DeFi heavyweights press SEC for formal broker rules after ‘non-custodial UI’ guidance

DeFi heavyweights urge the SEC to turn its temporary “non‑custodial UI” safe harbor into binding broker rules that shield neutral infrastructure from creeping regulation.

A broad coalition of DeFi builders and investors is pressing the U.S. Securities and Exchange Commission to lock in its recent staff guidance on “non‑custodial user interfaces” through formal rulemaking, arguing that only clear, durable definitions of “broker” will prevent neutral infrastructure from being regulated out of existence. In a letter filed this week, the DeFi Education Fund, Aave Labs, Uniswap Labs, Paradigm, Andreessen Horowitz and other signatories responded to the SEC Division of Trading and Markets’ April 13 staff statement on when crypto asset front ends must register as brokers.

The coalition “strongly supports” the staff’s conclusion that a non‑custodial user interface “that merely converts user‑initiated instructions into blockchain‑legible commands” and leaves users in full control of their assets does not need broker‑dealer registration. They argue that such tools function as technical infrastructure rather than transaction intermediaries, aligning with Commissioner Hester Peirce’s call for a “more permanent regulatory approach” that reflects how DeFi actually works.

From interim guidance to binding rules

The April 13 statement carved out a five‑year no‑action framework for “Covered User Interface Providers,” allowing certain DeFi front ends and self‑custodial wallets to operate without broker registration so long as they meet 12 conditions, including strict limits on discretion, order handling, and recommendations. In a notable departure from traditional practice, the staff said it would not object if these providers receive transaction‑based fees, provided compensation is flat, objective, and agnostic to product or venue, while still banning payment for order flow.

But the guidance is explicitly temporary and can be withdrawn in 2031 absent Commission action, a sunset the DeFi coalition says is not good enough for businesses making multi‑year infrastructure bets. Their letter urges the SEC to open a notice‑and‑comment rulemaking that would hard‑code a modern broker definition, explicitly excluding neutral software providers, validators, RPC/API operators, oracle networks, and cloud infrastructure that never take custody or exercise trading discretion.

“Absent clear, technology‑neutral rules, future staff or Commissions could reinterpret the broker definition in ways that chill innovation and push core U.S. infrastructure offshore,” the groups warn, echoing concerns that ad hoc guidance can be reversed as quickly as it is issued.

Regulatory vacuum as Congress stalls

The timing of the letter is not accidental. With the CLARITY Act — the main federal crypto market‑structure bill — stuck in the Senate Banking Committee and facing a hard end‑of‑May deadline set by Senator Bernie Moreno, industry groups increasingly see the SEC’s rulebook as the only near‑term lever for clarity. Legal memos from firms including Sidley, Jones Day, and Deloitte have already framed the April 13 statement as a “path” for DeFi interface providers but stressed that it only addresses broker‑dealer rules, not exchange registration, AML obligations, or anti‑fraud liability.

In its own weekly “DeFi Debrief,” the DeFi Education Fund called the staff move “a significant first step” but emphasized that “lasting regulatory certainty requires Commission‑level action,” not just staff statements. Until Congress acts or the SEC completes a full rulemaking, the coalition’s push underscores a broader reality: the fate of U.S. DeFi infrastructure still hinges on how a 90‑year‑old broker definition is applied to lines of code.