Hyperliquid Policy Center urges SEC and CFTC to develop equity perpetual contract framework

Hyperliquid Policy Center requests the SEC and CFTC to include eligible equity perpetual contracts in the category of securities futures.

The Hyperliquid Policy Center has submitted applications to the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to recognize eligible equity perpetual contracts as securities futures. Previously, nominal trading volume in the HIP-3 market exceeded US$480 billion in the first 10 months of operation.

Summary

The Hyperliquid Policy Center has requested the SEC and CFTC to treat eligible equity perpetual contracts as securities futures. The proposal proposes bringing eligible equity perpetual contracts into an existing framework jointly supervised by the SEC and CFTC. In the first 10 months after its launch, the cumulative nominal trading volume of the HIP-3 market exceeded US$480 billion. HPC hopes that regulators will maintain consistency in the classification of perpetual contracts while retaining the flexibility of exchanges to list.

The Hyperliquid Policy Center stated in a comment letter dated August 24 that cash-settled equity perpetual contracts with established characteristics of futures contracts should be classified as securities futures. This category is jointly regulated by two major U.S. regulators.

For products with trading volumes of hundreds of billions of dollars, perpetual contracts still fail to solve the most basic question under U.S. law: Are they futures or swaps? A federal judge once described this process as "determining whether a tetrahedron belongs to..."

The document is a response to a joint SEC and CFTC consultation on how U.S. law should define swaps, security-based swaps, and products that may not fall into these categories. HPC pointed out that although perpetual contracts have been widely expanded outside the United States, this basic classification issue remains unresolved.

According to the HPC proposal, regulators should first examine the structure of derivatives and their trading methods to determine whether they are futures or swaps. The assets referenced by the contract will then determine the division of regulatory authority between the SEC and the CFTC. The organization believes that perpetual contracts for bitcoin, crude oil or individual stocks should receive the same initial product classification if each instrument has the same futures characteristics. Contracts involving a single stock and meeting futures conditions will be classified as securities and futures and subject to joint supervision by both institutions.

Hyperliquid Group states that equity perpetual contracts can qualify for securities futures.

The core of HPC's position lies in the structure of perpetual contracts: they have no predetermined maturity date, but use a regular capital payment mechanism to bring their prices closer to the assets they track. When the contract price is higher than the reference price, the holder of a long position pays the short position; if the contract price is lower than the reference price, the short position pays the long position. HPC said that this mechanism continues to encourage perpetual prices to converge towards the underlying assets, playing the functions of maturity and final settlement in traditional term futures.

HPC also cited characteristics that courts and regulators have historically examined when reviewing futures contracts, including standardized terms, interchangeability, fixed unit numbers and the ability to close out positions through reverse trading. In Hyperliquid's HIP-3 market, positions are opened and closed through the central limit order book, margins are maintained, and contract prices are publicly available. Holders of equity perpetual contracts receive price risk exposure, but do not receive ownership, voting or other related rights in the reference stock.

document states that the lack of an expiration date does not automatically rule out futures classification. HPC cited federal court decisions and argued that a specified future delivery or settlement date is not always required and that indefinite contracts may still have the future attributes associated with futures contracts. U.S. regulators have applied this reasoning to cryptocurrency perpetual contracts. In May this year, the CFTC approved Kalshi's Bitcoin Perpetual Contract as the first federally regulated Bitcoin Perpetual Futures Contract in the United States. The May 29 approval classified BTCPERP as a futures contract, although it has no fixed expiration date.

Kalshi began offering the contract in June and has since expanded its regulated sustainable product line to other cryptocurrencies. The CFTC said other products were still subject to review, leaving the treatment of contracts involving other asset classes subject to further regulatory analysis.

Classification issues have not been resolved by the SEC and CFTC

Past enforcement cases have not provided a unified answer to perpetual contracts. HPC said earlier actions by the CFTC treated some perpetual products as swaps when reviewing certain parts of the definition of swaps in the Commodity Exchange Act, but did not determine whether these instruments met legal exclusions covering futures contracts. Other cases regard sustainable products as leveraged or margin retail commodity transactions, and apply trading requirements similar to futures.

The SEC used the term "perpetual futures" in its case related to the Mango Markets vulnerability, while questioning that these products were futures contracts offered under regulated futures rules. According to HPC, neither enforcement actions nor courts have resolved the prerequisite issue of whether these instruments themselves are futures or securities futures excluded from the definition of swaps.

The CFTC took a different approach with Kalshi in May, approving BTCPERP as a "sales contract for future delivery." The accompanying policy statement stated that perpetual contracts in other asset classes should be reviewed, and specifically noted that equity products are areas where both the CFTC and the SEC should participate.

Differences over this interpretation have entered the federal court. CME Group subsequently filed a legal challenge to perpetual contracts, arguing that Kalshi's products should be placed under the swap framework rather than treated as ordinary futures. CME's position questions the legal basis used by the CFTC in approving these contracts.

At about the same time period, the SEC and CFTC launched a definition review, prompting HPC to file its latest documents. The two agencies sought public opinion on swaps, security-based swaps, exclusions from these definitions, and emerging derivatives, including products that raise issues of their jurisdictional boundaries.

HIP-3 trading volume puts US$480 billion in regulatory debate

HPC linked its request to trading activity that has occurred under Hyperliquid's HIP-3 framework. Within this framework, independent market operators known as "deployers" can create their own sustainable markets. The agreement is responsible for execution, price time order matching, margin requirement execution, fund transfer, clearing and settlement. Deployers control factors including listed assets, contract specifications, oracle sources, leverage limits and open contract caps.

The HIP-3 market currently covers multiple traditional asset classes for users outside the United States, including crude oil, gold and other precious metals, foreign exchange, stock indices, individual stocks and exchange-traded funds. Documents show that in the 10 months after the launch of HIP-3, cumulative nominal trading volume in these markets exceeded US$480 billion and maintained approximately US$40 billion in open interest. Across the entire Hyperliquid platform, the market handled nearly US$3 trillion in nominal transaction volume in 2025 and more than US$1.5 trillion between 2026 and August 23.

Equity-linked products have become part of this expansion. A July review of Hyperliquid equity perpetual contracts detailed how the platform holds perpetual contracts that track stocks while providing traders with synthetic price risk exposure without involving ownership of the underlying stock. HPC said U.S. users currently do not have access to Hyperliquid, which means that the liquidity and infrastructure described in its documents were developed outside the U.S., while regulated access to perpetual contracts in the U.S. remains limited.

Securities futures will place equity perpetual contracts under dual regulation

HPC recommends using the existing securities futures framework for equity perpetual contracts that meet futures characteristics, as this category already assigns regulatory responsibilities to two agencies. Under this framework, designated contract markets regulated by the CFTC can list securities futures upon notification of registration with the SEC. National stock exchanges can operate in the other direction by notifying registration with the CFTC, while intermediaries have parallel registration channels.

Commercial activity in securities and futures has been limited since OneChicago closed in 2020, but documents point to renewed interest this year. CME Group announced in June that it would launch individual stock futures starting July 27, bringing U.S. exchange activity back to an already largely silent product category. The HPC requires the two institutions to confirm that cash-settled equity perpetual contracts with established futures characteristics can be listed as securities futures, while allowing exchanges to retain flexibility in deciding how individual products should be classified.

The organization also requires consistent classification standards between the two regulators and requested updates to the securities and futures framework so that existing listing standards can accommodate the new contract structure. HPC stated that classification should remain flexible enough so that bilaterally, individually negotiated perpetual products that lack future-related interchangeability, offset rights and multilateral execution characteristics can be treated as swaps or security-based swaps.

According to the documents, the SEC and CFTC can issue explanatory guidance, policy statements, or staff guidance without waiting for formal rules to be developed. The two institutions also have common authority to revise securities and futures listing standards, which have previously been used in American depositary receipts, ETFs, closed-end fund units and debt securities.