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Phantom Technologies and the Hyperliquid Policy Center have asked the U.S. Commodity Futures Trading Commission to create clearer rules for on-chain derivatives markets.
Their July 9 filing says current derivatives rules still assume a custodial system built around brokers, exchanges and clearinghouses, while public blockchains can separate software infrastructure from control over customer orders and funds. The request gives the CFTC a policy roadmap, but it does not approve Hyperliquid for U.S. traders.
July 9 Filing Answers CFTC Fintech Review
Phantom and the Hyperliquid Policy Center submitted the joint comment in response to the CFTC’s request for information on rules that may limit fintech firms from working with regulated financial institutions. The agency opened the review on June 16 to identify regulations, guidance, orders, no-action letters and other items that may impede fintech partnerships or slow application processes for eligible firms.
The groups said the main problem is that CFTC rules generally assume a layered, custodial market structure. In that model, a broker handles the order, an exchange matches the trade and a clearinghouse guarantees and settles it while intermediaries control customer orders or funds.
Phantom and the Hyperliquid Policy Center argued that on-chain markets work differently because users can interact with software-based systems while keeping control of their private keys. They said that difference requires rules that focus on the entities performing regulated functions, not on passive software or public blockchain protocols standing alone.
Groups Seek 3 On-Chain Derivatives Rule Changes
The filing makes three main requests. First, the groups want the CFTC to confirm that developing or contributing to on-chain protocol software does not by itself trigger registration as a designated contract market, swap execution facility, derivatives clearing organization, futures commission merchant, introducing broker or swap dealer.
Second, they want guidance allowing CFTC-registered firms to use on-chain infrastructure for regulated functions. That could include a designated contract market using an on-chain protocol for matching and execution, a derivatives clearing organization using on-chain systems for margining and settlement, or a futures commission merchant accepting customer orders and funds through blockchain-based infrastructure.
Third, the groups want the CFTC to codify the approach in Phantom’s March no-action letter. They said a formal rule would give similar non-custodial wallets and front-end providers more certainty when they merely provide technical access to regulated markets or intermediaries.
Developers Would Sit Outside Broker Rules
The filing’s first request is aimed at the line between software development and regulated financial activity. Phantom and the Hyperliquid Policy Center said registration should apply to persons or entities that handle customer orders or funds, enter into transactions with customers, or otherwise perform regulated functions.
They argued that public blockchain software has no legal personality, cannot enter contracts and cannot respond to regulatory inquiries. On that basis, the groups said a protocol should not be treated like a broker, exchange or clearinghouse simply because it can facilitate derivatives trading.
That distinction is central to the request. The groups are not asking the CFTC to remove obligations from registered firms. Instead, they want the agency to say that the compliance burden should attach to the firms using on-chain systems for regulated activity, not to developers who publish or contribute to software without ongoing control over its use.
DCMs, DCOs and FCMs Could Use Blockchains
The second request focuses on the regulated derivatives stack. Designated contract markets operate CFTC-regulated trading venues, derivatives clearing organizations handle clearing and margin functions, and futures commission merchants sit between customers and futures markets.
Phantom and the Hyperliquid Policy Center said those registered entities should be allowed to use public blockchain infrastructure if they can still satisfy CFTC core principles and customer-protection rules. For trading venues, that could mean using on-chain systems for matching and execution while retaining offchain authority over listed contracts, market surveillance, emergency powers and member discipline.
For clearing organizations, the groups said on-chain systems could support margining, settlement, clearing and default management. For futures commission merchants, they said blockchain infrastructure could support customer orders and funds if the firm still complies with know-your-customer, disclosure, order-handling and segregation requirements.
Phantom Wants March Wallet Relief Codified
The CFTC’s March no-action letter gave Phantom limited staff relief for a specific model involving self-custodial wallet software connected to registered derivatives markets and intermediaries. The CFTC said its Market Participants Division would not recommend enforcement against Phantom or relevant personnel for failure to register as an introducing broker or associated person, as long as the company stayed within the conditions of the letter.
The letter did not treat Phantom as a broad DeFi venue or give open-ended approval to unregistered derivatives trading. Phantom’s proposed role was limited to providing front-end software that lets users review market data, view product information and submit orders directly to registered collaborators, including designated contract markets, futures commission merchants and introducing brokers.
The staff letter also said Phantom would not hold or control user assets, generate express buy or sell signals, or exercise discretion over the routing or execution of user orders. Phantom and the Hyperliquid Policy Center now want that functional analysis turned into a broader rule for similar wallets and front-end providers.
U.S. Users Remain Blocked From Hyperliquid
The filing says Phantom integrates Hyperliquid into its interface, but that functionality is not available to U.S. users today. The groups said they are working together to advocate for regulations that would let Americans access on-chain derivatives markets under CFTC oversight.
Hyperliquid is described in the filing as a general-purpose Layer 1 blockchain that facilitates financial activity, including derivatives markets. The Hyperliquid Policy Center describes itself as an independent research and advocacy group focused on creating a regulated path for Americans to access on-chain markets, including those available on Hyperliquid.
That point is important for claim discipline. The July 9 filing does not make Hyperliquid available to U.S. traders, and it does not authorize registered U.S. firms to use Hyperliquid infrastructure today. It asks the CFTC to issue guidance or rules that could create a path for regulated on-chain derivatives activity in the future.
CFTC Decision Could Shape Regulated DeFi
The request comes as U.S. regulators are under pressure to decide how decentralized infrastructure fits into financial-market rules written for centralized intermediaries. The CFTC’s fintech review gives firms a formal opening to identify rules that may block partnerships with regulated institutions or make application processes unnecessarily slow.
For on-chain derivatives, the core question is responsibility. If a public blockchain can handle execution, margining, clearing, settlement or recordkeeping, the CFTC still has to decide which registered entity is accountable for surveillance, segregation, default management, system safeguards and customer protection.
Phantom and the Hyperliquid Policy Center are asking the agency to preserve that accountability while allowing regulated firms to use blockchain infrastructure. The next step is not market access, but agency action: guidance, rulemaking or another formal response that says how non-custodial software, public protocols and registered derivatives firms can legally fit together.
