Hyperliquid Policy Center and Phantom call for CFTC specific DeFi rules
The Hyperliquid Policy Center and Phantom have urged the US Commodity Futures Trading Commission to review its onchain trading rulebook, arguing that existing rules designed for traditional financial markets are incompatible with decentralized infrastructure.
Summary
- The Hyperliquid Policy Center and Phantom called on the CFTC to create rules tailored to onchain trading instead of legacy market rules.
- The groups say that developers of decentralized trading software and custodial wallet providers should not face the same registration requirements as traditional intermediaries.
- The proposal comes as US regulators review derivatives rules and CME continues its legal challenge over the CFTC’s treatment of crypto futures.
According to a joint comment letter sent on Thursday by the Hyperliquid Policy Center (HPC) and Phantom, the current regulatory framework assumes a market structure where brokers, traders and clearinghouses control clients’ funds throughout the trading process. These organizations said that onchain markets work differently because users retain control over their assets.
The submission is in response to a joint Request for Information (RFI) issued last month by the CFTC and the Securities and Exchange Commission, which invited public feedback on rules that could slow financial innovation and make it harder for new technologies to work with CFTC-regulated firms. As previously reported by crypto.news, the agencies are also reviewing whether the existing definitions of exchanges and related derivatives remain relevant to new financial products.
HPC and Phantom require regulations optimized for decentralized markets
In their filing, HPC and Phantom argue that developers of onchain trading software should not automatically be required to register as exchanges or clearinghouses simply because they are building decentralized infrastructure. They also say that an unofficial wallet interface like Phantom should not be considered as introducing brokers.
Organizations argued that blockchain-based software cannot be regulated in the same way as intermediaries because, unlike traditional market operators, code cannot enter into contracts, respond to regulators or exercise legal obligations.
In line with those proposals, the letter said that companies already registered with the CFTC should be allowed to use blockchain technology for trading and clearing without facing unnecessary regulatory barriers.
The recommendations come as US regulators continue to examine how hedge funds fit within existing derivatives rules. CFTC Chairman Michael Selig previously said the agency’s joint review with the SEC could help resolve long-standing uncertainties under the Dodd-Frank Act, while SEC Chairman Paul Atkins called for clearer definitions covering new financial products.
The filing comes as CME challenges the future of crypto perpetual
The proposal also comes at a time when the CFTC is facing legal action by CME Group over its approval of crypto futures.
As previously reported by crypto.news, CME sued the regulator in June after approving unlimited futures products from platforms including Kalshi and opened a regulated channel for similar offerings. The exchange argues that fixed-term contracts should be classified as swaps rather than futures under the Dodd-Frank framework and says the regulator bypassed the due process required for switching products.
The dispute gained more attention after Kalshi expanded beyond Bitcoin perpetuals to write contracts linked to Ethereum, XRP and Hyperliquid, while Coinbase also found a regulated channel to offer some perpetual crypto futures through infrastructure linked to Deribit.
HPC’s founder, Jake Chervinsky, has publicly disputed CME’s lawsuit, describing it as a serious mistake and accusing the exchange of trying to fend off new competitors. One day after CME filed its lawsuit, the CFTC and the SEC published their joint request for public comment, which specifically asked whether the legal definition of swaps should be updated to account for emerging products such as perpetual crypto contracts.
