Phantom, Hyperliquid Urge CFTC to Update Onchain Derivatives Rules

Crypto wallet provider Phantom and decentralized exchange Hyperliquid formally called on the U.S. Commodity Futures Trading Commission this week to overhaul its regulatory framework to account for the realities of blockchain-based derivatives trading, arguing that rules built for traditional financial gatekeepers do not translate to decentralized infrastructure.

The two companies urged the CFTC to carve out explicit exemptions for blockchain developers and non-custodial wallet providers, a category of software tools that allow users to hold their own private keys rather than entrusting assets to a third-party custodian. Current CFTC rules were designed with centralized intermediaries in mind — entities that hold customer funds, execute orders, and bear counterparty risk — roles that on-chain protocols and self-custody tools simply do not perform in the same way.

Read more Kevin Warsh Reveals Fed Task Force Members, Including Andreessen and McMillon →

The push reflects a broader industry effort to prevent regulators from applying decades-old commodity and derivatives law to software code and open-source protocols without modification. Phantom and Hyperliquid contend that forcing non-custodial actors into compliance frameworks built for brokers or clearinghouses would impose unworkable obligations on entities that never take possession of user funds or exercise discretionary control over trades.

The appeal lands at a pivotal moment for U.S. crypto policy. The CFTC has signaled growing interest in asserting jurisdiction over decentralized finance, and the outcome of such regulatory interpretations could determine whether key DeFi infrastructure remains legally accessible to American users and developers. Industry observers note that how the agency responds may set a precedent reaching well beyond derivatives into broader DeFi oversight.

Continue reading at Cointelegraph