Phantom and Hyperliquid Urge CFTC to Update Rules for Onchain Derivatives

Phantom and the Hyperliquid Policy Center have asked the US Commodity Futures Trading Commission (CFTC) to clarify that blockchain protocol developers and non-custodial wallet providers should not be treated like traditional financial intermediaries.

The request was submitted in response to a CFTC request for information on how fintech regulations apply in the digital-assets era, urging the agency to codify exemptions and provide guidance tailored to onchain systems where users transact directly rather than relying on a firm to hold customer assets or execute orders.

Key takeaways

• Phantom and the Hyperliquid Policy Center want the CFTC to confirm that building onchain software and contributing to open protocols does not, by itself, trigger registration obligations meant for custodial intermediaries.
• The groups argue that regulations should target entities that actually handle customer funds or execute trades, not developers who do not control how software is used.
• They ask for explicit guidance that regulated derivatives exchanges, clearinghouses, and intermediaries may use blockchain infrastructure for execution, clearing, settlement, margining, and recordkeeping while staying within existing requirements.
• They also request an exemption framework so non-custodial wallet providers are not classified as introducing brokers.

Why the CFTC is being pressed on fintech rules

In the letter, the companies contend that much of the CFTC’s regulatory framework was built around intermediaries that operate as gatekeepers—typically taking custody of customer assets and routing trades through centralized processes. In contrast, onchain protocols can be designed so that users conduct transactions without any intermediary exercising control over funds or placing orders on their behalf.

From that premise, Phantom and the Hyperliquid Policy Center argue that applying registration rules designed for custodians and trade executors to protocol developers and infrastructure contributors would misalign legal obligations with actual operational roles in an onchain environment.

The filing specifically requests CFTC confirmation that protocol developers do not have to register solely for creating onchain software, alongside guidance that preserves the ability of regulated market participants to use blockchain-based infrastructure for core post-trade functions.

Exempting developers and addressing non-custodial wallets

Phantom and the Hyperliquid Policy Center also ask the CFTC to formalize exemptions to prevent non-custodial wallet providers from being treated as introducing brokers.

The argument centers on responsibility and control: the groups say registration should attach to firms that manage customer funds or execute trades, while entities that provide access to non-custodial tools and software—without holding assets or directing trade decisions—should not be forced into categories meant for intermediaries that perform those actions.

They further emphasize that the regulatory baseline, as it stands, leaves US users without comparable pathways into onchain derivatives markets, while related innovation continues elsewhere. Their position is that clarity and targeted exemptions would reduce friction and allow legitimate participation without stretching existing rules beyond their original intent.

Letter to the CFTC. Source: Hyperliquidpolicy.org

What regulated exchanges and clearing firms should be able to do onchain

Beyond exemptions for developers and wallet providers, the letter seeks to remove uncertainty for established, regulated derivatives actors. Phantom and the Hyperliquid Policy Center ask the CFTC to clarify that regulated derivatives exchanges, clearinghouses, and intermediaries can use blockchain infrastructure for functions such as trade execution, clearing, settlement, margining, and recordkeeping.

Crucially, they frame this request as compatible with continuing compliance: the groups say the ability to use onchain infrastructure should be preserved as long as firms continue to meet the requirements already applicable to their regulated roles.

This is an important distinction for market participants because it positions blockchain integration as an implementation choice rather than a substitute for regulatory oversight—potentially affecting how exchanges design matching engines, how clearing systems manage accounts and obligations, and how margining and audit trails are maintained.

Broader onchain derivatives pressure on US regulators

The letter lands amid an increasingly public debate over how US regulators should approach blockchain-based derivatives. According to earlier coverage, Intercontinental Exchange (ICE) and CME Group have also pushed for how the CFTC should evaluate risks tied to onchain platforms.

In May, reporting noted that ICE and CME urged regulators to scrutinize Hyperliquid’s move into commodity-linked perpetual futures, arguing that onchain derivatives in the energy space raise market integrity and manipulation concerns. Two weeks later, ICE CEO Jeffrey Sprecher called for a “level playing field” that would allow regulated exchanges to compete with onchain perpetual futures platforms, saying existing regulation can prevent traditional firms from offering 24/7 onchain products. Sprecher also said ICE had exploratory discussions with Hyperliquid to better understand how onchain derivatives markets operate.

Meanwhile, CME has continued expanding its regulated derivatives footprint. This year, the exchange announced futures tied to Avalanche and Sui, launched CFTC-regulated Bitcoin volatility futures, and introduced Nasdaq CME Crypto Index futures—a market-cap-weighted contract tracking seven digital assets. Separately, CME also pursued legal action: in June, the exchange sued the CFTC regarding the agency’s approval of crypto perpetual futures, arguing that the regulator exceeded its authority under the Commodity Exchange Act.

Taken together, the Phantom and Hyperliquid Policy Center letter reflects the same tension seen across the sector: regulated exchanges want pathways to use onchain infrastructure without giving up compliance obligations, while innovators and infrastructure providers want exemptions that reflect how onchain systems function when users retain control and firms do not custody funds or execute trades in the traditional sense.

Readers should watch how the CFTC responds to the specific exemption requests—particularly whether it will draw clearer lines between developer activity, non-custodial tooling, and intermediary conduct, and whether it provides explicit guidance on what regulated entities may do with blockchain infrastructure while staying within existing derivatives rules.