Crypto wallet provider Phantom and the Hyperliquid Policy Center have formally asked the U.S. Commodity Futures Trading Commission (CFTC) to update its regulatory framework for onchain derivatives, arguing that existing rules designed for traditional financial intermediaries do not apply to blockchain developers and non-custodial wallet providers.
Key Requests to the CFTC
In a response to a CFTC request for information on fintech regulation, the companies urged the agency to take three specific actions: confirm that blockchain protocol developers do not need 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.
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The core argument is that current CFTC regulations were built for custodial intermediaries that hold customer assets and process trades. Onchain protocols, by contrast, allow users to transact directly without any intermediary controlling funds or executing orders. The companies argue that registration requirements should apply to entities handling customer funds or executing trades, not to developers who create software or contribute to open-source protocols without controlling how that software is used.
Industry Pressure Mounts
The letter arrives amid intensifying debate over how blockchain-based derivatives should be regulated. In May, Intercontinental Exchange (ICE) and CME Group reportedly urged regulators to scrutinize Hyperliquid’s expansion into commodity-linked perpetual futures, raising concerns about market integrity and manipulation risks. Two weeks later, ICE CEO Jeffrey Sprecher called for a “level playing field” that would allow regulated exchanges to offer 24/7 onchain perpetual futures, saying existing rules prevent traditional exchanges from competing with decentralized platforms like Hyperliquid. Sprecher also revealed that ICE had held exploratory discussions with Hyperliquid to better understand onchain derivatives markets.
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CME, meanwhile, has continued expanding its own regulated crypto derivatives business, announcing futures tied to Avalanche and Sui, launching CFTC-regulated Bitcoin volatility futures, and introducing the Nasdaq CME Crypto Index futures. Despite that expansion, CME sued the CFTC in June over the agency’s approval of crypto perpetual futures, arguing the regulator exceeded its authority under the Commodity Exchange Act.
Why This Matters
The outcome of this regulatory debate could determine whether U.S. users gain access to onchain derivatives markets or remain “walled off” while innovation continues offshore. The groups warned that without regulatory clarity, the status quo will persist, pushing development and liquidity outside the United States. The CFTC’s response will signal how the agency intends to balance innovation with investor protection in the rapidly evolving digital asset space.
Conclusion
Phantom and Hyperliquid’s request represents a significant push for regulatory modernization in the crypto derivatives sector. As traditional exchanges like ICE and CME also seek clarity and competitive parity, the CFTC faces mounting pressure to define clear rules that accommodate blockchain-based infrastructure while maintaining market integrity. The agency’s next steps will be closely watched by industry participants and policymakers alike.
FAQs
Q1: What are the main requests Phantom and Hyperliquid made to the CFTC?
The companies asked the CFTC to exempt blockchain developers from registration requirements, issue guidance allowing regulated firms to use blockchain infrastructure, and codify exemptions for non-custodial wallet providers from being treated as introducing brokers.
Q2: Why do Phantom and Hyperliquid argue that current CFTC rules don’t apply to them?
They argue that existing regulations were designed for custodial intermediaries that hold customer assets and process trades, while onchain protocols enable direct user-to-user transactions without any intermediary controlling funds or executing orders.
Q3: How have traditional exchanges like ICE and CME responded to the rise of onchain derivatives?
ICE and CME have both called for regulatory scrutiny of platforms like Hyperliquid while also pushing for a “level playing field” that would allow them to offer similar onchain products. CME has also sued the CFTC over its approval of crypto perpetual futures.
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