New SEC Guidance Targets DeFi Interfaces, Self-Custodial Wallets, and Execution Routing Disclosures

Key Takeaways:

Under Section 15(a) of the Securities Exchange Act of 1934, any person in the business of effecting securities transactions for others is generally required to register as a broker. The SEC staff said in the statement that it will not object to a Covered User Interface Provider operating without that registration, provided the provider meets 12 specific conditions.

On routing, if an interface displays only one execution path, users must be able to view alternatives. If multiple routes appear, the interface must offer objective sorting tools, such as by price or speed, without labeling any route as the “best” option.

Compensation must be limited to a fixed charge applied consistently across products, routes, venues, and counterparties. The fee cannot vary based on which trading venue is selected or which asset is involved.

Any affiliated trading venues must be clearly identified, and the interface must connect to those venues on the same terms as any unaffiliated platform.

The statement also lists activities that remove a provider from its scope entirely. Operators who negotiate transaction terms, hold user funds, execute or settle trades, process trade documentation, or take and route orders are not covered by the staff’s no-action position.

The SEC said maintaining policies, procedures, and internal records, including the use of onchain transaction data alongside private books, could help providers demonstrate they are operating within the statement’s limits.