Hyperliquid Policy Center and Phantom jointly call for the CFTC to develop DeFi exclusive regulatory

Hyperliquid Policy Center and Phantom urge CFTC to update online trading rules

Hyperliquid Policy Center and Phantom have called on the U.S. Commodity Futures Trading Commission (CFTC) to update its rulebook for online trading, arguing that the existing regulatory framework for traditional financial markets does not apply to decentralized infrastructure.

Summary

Hyperliquid Policy Center and Phantom require the CFTC to develop rules specifically for on-chain transactions rather than following traditional market regulations. The two agencies said developers of decentralized trading software and providers of unmanaged wallets should not face the same registration requirements as traditional intermediaries. The proposal comes as U.S. regulators review derivatives rules and the CME launches a legal challenge over the CFTC\'s handling of cryptocurrency perpetual contracts.

According to a joint opinion letter filed Thursday by the Hyperliquid Policy Center (HPC) and Phantom, the current regulatory framework assumes a market structure in which brokers, exchanges and clearing houses control client funds throughout the trading process. The two institutions said that on-chain markets operate differently because users themselves control assets. The comment letter is a response to last month\'s joint CFTC and Securities and Exchange Commission request for information (RFI) that invited the public to provide feedback on regulations that may hinder financial innovation and make it difficult for new technologies to work with CFTC regulated companies. It has been previously reported that the two institutions are still reviewing whether existing definitions of swaps and related derivatives still apply to newer financial products.

HPC and Phantom seek customized rules for decentralized markets

In their submission, HPC and Phantom argued that developers of online trading software should not be automatically required to register as exchanges or clearing houses simply because they have built decentralized infrastructure. They also said that unmanaged wallet interfaces like Phantom should not be seen as introducing brokers. The two agencies believe that blockchain-based software cannot be regulated like centralized intermediaries because unlike traditional market operators, code cannot sign contracts, respond to regulators, and cannot be held legally accountable. In addition to these recommendations, the opinion letter also states that companies registered with the CFTC should be allowed to use blockchain technology for transactions and clearing without facing unnecessary regulatory obstacles.

The recommendations come as U.S. regulators are still studying how decentralized finance can be integrated into existing derivatives rules. CFTC Chairman Michael Selig has previously said a joint review by the agency and the SEC could help resolve long-standing ambiguities under the Dodd-Frank Act, while SEC Chairman Paul Atkins has called for clearer definitions to cover newer financial products.

CME submits an opinion letter when challenging cryptocurrency perpetual contracts

The proposal also comes as the CFTC faces legal action filed by CME Group over its approved regulated cryptocurrency perpetual contracts. It was previously reported that CME sued the regulator in June because the CFTC approved perpetual contract products launched by platforms including Kalshi and opened a regulated path for similar products. CME believes that under the Dodd-Frank framework, perpetual contracts should be classified as swaps rather than futures, and claims regulators have circumvented the legal process required for swap products. The controversy attracted more attention after Kalshi expanded its business from Bitcoin perpetual contracts to contracts linked to Ethereum, XRP and Hyperliquid, and after Coinbase gained regulated channels to provide certain cryptocurrency perpetual contracts through infrastructure connected to Deribit. HPC founder Jake Chervinsky publicly opposed CME\'s lawsuit, calling it a serious mistake and accusing the exchange of trying to hinder new competitors. The day after CME filed the lawsuit, the CFTC and the SEC issued a joint public comment announcement, specifically asking whether the legal definition of swaps should be updated to cover emerging products such as cryptocurrency perpetual contracts.