The Hyperliquid Policy Center and Phantom Technologies have jointly urged the Commodity Futures Trading Commission to clarify that writing protocol software does not constitute operating a regulated exchange. In a comment letter submitted on July 9, the two firms responded to the CFTC's Request for Information on fintech regulations, arguing that developers who publish onchain code should not be forced to register as Designated Contract Markets or Futures Commission Merchants.
Three specific requests
The letter outlines three main asks. First, the CFTC should confirm that developing and publishing onchain protocol software alone does not trigger registration requirements — building a smart contract for derivatives trading should not equate to running a traditional futures desk. Second, the agency should update guidance to allow registered exchanges and intermediaries to use onchain technology for regulated functions. Third, the CFTC should formalize no-action relief previously granted to Phantom on March 17 under CFTC Letter No. 26-09, which allowed Phantom's non-custodial wallet to connect users to registered derivatives markets without registering as an Introducing Broker. The firms want that precedent codified into lasting guidance rather than left as a one-off letter.
Why these firms are leading the charge
Hyperliquid operates a Layer-1 blockchain built specifically for derivatives and financial activities, with a native token HYPE that has a total max supply of 1 billion. Its Policy Center, established in early 2026, advocates for regulatory clarity around onchain markets. Phantom, a non-custodial wallet provider, does not hold user funds or execute trades; it simply provides a window into blockchain activity. That distinction is critical because traditional regulatory frameworks assume that any entity connecting users to financial markets is a broker or intermediary. Phantom's earlier no-action relief signaled that some regulators understand the difference between a tool that facilitates access and an entity that handles money.
Broader regulatory implications
The CFTC has historically not treated creators of offchain trading software as regulated entities simply for writing code. The letter argues that the same logic should apply to onchain developers. It also notes that onchain systems offer advantages over traditional custodial infrastructure, such as reduced intermediary risk, settlement transparency, and elimination of counterparty risk through self-custody. Institutional capital has consistently cited regulatory uncertainty as a primary barrier to deeper engagement with onchain derivatives. A CFTC framework that explicitly permits registered entities to operate on blockchain infrastructure would remove a major obstacle, turning 'technically not illegal' into 'explicitly permitted' — a crucial distinction for compliance officers at large funds.