The Hyperliquid Policy Center (HPC) and Phantom asked the Commodity Futures Trading Commission (CFTC) to review the rules governing the on-chain trading infrastructure, highlighting the need to adapt regulation to the advance of cryptocurrencies and decentralized finance.
In a joint letter sent to the agency, the organizations argued that the current model was built based on the traditional financial system, which relies on centralized intermediaries, and that this does not reflect how blockchain-based protocols work.
"The Commission’s preexisting rules were created for traditional markets," HPC and Phantom wrote. "In those markets, clients deliver their orders and money to a chain of intermediaries: a broker receives the order, an exchange matches it, and a clearinghouse guarantees and settles the transaction, collecting the margin and taking responsibility for the trade. At each step, someone other than the client controls the funds."
The entities highlighted that, unlike that model, on-chain markets operate without direct intermediaries, requiring a regulatory approach of their own. "On-chain markets work differently and need their own rules," they added.
The request comes after the CFTC and the Securities and Exchange Commission (SEC) opened, in June, a Request for Information (RFI), with the goal of understanding how current regulations may be limiting innovation and making it harder for new technology providers to operate in the financial sector.
In the assessment of the HPC and Phantom, simply developing software for decentralized trading should not require registration as a broker or a clearinghouse. The same argument applies to non-custodial interfaces, which only facilitate user access to the platforms.
According to the letter, the code itself has no legal personality and no ability to assume legal responsibilities, which differentiates it from traditional derivative market structures.
In addition, the entities argued that companies already registered with the CFTC could adopt blockchain-based solutions to modernize their trading and settlement processes.
The debate is taking place amid greater regulatory flexibility in the United States. Under the current presidency of Donald Trump, the CFTC has adopted a posture more open to the cryptocurrency sector, including the recent approval of regulated perpetual bitcoin futures contracts in the country.
At the same time, the discussion has gained tension with the actions of the CME Group, which has been pushing for increased oversight over platforms such as Hyperliquid. The company has also filed a lawsuit against the CFTC, questioning the classification of perpetual futures contracts.