Hyperliquid and Phantom are calling on the CFTC to adopt a new approach to regulating DeFi: it's time to abandon outdated norms.
The decentralized finance (DeFi) market in the United States is on the verge of a key regulatory decision. The Hyperliquid Policy Center (HPC) and leading non-custodial wallet provider Phantom have submitted a joint comment to the Commodity Futures Trading Commission (CFTC) demanding that DeFi tools be exempted from archaic rules designed for traditional financial intermediaries.
Both organizations submitted their proposals before the CFTC's July 9 deadline for comments. Their key thesis is simple and radical: software for on-chain protocols and non-custodial wallets are tools, not intermediaries. Consequently, applying the same rules to them as to exchanges or clearinghouses means stifling innovation at its root.
Three Demands That Will Change the Rules of the Game
The response from HPC and Phantom was a reaction to the CFTC's June 18 request, in which the regulator asked market participants to identify rules hindering fintech development. In their document, the companies put forward three clear proposals.
First: achieve official recognition that publishing software code for on-chain protocols does not equate to operating an exchange or clearinghouse. Developers should not automatically be required to register as financial intermediaries.
Second: allow already registered exchanges and clearinghouses to perform their regulated functions within on-chain systems. This would enable U.S. derivatives trading rules to adapt to new technologies without losing oversight of compliance standards.
Third: codify the exemption granted to Phantom in March into official regulations, so that other non-custodial wallet providers receive similar guarantees. This would create equal and predictable conditions for the entire ecosystem.
Non-Custodial Wallets Are Not Intermediaries
The key argument from HPC and Phantom is that non-custodial wallets do not hold client funds or execute transactions on their behalf. They are merely an interface for interacting with the blockchain. Equating them to brokers or dealers is a legal and technological error.
According to the authors of the submission, clear and modern rules for on-chain markets would help retain developers in the U.S., rather than pushing them toward more favorable jurisdictions. Additionally, transparent DeFi markets can provide faster trade execution and reduce counterparty risks—something the traditional system has struggled to achieve for years.
This move became possible amid a shift in the CFTC's own direction. Chairman Michael Selig, who took office in December, publicly supports more progressive regulation of the crypto industry and has approved the launch of perpetual futures in the U.S. The initiative by HPC and Phantom fully aligns with the regulator's current policy trajectory.
My professional opinion: The request from HPC and Phantom is not just lobbying, but a clear market signal that without adapting rules, the U.S. risks losing its leadership in DeFi. The CFTC should not only consider these proposals but also initiate a dialogue with developers to create a flexible regulatory environment. Otherwise, innovation will move to Asia or Europe, leaving American users with outdated and less secure alternatives.