DeFi heavyweights are pushing the SEC to convert its temporary “non-custodial UI” safe harbor into binding broker rules that protect neutral infrastructure from creeping regulation.
A broad coalition of DeFi builders and investors is urging the U.S. Securities and Exchange Commission to enshrine its recent staff guidance on “non-custodial user interfaces” through formal regulation, arguing that only clear, sustainable definitions of “broker” will prevent neutral infrastructure from being regulated. 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 should 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-readable commands” and gives users full control over their assets would not require broker-dealer registration. They argue that such instruments act as technical infrastructure and not as intermediaries for transactions, echoing 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 introduced a five-year framework for ‘Covered User Interface Providers’, allowing certain DeFi front ends and self-custodial wallets to operate without broker registration as long as they meet twelve conditions, including strict limits on discretion, order fulfillment and recommendations. In a notable departure from traditional practice, staff said it would not object to these providers receiving transaction-based compensation, provided the compensation was flat, objective and independent of product or location, while still prohibiting payment for order flow.
But the guidance is explicitly temporary and could be withdrawn in 2031 if the Commission does not intervene. A sunset that, according to the DeFi coalition, is not good enough for companies making multi-year infrastructure investments. Their letter urges the SEC to open a notice-and-comment rulemaking that hardcodes a modern broker definition, explicitly excluding neutral software vendors, validators, RPC/API operators, oracle networks, and cloud infrastructure that never take control or exercise trading discretion.
“In the absence of clear, technology-neutral rules, future staff or committees could reinterpret the definition of brokers in ways that stifle innovation and push core U.S. infrastructure abroad,” the groups warn, echoing concerns that ad hoc directives could be rolled back as quickly as they are issued.
A regulatory vacuum as Congress stalls
The timing of the letter is not coincidental. With the CLARITY Act — the key 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 short-term lever for clarity. Legal memos from firms including Sidley, Jones Day and Deloitte have already described the April 13 statement as a “pathway” for DeFi interface providers, but emphasized that it only covers broker-dealer rules, and not exchange registration, AML obligations or anti-fraud liability.
In its own weekly “DeFi Debrief,” the DeFi Education Fund called the staff move “an important first step,” but emphasized that “lasting regulatory certainty requires action at the Commission level,” not just statements from staff. Until Congress acts or the SEC completes a full rulemaking, the coalition’s push underscores a broader reality: the fate of America’s DeFi infrastructure still depends on how a 90-year-old broker definition is applied to lines of code.