Payment for Order Flow (PFOF)
Payment for Order Flow (PFOF) is a compensation arrangement where a trading venue or intermediary pays a broker, wallet, or interface for routing client orders to them. In crypto, PFOF commonly manifests when a wallet routes user swaps through a specific DEX aggregator or builder in exchange for a kickback from the spread or MEV profits extracted from those trades. The controversy: if the executing party extracts more value from the order than they return in payment, the trader experiences worse net execution than routing to a neutral venue. PFOF creates a conflict of interest between the interface (optimizing for rebate revenue) and the user (optimizing for best execution). Regulatory attention on PFOF in equity markets (e.g., SEC scrutiny of Robinhood) has parallels in crypto, where DEX aggregators and wallet providers increasingly face questions about routing transparency and execution quality. Private order flow routing to trusted builders is sometimes framed as a defense against sandwich attacks rather than PFOF, though the economic structure is similar.