HyperLiquid Policy Center and Phantom Request CFTC Rule Updates
In a recent comment letter, the HyperLiquid Policy Center (HPC) and Phantom urged the Commodity Futures Trading Commission (CFTC) to revise its regulations to better align with self-custodial and on-chain trading environments.
The organizations pointed out that existing CFTC rules cater to traditional financial systems where intermediaries hold custodial roles. They highlighted the process: customers pass their orders and funds through various intermediaries, including brokers and exchanges, before a clearinghouse guarantees the transactions.
“At every step, someone other than the customer is in control of the funds,” the letter stated, underscoring the reliance on intermediaries in conventional markets.
HPC and Phantom contended that on-chain markets operate differently. Rules embedded in the code enable self-management and decentralized peer-to-peer trading without intermediary involvement. This structure allows regulated firms to expedite settlement times and enhance transparency.
“These markets extend beyond rules designed for custodial intermediaries functioning within private systems, and the regulations should evolve accordingly,” the groups noted.
The letter was submitted in response to the CFTC and the Securities and Exchange Commission’s (SEC) recent request for information (RFI) aimed at gathering public feedback on preventing cooperation between fintech firms and CFTC-regulated entities.
Call for Significant CFTC Actions
HPC and Phantom suggested that the Commission should guarantee that developers creating on-chain protocols without maintaining oversight do not have to register as traditional exchanges or brokers. They also requested guidance for CFTC-regulated organizations looking to utilize on-chain infrastructure.
Furthermore, they advocated for the transformation of the no-action letter granted to Phantom into formal regulations. This change would streamline access to regulated on-chain markets for front-end and wallet providers without requiring them to seek individual exemptions already granted by the Commission.
Under Chairperson Michael Selig, the CFTC has adopted a more open stance towards on-chain financial products, reflecting some objectives of the previous administration. Recent steps include launching a tokenized pilot program and approving the first regulated Bitcoin perpetual futures contract.
Yet, some industry confusion remains. Last month, CME Group filed a lawsuit against the CFTC, contesting its approval of these products and arguing that they should be categorized as swaps rather than perpetual futures.
Meanwhile, on Tuesday, the SEC outlined plans to formalize its oversight of digital assets, awaiting Congressional action on the Clarity Act.
