) and a 1983 Federal Register line reading “soliciting or accepting orders” to cover more than the literal act.

And it is staff. Page seven: not binding on the Commission. The Division keeps the right to “suspend, terminate, or otherwise restrict” it.