Hyperliquid Policy Center calls on SEC and CFTC to unify stock perpetual contract rules

The Hyperliquid Policy Center calls on the SEC and CFTC to coordinate rules for regulating equity perpetual contracts

The organization is urging U.S. regulators to build a shared framework for equity-linked perpetual contracts. The Hyperliquid Policy Center has asked the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to jointly develop a regulatory framework for equity perpetual contracts. Relevant reports pointed out that the move aims to promote unified rules to cover perpetual contracts linked to stock prices.

A stock perpetual contract is a derivative contract that tracks the price of individual stocks and has no expiration date. They are similar to perpetual futures common in cryptocurrency trading, but apply the same structure to traditional stocks. This overlap creates a regulatory gray area, as equity-linked products are usually within the jurisdiction of the SEC, while the derivatives market has traditionally been the domain of the CFTC.

Hyperliquid is the platform behind the Policy Center and operates a decentralized exchange known as the sustainable futures market. The policy center appears to be playing the role of an advocacy agency focused on influencing U.S. policy on cryptocurrency native derivative products. It also issued an appeal to both regulators, indicating that it was trying to avoid repeating the past mistakes of cryptocurrency companies that fell into trouble due to conflicting guidance given by different regulators.

There have been some gaps or overlaps in the division of powers between the SEC and the CFTC over financial products. Securities are regulated by the SEC, and commodities and most derivatives are regulated by the CFTC. Stock perpetual contracts combine the characteristics of two types of products-their value is derived from securities, but traded in a similar manner to futures contracts. This structure makes it a long-term gray area for regulators and market participants.

The timing of this push is crucial given the broader debate in Washington over legislation on the structure of digital assets markets. In recent years, lawmakers and regulators have been discussing how to divide the regulatory responsibilities of the SEC and CFTC for the cryptocurrency market. Reported that a formal framework for equity perpetual contracts may set a precedent for how to deal with hybrid products in the future.

Neither media disclosed the specific proposal text or response timetable of the SEC or CFTC. It is unclear whether the two regulators have formally responded to the Hyperliquid Policy Center's request. Still, this trend suggests that cryptocurrency-native platforms are increasingly interested in developing rules to regulate traditional stock tokenization or derivative exposure.

Stock perpetual contracts have attracted attention as a potential bridge connecting cryptocurrency trading infrastructure and traditional stock markets. Providing round-the-clock leveraged stock exposure without the need to open a traditional brokerage account may attract a large number of traders. But this feature also raises investor protection issues, which are likely to be subject to strict scrutiny by regulators.

Market Impact

A clearer regulatory framework for equity perpetual contracts could open the door for platforms such as Hyperliquid to expand equity-linked products. This will extend the already popular perpetual futures model in cryptocurrency trading to traditional stock markets. Clear guidance from the SEC and CFTC may also reduce uncertainty faced by other exchanges considering launching similar products.

Without coordinated guidance, platforms that provide equity-linked perpetual contracts face the legal risk of operating in jurisdictional gray areas. Regulatory ambiguity has previously dragged down product launches in the cryptocurrency derivatives space. Any future joint framework could affect how other exchanges build equity-linked derivatives products in the future.

The promotion by the Hyperliquid Policy Center highlights the ongoing friction between securities and derivatives regulation in the cryptocurrency space. Whether the SEC and CFTC will respond with a joint framework remains to be seen.

FAQs

What is a stock perpetual contract?
Stock perpetual contracts are derivative contracts that track stock prices and have no expiration date, similar to cryptocurrency perpetual futures.

Why was the Hyperliquid Policy Center involved in this?
The center is an advocacy group associated with the Hyperliquid platform, which operates a decentralized sustainable futures market and hopes to obtain clearer U.S. regulatory rules.

Why are both the SEC and CFTC relevant to this?
Stock perpetual contracts combine the characteristics of securities (usually regulated by the SEC) and derivatives (usually regulated by the CFTC), resulting in overlapping jurisdictions.

Has the SEC or CFTC responded to this request?
Relevant reports did not show that the two regulatory agencies had made formal responses.