Phantom and Hyperliquid Urge CFTC to Modernize Rules for Onchain Derivatives

Phantom and Hyperliquid Policy Center urged the US Commodity Futures Trading Commission (CFTC) to exempt blockchain developers and non-custodial wallet providers from rules designed for traditional financial intermediaries. The companies argued that existing CFTC regulations were designed for custodial financial intermediaries that hold customer assets and process trades, while onchain protocols allow users to transact directly without intermediaries controlling funds or executing orders.

Modernizing Regulations

Phantom and Hyperliquid requested the CFTC to confirm that blockchain protocol developers do not have to register solely for creating onchain software, issue guidance allowing regulated derivatives firms to use blockchain infrastructure, and codify exemptions preventing non-custodial wallet providers from being treated as introducing brokers.

■Exemption of blockchain protocol developers from registration

■Guidance for regulated derivatives firms to use blockchain infrastructure

■Exemptions for non-custodial wallet providers

Market Impact

The companies' request comes as crypto companies and traditional exchanges press US regulators for greater clarity on how blockchain-based derivatives should be regulated. Intercontinental Exchange and CME Group had previously urged regulators to scrutinize Hyperliquid's expansion into commodity-linked perpetual futures, citing market integrity and manipulation risks.

The markets are experiencing some tension due to regulatory uncertainty surrounding blockchain-based derivatives, despite their growing popularity. However, Phantom and Hyperliquid's request is seen as an important step towards reducing this uncertainty and providing more clarity.