DeFi Leaders Urge SEC for Definitive Broker Regulations Following ‘Non-Custodial UI’ Guidance

Prominent DeFi leaders are calling on the SEC to solidify its temporary “non-custodial UI” safe harbor into binding broker regulations that protect neutral infrastructure from increasing oversight.

A diverse group of DeFi developers and investors is urging the U.S. Securities and Exchange Commission to formalize its recent staff guidance on “non-custodial user interfaces” through official rulemaking. They contend that precise, lasting definitions of “broker” are essential to safeguarding neutral infrastructure from regulatory challenges. In a letter submitted 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’ staff statement from April 13 regarding when crypto asset front ends are required to register as brokers.

The coalition “strongly supports” the staff’s assessment that a non-custodial user interface, which merely translates user-initiated commands into blockchain-recognizable actions and keeps users in full control of their assets, does not require broker-dealer registration. They argue these tools serve as technical infrastructure rather than transactional intermediaries, aligning with Commissioner Hester Peirce’s call for a “more permanent regulatory approach” that accurately represents how DeFi functions.

From interim guidance to binding rules

The April 13 statement established a five-year no-action provision for “Covered User Interface Providers,” enabling certain DeFi front ends and self-custodial wallets to operate without broker registration, provided they satisfy 12 conditions including strict limits on discretion, order management, and recommendations. Notably, the staff indicated it would not object if these providers earned transaction-based fees, given that the compensation is flat, objective, and neutral to product or venue, while still prohibiting payment for order flow.

However, this guidance is explicitly temporary and can be revoked in 2031 if no Commission action is taken, a limitation the DeFi coalition argues is insufficient for entities making long-term infrastructure investments. The letter urges the SEC to initiate a notice-and-comment rulemaking process to develop a modern broker definition that clearly excludes neutral software providers, validators, RPC/API operators, oracle networks, and cloud infrastructure that never assume custody or exercise trading discretion.

“Without clear, technology-neutral regulations, future staff or Commissions could reinterpret the broker definition in ways that stifle innovation and drive essential U.S. infrastructure overseas,” the groups caution, voicing concerns that ad hoc guidance can be easily reversed.

Regulatory vacuum as Congress stalls

The timing of the letter is intentional. With the CLARITY Act — the primary federal legislation concerning crypto market structure — held up in the Senate Banking Committee and facing an imminent deadline at the end of May set by Senator Bernie Moreno, industry groups increasingly perceive the SEC’s rulebook as the only timely means for clarity. Legal memos from firms such as Sidley, Jones Day, and Deloitte have already presented the April 13 statement as a “path” for DeFi interface providers but emphasized that it only pertains to broker-dealer regulations, excluding exchanges, AML obligations, or anti-fraud liabilities.

In its weekly “DeFi Debrief,” the DeFi Education Fund characterized the staff’s move as “a significant first step” but stressed that “lasting regulatory certainty necessitates action at the Commission level,” not merely staff announcements. Until Congress takes action or the SEC completes a comprehensive rulemaking, the coalition’s advocacy highlights a broader reality: the future of U.S. DeFi infrastructure is still contingent on the application of a 90-year-old broker definition to modern lines of code.