SEC Staff Provides Relief for Crypto Wallet Interfaces

Introduction

On April 13, 2026, the staff of the SEC’s Division of Trading and Markets issued a statement clarifying that operators of certain user interfaces used to access or interact with crypto asset securities (“Covered User Interfaces”) are not required to register as broker-dealers under the Exchange Act.¹ A “Covered User Interface” generally refers to an interface provided by a website, browser extension, or other software application that may be embedded in a wallet or separately available for download, designed to assist users engaging in crypto asset securities transactions through the user’s self-custodial wallet.² Covered User Interfaces may also provide users with market data, such as potential execution routes, asset prices, and estimated transaction costs (e.g., “gas” fees) for crypto asset securities transactions. 

The Statement, by its own terms, applies only to user interfaces for crypto asset securities, not for other securities. The Statement defines a “crypto asset” as “any digital representation of value that is recorded on a cryptographically secured distributed ledger” and states that crypto asset securities include tokenized versions of an equity or debt security.³

For entities engaging in traditional broker-dealer activities, broker-dealer registration can be expensive and time-consuming. Once registered, broker-dealers are subject to substantial and continuing compliance obligations, including obligations relating to net capital, customer protection, recordkeeping, and supervisory requirements administered by the Financial Industry Regulatory Authority (“FINRA”). Accordingly, this Statement will likely be welcomed by operators of self-custodial wallet interfaces and certain decentralized finance (“DeFi”)⁴ interfaces, and represents a major step in ongoing initiatives to provide a “regulatory sandbox” for innovation involving market participants that do not fit neatly within the existing regulatory frameworks.

The Statement is immediately effective, but the staff has sought public comment on all aspects of the Statement. Following the release of the Statement, SEC Commissioner Hester Pierce commented that “[w]hile the staff expressing its view is helpful, I favor a more permanent regulatory approach that addresses the broker definition in light of current market circumstances.”⁵ Absent intervening SEC action, the Statement will be effective for a period of five years and will be considered withdrawn on April 14, 2031.

Background: Broker-Dealer Registration Requirements and Covered User Interface Providers

Section 15(a) of the Exchange Act makes it unlawful for any broker or dealer to “effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security” unless it is registered with the SEC as a broker-dealer or otherwise qualifies for an exemption.⁶ The Exchange Act defines a “broker” as “any person engaged in the business of effecting transactions in securities for the account of others.”⁷ Traditionally, the SEC and the federal courts have determined that a person “effects transactions in securities” if the person participates in such transactions “at key points in the chain of distribution.”⁸ Such participation can take the form of activities such as soliciting securities transactions; negotiating securities transactions; taking, routing or matching orders; facilitating the execution of a securities transaction; processing trade documentation; or handling customer funds or securities. These activities have been assigned varying weights (some activities such as soliciting investors or handling customer funds or securities have typically been assigned greater weight than others). Typically, however, some combination of these activities have been viewed as constituting broker-dealer activity in combination with the receipt of “transaction-based compensation” – i.e., compensation based, directly or indirectly, on the size, value or completion of any securities transactions.⁹

Courts and the SEC have often treated the receipt of transaction-based compensation as the most important, if not the primary determinative factor, in determining broker-dealer status. However, there have been notable exceptions, particularly in the context of crypto assets, where at least one federal court¹⁰ has taken the view that a self-custodial “digital wallet” that enabled customers to store and access their crypto-assets on their own computers or mobile devices was not a broker-dealer for the purposes of the Exchange Act. The court noted that while the wallet application allowed customers to access third-party decentralized trading platforms (or DEXs) and that the wallet provider charged a flat fee of 1% of the principal amount for each transaction executed through the wallet, the wallet application did not negotiate terms for the transaction, make investment recommendations, arrange financing, hold customer funds, process trade documentation, or conduct independent asset valuations. The SDNY also noted that in routing customer orders, the wallet application permitted the user to control the routing of transactions to third party venues. The court concluded that although the wallet provider received transaction-based compensation, the factual allegations concerning the wallet application were insufficient in aggregate to conclude that the wallet provider was acting as a broker-dealer under the Exchange Act.

The Statement appears to build on the SDNY’s opinion by providing a detailed explanation of the activities that Covered User Interfaces may engage in without registering as broker-dealers, and the conditions they must meet. We consider those activities and conditions further below.

How Covered User Interfaces Can Operate without Registering as a Broker-Dealer

The Statement identifies three categories of conditions applicable to providers of Covered User Interfaces (“Covered User Interface Providers”) seeking to avoid broker-dealer registration: (1) requirements; (2) permitted activities; and (3) prohibited activities.

Requirements

• Compensation: The Covered User Interface’s compensation must be limited to fixed charges to the user. Notably, these fees may be charged per crypto asset securities transaction (as a flat fee or percentage of the transaction) or as a flat fee, so long as the fees are agnostic as to product, execution route, execution venue, and counterparty. The Statement makes clear that Covered User Interface Providers may not receive payment for order flow.
• Policies, Procedures, and Controls: Covered User Interface Providers must establish procedures and controls reasonably designed to:
  • Evaluate, onboard, and audit the trading venues and distributed ledger trading systems to which they connect to ensure the market data users access from these systems is accurate; and
  • Periodically reassess default transaction parameters based on objective factors, and address any conflicts of interest or risks associated with these parameters.
• Disclosures: A Covered User Interface Provider must prominently disclose and regularly update all material facts to users related to (among other matters) its:
  • Limited role as the interface operator, including a prominent disclosure stating that the Covered User Interface Provider is not registered with or regulated by the SEC;
  • Parameters used to prepare trading instructions and display market data related to potential execution routes, and how default parameters are set; and
  • Material conflicts of interest associated with a crypto asset securities transaction and use of users’ trading information.¹¹

Permitted Activities

Under the Statement, Covered User Interface Providers may only engage in certain activities, including (among others):

• Permitting users to customize any default crypto asset security transaction parameters (e.g., price slippage, maximum “gas” fees, priority fees, “tips”, and transaction time);
• Selecting one or more default trading venues (e.g., limit order book matching systems, request-for-quote systems) or distributed ledger trading systems (e.g., automated market maker liquidity pools and/or liquidity aggregators) with which to connect or interact;¹² and
• Providing filtering or sorting tools that display potential routing destinations based on objective factors (such as alphabetically, lowest/highest price, or speed) and allowing the user to sort based on such factors.¹³

Prohibited Activities

The Statement also notes that Covered User Interface Providers may not engage in the following activities:

• Soliciting investors to engage in any specific crypto asset securities transactions (though it can solicit investors to use the Covered User Interface);
• Making investment recommendations or providing advice (for example, by indicating that a particular execution pathway offers the “best price” or is the “most reliable”);
• Exercising any control or discretion over, or engaging in any decision-making regarding, the market information provided, or securities transactions;
• Negotiating terms for any transaction;
• Arranging for financing;
• Processing trade documentation;
• Conducting independent asset valuations;
• Holding, having access to, handling, managing, or possessing user funds, securities, or stablecoins;
• Executing or settling transactions; or
• Taking or routing orders.

The prohibition on “taking or routing orders” highlights the limited scope of the Statement: to user-initiated crypto asset securities transactions.

Implications for Covered User Interfaces: Short-Term Relief, Long-Term Uncertainty?

Reception by the Crypto Industry and Traditional Broker-Dealers: The Statement represents significant relief for crypto asset market participants, particularly the providers and operators of self-custodial wallet interfaces and certain DeFi interfaces and applications. This development reflects SEC Chairman Paul Atkins’s view that “the Securities and Exchange Commission should not fear innovation. Rather, it should embrace and champion it.”¹⁴

At the same time, operators and providers of Covered User Interfaces will still need to carefully review the Statement to ensure that they meet all of the Statement’s requirements and perform none of the prohibited activities. With that said, firms that utilize this new relief in the short run should factor into their long-term business plans the evolving regulatory framework associated with crypto asset securities, and how that may change during future administrations.

The Statement and Its Limited Scope: While the crypto industry’s enthusiasm about the Statement is understandable, it is equally necessary to understand the limits in the Statement’s scope. First, it is designed to apply to apps that empower user-initiated transactions and not to the offer or sale of or investment or routing advice relating to securities. Thus, the Statement applies only to interfaces, i.e. the front-end applications through which investors access crypto asset trading venues. Notably, the Statement only applies to Covered User Interfaces for self-custodial wallets, and does not provide relief to custodial wallets managed by third parties. It also offers no relief to the trading venues to which Covered User Interfaces connect, whether such venues are centralized or decentralized. In fact, the regulatory status of the decentralized trading venues to which Covered User Interfaces connect is the subject of vigorous ongoing debate at the Commission and elsewhere.  

Second, it is unclear how the Statement will be received by federal courts. Federal courts, both within and across the various circuits, have often disagreed on the precise combination of factors that require an entity to register as a broker-dealer. In a post-Chevron world,¹⁵ federal courts may not extend to a Covered User Interface the same latitude reflected in the Statement.

Third, even if federal courts defer to the Statement’s interpretation of broker-dealer regulations, it is questionable whether such deference will have an effect on state laws and state courts. The Statement is unlikely to be viewed as pre-empting any state laws on broker-dealer registration, and Covered User Interfaces should therefore take care to examine whether their operations require them to register under the laws of any state in which they operate.

The limits on the scope of the Statement nonetheless do not obscure the fact that the Statement constitutes a major step forward for many protocols, applications, and their operators and providers. While the SEC has provided significant guidance on crypto assets,¹⁶ the Statement constitutes the first major relief for crypto market intermediaries. The clear next steps for the SEC are to attempt to resolve the securities regulatory status of DeFi and to devise broker-dealer and investment adviser regulatory frameworks that are tailored to crypto assets and business models. More is likely to follow.