Hyperliquid, Phantom Just Told The CFTC Its Rules Are Outdated — Here Is What They Want Instead

The Hyperliquid Policy Center (HPC) and crypto wallet provider Phantom filed a joint letter to the Commodity Futures Trading Commission (CFTC) on Thursday, asking the federal derivatives regulator to update its rules for on-chain trading infrastructure. 

The letter argues that CFTC regulations were written for a financial system built around intermediaries — banks, brokers, and clearinghouses — and do not reflect how blockchain-based markets actually work.

What Hyperliquid And Phantom Are Asking 

The two organizations are asking the CFTC to take three specific steps. First, they want the agency to confirm that writing or contributing to blockchain software does not automatically trigger registration requirements under federal commodity law. 

Second, they want guidance on how CFTC-regulated markets and intermediaries can use on-chain technology to perform their operations. Lastly, they want the agency to formalize protections for non-custodial wallet providers.

Their core argument is that software running on a public blockchain has no legal personality, cannot enter into contracts, and cannot mishandle customer orders or funds. 

Regulating the developers who build that software as if they were financial intermediaries would, in their view, push innovation offshore and cut American users off from on-chain derivatives markets already accessible to users in other countries.

The letter also addresses a practical concern about how existing CFTC rules handle custody. Current rules assume that customer funds are held at a bank or depository institution and that clients must surrender control of their money to a registered firm. 

In an on-chain environment, customers can maintain control of their own funds at all times — only releasing them within predefined margin and liquidation parameters. 

Both the Hyperliquid Policy Center and Phantom argue that this structure is actually better for consumer protection than the traditional model, not worse, and that the CFTC should confirm it satisfies existing risk management requirements.

CFTC’s Crypto Shift 

On recordkeeping, the letter points out that public blockchains already provide the core guarantees that CFTC record storage rules were designed to achieve and asks the Commission to confirm that maintaining required records on a public blockchain satisfies current obligations.

Hyperliquid Policy Center’s and Phantom’s letter follows the CFTC request for information under a Trump executive order directing regulators to identify rules that unnecessarily block financial technology firms from partnering with federally regulated markets. 

The CFTC is under a more crypto-friendly posture than it maintained in recent years, following the appointment of Chair Mike Selig. The agency has already issued a no-action letter to Phantom, confirming that the protocol’s non-custodial wallet software does not make it an introducing broker under federal commodity law. 

At the time of writing, Hyperliquid’s native token, HYPE, was trading at $67 according to CoinGecko data, up 16% over the past month and 64% year to date — outperforming every major cryptocurrency including Bitcoin (BTC). 

Featured image generated with OpenArt.