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Hyperliquid Policy Center and Phantom told the CFTC that existing broker and exchange rules were built for a financial system of intermediaries and no longer map cleanly onto non-custodial or decentralized onchain protocols. The two organizations submitted the argument in response to the CFTC's mid-June request for comment on updating its rules.
Why it matters
The CFTC's perimeter was drawn for centralized venues that hold customer funds, clear trades through intermediaries, and run visible order books. Onchain perpetual platforms settle trades through smart contracts, do not custody user collateral in the traditional sense, and route liquidity through onchain pools rather than firm desks. Replicating the full broker-dealer rulebook onto that stack risks duplicative compliance for conditions the protocol structurally cannot create.
Market impact
The submission lands as the CFTC weighs how aggressively to extend its traditional perimeter over DeFi derivatives. If the agency narrows the definition of who counts as an exchange or broker for non-custodial protocols, US-based builders gain clearer cover to launch onchain perps without re-engineering themselves as registered intermediaries. A wide reading, by contrast, pushes US volume offshore and freezes domestic product development. The comment window is the opening move in a multi-year rule fight that will shape where the next generation of DeFi derivatives is built.
Frequently asked questions
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What did Hyperliquid Policy Center and Phantom ask the CFTC to do?
They asked the CFTC to stop applying its traditional broker and exchange framework to non-custodial and decentralized onchain protocols, arguing those rules were built for intermediaries the protocol stack no longer requires.
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Why are current CFTC rules a bad fit for onchain perpetual platforms?
CFTC perimeter rules assume centralized venues that hold customer funds, clear trades through intermediaries, and run visible order books. Onchain perps settle through smart contracts and route liquidity through onchain pools, so the original rule logic does not translate cleanly.
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When was the CFTC's request for comment issued?
The CFTC issued the request for comment in mid-June, and Hyperliquid Policy Center and Phantom submitted their response to that window.
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What happens if the CFTC narrows its definition of exchange and broker for onchain protocols?
US-based builders would get clearer cover to launch onchain perpetual products without re-engineering themselves as registered intermediaries, lowering the cost of domestic product development.
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What is the downside if the CFTC applies the full broker-dealer framework to DeFi derivatives?
A wide reading would force US DeFi venues into compliance structures designed for centralized intermediaries, pushing volume offshore and freezing domestic product development until the framework is reformed.
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