Hyperliquid and Phantom urge the CFTC to remove DeFi from outdated crypto regulations
The Hyperliquid Policy Center (HPC) analytical center, together with the developer of the non-custodial wallet Phantom, has sent an official appeal to the U.S. Commodity Futures Trading Commission (CFTC) demanding a revision of the approach to regulating decentralized finance (DeFi). The key thesis of the document: on-chain infrastructure cannot be regulated under the same principles as traditional financial intermediaries.
This appeal could fundamentally change the trajectory of U.S. crypto regulation, laying the groundwork for legal certainty in the areas of self-custody of assets, on-chain trading, and blockchain innovation. This is not just about recommendations, but an attempt to create a precedent that will define the future of the entire market.
Specialized Rules for DeFi: Separating Technology and Services
In their joint response to the CFTC's request on fintech development, HPC and Phantom emphasize that developers who publish on-chain protocols cannot automatically be equated with operators of exchanges or clearing houses. They insist on the need for a clear distinction between two entities: creating technology and providing regulated financial services.
The authors draw a direct analogy with programmers who write code for traditional exchange systems but are not themselves subject to regulation. A protocol developer is a creator of a tool, not a financial intermediary. Furthermore, they propose that the CFTC develop clear mechanisms that would allow registered exchanges and clearing houses to implement on-chain infrastructure without violating regulatory requirements.
Self-Custody: In the Spotlight
A separate and perhaps the most important section of the appeal is dedicated to non-custodial wallets. HPC and Phantom categorically state: such services do not manage user funds or conduct transactions on their behalf. Consequently, regulating them as financial intermediaries is a legal error that stifles innovation.
The key demand is to enshrine at the regulatory level the recent CFTC decision not to impose sanctions on Phantom. This would create legal certainty for all similar services in the United States, freeing developers from the fear of sudden reprisals.
Why This Is Critically Important for the Market
The initiators of the appeal see this not just as protecting their own interests, but as a strategic step for the entire ecosystem. Specialized regulation, in their view, would incentivize developers to stay and work in the U.S., rather than moving to jurisdictions with a more favorable legal environment.
Moreover, properly configured on-chain infrastructure can enhance market transparency, accelerate settlements, and reduce counterparty risks, while maintaining user control over assets. If this logic is adopted, we will witness the formation of conditions for the mass institutional adoption of blockchain solutions, while maintaining regulatory control precisely where it is truly needed—at the level of financial intermediaries.
Expert Opinion: This appeal is not just lobbying, but a clear signal to the market. If the CFTC adopts this logic, we will see explosive growth in DeFi protocols and non-custodial services in the U.S. The current approach, where developers are judged by 20th-century laws, is a direct path to losing technological leadership. The regulator faces a choice: create the future or stifle it in its infancy.