Hyperliquid and Phantom Urge CFTC to Exempt DeFi From Legacy Rules

When the Hyperliquid Policy Center (HPC) and non‑custodial wallet provider Phantom submitted a joint comment to the Commodity Futures Trading Commission (CFTC), they did more than meet a filing deadline—they sparked a debate over whether the nation’s oldest derivatives regulator should treat on‑chain software as a tool rather than a broker.

The filing, due before the CFTC’s July 9 comment deadline, answers a request for information (RFI) issued on June 18 that asked industry to identify rules that impede financial‑technology progress. HPC and Phantom outlined three specific requests: first, a clarification that publishing on‑chain protocol code does not, by itself, trigger registration as an exchange or clearinghouse; second, permission for registered exchanges and clearinghouses to run regulated functions on on‑chain systems; and third, a codified rule that would turn the March no‑action relief granted to Phantom into a permanent exemption for all self‑custodial wallets.

At the heart of the argument is the nature of self‑custody. Unlike custodial exchanges, non‑custodial wallets never hold user funds or execute trades; they merely provide a cryptographic interface. HPC and Phantom contend that imposing intermediary obligations on such software would replicate the logic of legacy rules designed for centralized market makers, not for code that lives on a public ledger.

Why does this matter for the broader market? If the CFTC adopts the requests, developers could keep their projects on U.S. soil rather than relocating offshore to avoid regulatory friction. Transparent, on‑chain markets can settle in seconds, reducing counter‑party risk—a point the filers stress could make DeFi more attractive to institutional investors who have traditionally shied away from the perceived opacity of crypto.

Institutional reaction is already forming. Several hedge funds and asset managers have publicly expressed interest in “on‑ramp” strategies that blend traditional futures with DeFi liquidity, but they have been hampered by regulatory uncertainty. A clear exemption would give these firms the legal certainty needed to allocate capital to decentralized platforms, potentially shifting a sizable portion of futures volume from legacy exchanges to hybrid on‑chain venues.

From a structural perspective, the CFTC’s response will likely follow a two‑step path: first, issuing formal guidance that interprets the existing Commodity Exchange Act in light of blockchain technology; second, drafting rule amendments that embed the requested exemptions. The agency’s recent tilt toward clearer crypto policy—exemplified by Chairman Michael Selig’s approval of on‑shore perpetual futures—suggests a willingness to experiment, but the final decision will hinge on how the commission balances innovation against investor protection.

Real‑world implications extend beyond the crypto niche. A regulatory framework that distinguishes between software tools and market intermediaries could set a precedent for other emerging technologies, such as decentralized identity services and tokenized securities. Moreover, the move could influence global regulators watching the U.S. approach, potentially aligning international standards around a more technology‑centric view of financial markets.

Market participants are watching closely. If the CFTC grants the exemptions, we may see a surge in on‑chain derivatives products offered by U.S.‑registered firms, a boost in institutional capital flowing into DeFi, and a measurable reduction in the “offshore” development pipeline that has long been a pain point for American crypto talent.

Until the commission issues its final guidance, the filing stands as a concrete illustration of how industry players are shaping policy from the front lines, using the RFI process to push for a rulebook that reflects the speed and architecture of modern finance.