Hyperliquid Policy Center and Phantom call for DeFi specific CFTC regulations

The core claim: software is not the broker

The filing, described by multiple crypto outlets, responds to a CFTC request for information on rules that may be slowing financial-technology innovation. Hyperliquid Policy Center and Phantom’s central argument is structurally simple: writing onchain trading software should not, by itself, be treated as operating a brokerage, exchange, clearinghouse, or dealer business.

They contend that existing CFTC categories assume a familiar market stack: brokers route orders, exchanges match trades, clearinghouses manage settlement, and intermediaries handle customer funds. Onchain systems invert part of that architecture. A public blockchain protocol may facilitate trading, but the code itself does not hold legal personality, cannot sign contracts, and cannot answer regulatory inquiries. In their framing, registration should attach to people or entities that actually handle customer orders or funds, or enter into transactions with customers — not automatically to developers who publish infrastructure.

That distinction matters for DeFi yield markets because capital alignment increasingly depends on composable rails: wallets, front ends, liquidity venues, settlement layers, and risk engines often sit in separate hands. If each layer is treated as though it performs the full intermediary function, liquidity fragmentation becomes a regulatory outcome rather than only a market-design problem.

Why wallets and onchain venues are in the frame

Phantom and Hyperliquid Policy Center also argue that non-custodial wallet interfaces should not be treated as introducing brokers merely because they help users access decentralized infrastructure. Phantom, according to the reporting, has asked the CFTC to turn a March 2026 no-action position for the wallet into a formal rule for similarly situated firms.

The practical implication is direct: a non-custodial interface is not the same as an entity taking possession of funds or controlling user keys. In staking and restaking markets, this distinction already shapes risk analysis. The question is always where control sits: who can move assets, who can alter validator dynamics, who can impose slashing conditions, who can interrupt withdrawals, and who bears legal responsibility when an activity crosses into regulated territory.

The letter also asks the CFTC to clarify that registered markets may use blockchain infrastructure for execution, clearing, and settlement without unnecessary barriers. This is a more subtle point, but perhaps the more architectural one. It implies that onchain infrastructure is not only a venue for unregistered activity; it could also become a substrate for regulated firms, provided the rules recognize the difference between software rails and accountable operating entities.

What DeFi capital should watch next

This is not a rulemaking outcome. It is a comment in a broader agency review, and the CFTC has not said how it will respond. That uncertainty is where capital managers should focus. If the agency accepts the basic separation between code, interfaces, and entities that custody funds or transact with users, the U.S. path for onchain derivatives and adjacent yield strategies could become less structurally hostile. If it rejects that separation, protocol teams and wallet providers may face a more fragmented compliance map.

There is also a parallel market-structure dispute in the background. Crypto News reports that CME Group has sued the CFTC over its approval of regulated crypto perpetual futures, arguing that such contracts should be classified as swaps rather than futures under the Dodd-Frank framework. That case sits beside the Phantom-Hyperliquid filing as part of the same larger question: which financial functions belong inside old categories, and which require new definitions?

For yield-oriented DeFi users, the immediate action is not to chase a regulatory headline. It is to examine dependencies. Which protocols rely on U.S.-facing front ends? Which wallets are non-custodial in fact, not only in branding? Which strategies depend on perpetuals, derivatives liquidity, or cross-margin infrastructure that may be reclassified? And where does the actual control of funds sit?

The open question is whether regulators will treat onchain markets as a variant of the old intermediary model, or as a different capital-routing architecture that needs its own points of accountability. That answer will shape not just compliance language, but the future alignment between liquidity, validators, interfaces, and the software that binds them.