Phantom, Hyperliquid Urge CFTC to Modernize Onchain Derivative Rules
Phantom and Hyperliquid Policy Center asked the CFTC to exempt non-custodial wallets and protocol developers from intermediary rules, urging modernized regulations to integrate blockchain infrastructure into derivatives markets and prevent US users from being walled off.
Quick Take
Phantom and Hyperliquid ask CFTC to exempt wallet providers and protocol devs.
They argue current rules lock US users out of onchain derivatives markets.
ICE and CME oppose, raising market integrity and manipulation concerns.
CME expands crypto futures despite suing CFTC over perpetuals approval.
Market Impact Analysis
BullishRegulatory clarity and exemption for non-custodial wallets could increase institutional adoption of onchain derivatives, though adoption depends on CFTC action.
Speculation Analysis
Key Takeaways
- Phantom and Hyperliquid ask CFTC to exempt non-custodial wallets and protocol devs from intermediary rules.
- Current regulations wall off US users from onchain derivatives markets, the firms argue.
- ICE and CME oppose, citing market integrity concerns, while CME launches crypto futures.
- Regulatory clarity could boost institutional onchain derivatives adoption.
What Happened
Phantom and the Hyperliquid Policy Center filed a letter with the CFTC requesting updated regulations. They argue that current rules, built for custodial intermediaries, shouldn't apply to non-custodial wallets or protocol developers. The groups want explicit exemptions and guidance allowing registered derivatives firms to use blockchain infrastructure for trade execution, clearing, and settlement. The move aims to integrate onchain markets into the regulatory fold, rather than letting US users remain isolated from global derivatives innovation. No immediate CFTC action is guaranteed, but the letter marks a formal push to align rules with blockchain realities.
The Numbers
While the letter itself lacks hard data, the regulatory battle has seen concrete actions. CME Group launched futures for Avalanche and Sui even as it sued the CFTC in June 2026 over crypto perpetuals approval. ICE and CME previously urged scrutiny of Hyperliquid's commodity-linked perpetuals, flagging manipulation risks. The CFTC’s request for fintech feedback drew this response, signaling an ongoing struggle between traditional exchanges and decentralized platforms. Without reform, US participation in onchain derivatives could shrink as innovation continues offshore.
Why It Happened
Existing CFTC rules assume intermediaries hold assets and process orders. Onchain protocols let users transact peer-to-peer, removing the middleman. This mismatch effectively bans regulated firms from using blockchain infrastructure for derivatives, pushing activity to offshore or unregulated venues. Phantom and Hyperliquid argue that developers shouldn't be treated like brokers because they don't control funds or execute trades. They seek parity, allowing US markets to compete globally while still protecting against fraud and manipulation.
Broader Impact
If the CFTC adopts these recommendations, it could open the door for regulated exchanges to offer onchain perpetuals and other derivatives, boosting institutional crypto adoption. Conversely, rejecting them may cement the status quo where US traders are sidelined from a rapidly growing market. The debate also highlights the tension between incumbent exchanges and decentralized platforms, with ICE and CME pushing for either a crackdown or a level playing field.
What to Watch Next
- CFTC's response to the letter and any formal rulemaking or guidance.
- Further clashes between traditional exchanges and decentralized platforms, including CME's legal challenge to CFTC.
- Potential expansion of onchain derivatives if regulatory clarity emerges, or continued offshore shift if not.
This article is for informational purposes only and does not constitute financial advice.
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