Phantom Technologies and the Hyperliquid Policy Center have urged the U.S. Commodity Futures Trading Commission (CFTC) to update its regulatory framework for decentralized financial markets, arguing that rules designed for traditional intermediaries no longer reflect how onchain infrastructure operates.
In a joint comment letter submitted on July 9 in response to the CFTC’s Request for Information on financial technology, the two organizations proposed a series of regulatory changes aimed at providing legal clarity for blockchain developers, non custodial wallet providers, and regulated firms seeking to adopt blockchain based infrastructure.
The recommendations come as U.S. regulators continue reviewing how existing financial rules should apply to decentralized finance and onchain derivatives markets.
Key Takeaways
- Phantom and the Hyperliquid Policy Center asked the CFTC to clarify that publishing blockchain software does not require federal registration.
- The groups want regulated derivatives firms to receive clear guidance on using blockchain infrastructure for trading, settlement, and clearing.
- Phantom requested that its existing no action relief be converted into permanent regulatory guidance for non custodial wallet providers.
- The organizations argued that regulatory clarity would support innovation while maintaining oversight of businesses that actually custody customer assets.
Developers Should Not Be Treated as Financial Intermediaries
The first recommendation focuses on blockchain protocol developers. According to the joint filing, writing and publishing open source software should not automatically require registration as an exchange, broker, or other regulated financial entity. The organizations argued that developers who simply create protocol code do not control customer assets, execute transactions, or operate financial markets.
Instead, they believe regulatory obligations should apply only to businesses that actively hold customer funds or facilitate transactions on behalf of users.
The filing also notes that developers of traditional financial software have not historically been classified as financial intermediaries simply because their applications are used in financial markets. The groups contend that blockchain developers should be treated under the same principle.
Bringing Blockchain Infrastructure Into Regulated Markets
A second proposal asks the CFTC to clarify how regulated derivatives firms can integrate blockchain technology into their operations.
The organizations said current regulations do not provide sufficient guidance for exchanges, clearing organizations, and other regulated entities seeking to use blockchain networks for functions such as trade execution, settlement, collateral management, recordkeeping, and clearing.
Hyperliquid, which operates a Layer 1 blockchain focused on derivatives trading, argued that onchain infrastructure can improve market transparency while reducing dependence on custodial intermediaries.
The filing also highlighted that peer to peer settlement models may reduce operational risks associated with centralized custody without eliminating regulatory oversight.
Phantom Seeks Permanent Regulatory Certainty
The third request centers on Phantom’s regulatory status.Earlier this year, the CFTC issued No Action Letter No. 26-09, allowing Phantom’s non custodial wallet to connect users with registered derivatives markets without requiring registration as an Introducing Broker. Phantom does not custody customer assets, execute trades, or manage private keys. Instead, it provides software that allows users to access blockchain based services while maintaining control of their own funds. The company is now asking the CFTC to formalize that position through broader regulatory guidance instead of relying on individual no action relief.
Such guidance, the filing argues, would establish a consistent framework for other wallet providers operating under similar non custodial models.
A Broader Debate Over Onchain Regulation
The recommendations arrive as regulators continue evaluating how decentralized financial infrastructure should fit within existing commodities law.
Supporters argue that applying traditional intermediary rules to decentralized software creates legal uncertainty that discourages innovation and pushes developers to jurisdictions with clearer regulations.
The filing also argues that regulated financial institutions should be allowed to adopt blockchain infrastructure without creating additional compliance uncertainty, provided they continue meeting existing regulatory obligations.
For Hyperliquid and Phantom, clearer rules could eventually expand lawful access to regulated onchain derivatives markets in the United States while preserving user self custody.
The proposal does not ask the CFTC to remove oversight from digital asset markets. Instead, it seeks to distinguish software developers and technology providers from businesses that actually custody customer funds or execute transactions.
Conclusion
Phantom and the Hyperliquid Policy Center are urging the CFTC to modernize regulations for blockchain based financial markets by recognizing the differences between decentralized software and traditional financial intermediaries. Their proposals seek clearer rules for developers, regulated exchanges, and non custodial wallet providers while maintaining oversight of businesses that directly handle customer assets.
As the CFTC reviews industry feedback, the agency’s response could influence how decentralized derivatives platforms, wallet providers, and blockchain developers operate in the United States. The outcome may also shape the broader integration of onchain infrastructure into regulated financial markets in the years ahead.
