Hyperliquid’s policy arm and non-custodial wallet provider Phantom submitted a joint comment to the Commodity Futures Trading Commission on Thursday, making the case that existing registration requirements designed for centralized exchanges and brokers are a poor fit for decentralized protocol software and self-custody wallets. The filing, disclosed by the Hyperliquid Policy Center (HPC), represents one of the more pointed industry responses to the CFTC’s ongoing effort to define the regulatory perimeter around digital asset trading infrastructure. At stake is whether software that facilitates peer-to-peer transactions will be treated the same as intermediaries that hold customer funds and execute orders on their behalf.
Why This Filing Matters for DeFi and Wallet Providers
The comment arrives at a moment when U.S. regulators are actively debating how far traditional financial rules should extend into decentralized finance. Both the CFTC and the SEC have signaled interest in bringing more crypto activity under their oversight frameworks, but the question of where protocol-level software ends and regulated intermediary activity begins remains unresolved (a distinction regulators have been slow to enforce with any consistency). This joint filing attempts to draw that line clearly.
- Regulatory scope challenge: Hyperliquid and Phantom argue that applying exchange and broker-dealer registration to onchain protocol code conflates software with service providers, potentially chilling open-source development and innovation in decentralized infrastructure.
- Non-custodial wallets singled out: The filing contends that wallets like Phantom, which never take custody of user assets, perform a fundamentally different function than brokerage firms and should not be swept into the same compliance regime.
- Industry coalition signal: A DeFi protocol and a wallet provider filing jointly suggests growing coordination among different segments of the crypto ecosystem when facing regulatory pressure.
- The CFTC’s response to this and similar comments could set a precedent that shapes how decentralized applications interact with U.S. commodity markets law for years to come.
What Hyperliquid and Phantom Are Actually Arguing
The core of the joint comment rests on a structural distinction. Traditional exchanges match buyers and sellers, hold collateral, and manage counterparty risk. Brokers route orders and often maintain discretionary control over client accounts. Onchain protocols, by contrast, operate through smart contracts that execute automatically based on predefined rules. No single entity holds funds. No intermediary stands between the user and the blockchain.
Phantom, which operates as a self-custody crypto wallet across multiple blockchains, has particular reason to resist being classified alongside custodial brokers. The wallet generates private keys locally on a user’s device and never stores or transmits them. Treating that function as brokerage activity would, the companies argue, stretch the statutory definitions well beyond their intended scope.
Hyperliquid’s protocol runs a perpetual futures exchange on its own Layer 1 blockchain. Its policy center has been increasingly active in Washington, and this filing marks a deliberate effort to shape the regulatory conversation before rules are finalized rather than litigating after the fact.
The Regulatory Landscape: Where the CFTC Stands
The CFTC has jurisdiction over commodity derivatives, including crypto futures and swaps. Under the Commodity Exchange Act, entities operating as designated contract markets or swap execution facilities must register and comply with a dense set of rules covering everything from capital requirements to surveillance obligations.
But applying those categories to decentralized protocols raises thorny questions. Who registers when there is no central operator? How do you impose know-your-customer requirements on a smart contract? And if a wallet simply signs transactions that a user initiates, is it really “facilitating” trading in the way the statute contemplates?
These aren’t hypothetical puzzles. The CFTC has already brought enforcement actions against DeFi protocols, including its 2023 settlements with Opyn, ZeroEx, and Deridex for offering unregistered commodity trading. Still, those cases targeted specific conduct rather than establishing a broad framework. What remains less clear is whether the agency intends to formalize a rule that would capture all onchain trading activity by default.
How Other Jurisdictions Compare
| Jurisdiction | Approach to DeFi Protocols | Wallet Regulation |
|---|---|---|
| United States (CFTC) | Enforcement-driven; no formal DeFi framework yet | Under review; non-custodial status debated |
| European Union (MiCA) | Excludes fully decentralized protocols, at least on paper | Custodial wallets regulated; non-custodial largely exempt |
| United Kingdom (FCA) | Consultation phase; focused on centralized intermediaries first | Registration required for custodial providers |
| Singapore (MAS) | Licensing regime applies to service providers, not protocols directly | Non-custodial wallets not currently licensed |
The EU’s Markets in Crypto-Assets regulation, which took full effect in late 2024, arguably offers the closest thing to a template. Its carve-out for fully decentralized services is narrow and contested, but it at least acknowledges the conceptual difference that Hyperliquid and Phantom are pressing the CFTC to recognize.
Strategic Framing: How Industry Players Are Shaping the Narrative
What makes this filing notable isn’t just its legal arguments. It’s the framing. By positioning onchain protocols as neutral infrastructure and wallets as user-controlled tools, Hyperliquid and Phantom are borrowing from a playbook that internet companies used in the 1990s to resist being treated as publishers of user-generated content. The analogy isn’t perfect, but the rhetorical strategy is deliberate: define the technology as a conduit, not a counterparty.
This approach carries risks. Regulators may view it as an attempt to avoid accountability for platforms that, in practice, facilitate speculative trading with significant consumer risk. And the CFTC has shown little appetite for bright-line exemptions when enforcement tools remain available.
Yet the joint nature of the comment is itself a signal. Hyperliquid’s decentralized perpetual futures platform and Phantom occupy different parts of the value chain. Their alignment suggests the industry is coalescing around shared principles rather than fighting individual battles, a shift from the fragmented lobbying efforts that characterized earlier regulatory skirmishes in crypto.
Frequently Asked Questions
What is the CFTC considering that prompted this filing?
The CFTC has been evaluating whether its existing registration requirements for exchanges and brokers should extend to decentralized protocol software and non-custodial wallet providers. The joint comment from Hyperliquid and Phantom responds directly to that inquiry.
Does this filing have any binding effect?
No. Public comments inform the rulemaking process but do not compel the agency to adopt any particular position. They do, however, become part of the administrative record and can influence how final rules are drafted.
Are non-custodial wallets currently regulated in the U.S.?
The regulatory status of non-custodial wallets remains unsettled. FinCEN has previously indicated that non-custodial wallet providers may not qualify as money services businesses, but the CFTC’s framework operates under different statutory authority. How these overlapping regimes interact is one of the unresolved tensions in U.S. crypto policy.
Could this lead to a formal exemption for DeFi protocols?
Possibly, though the CFTC has not signaled any intent to create a blanket carve-out. The more likely near-term outcome is guidance that distinguishes between different levels of decentralization and control, rather than a single rule that applies uniformly.
