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Phantom and Hyperliquid want the CFTC to back off. The two companies have formally pushed the Commodity Futures Trading Commission to modernize its rules around onchain derivatives — and they’re specifically asking for exemptions that would protect blockchain developers and non-custodial wallet providers from regulations built for a completely different world.
The core argument isn’t complicated. Phantom and Hyperliquid say the existing CFTC framework was written with traditional financial intermediaries in mind — think brokers, clearinghouses, centralized exchanges. Not open-source protocol developers. Not wallet software that never touches a single dollar of customer money. Applying those same rules to decentralized platforms, the companies argue, is basically a category error. The architecture is different. The risk profile is different. The relationship to customer funds is, in many cases, nonexistent. And yet the compliance burden lands the same way, which is pretty much the definition of a broken regulatory fit.
The CFTC hasn’t responded yet.
What Phantom and Hyperliquid Actually Want
The requested exemptions are targeted. Phantom and Hyperliquid aren’t asking the CFTC to abandon oversight of the derivatives market. They’re asking for a carve-out — one that would cover developers and non-custodial wallet providers who don’t hold or control customer assets. The logic is that if you can’t move a user’s funds, you probably shouldn’t face the same regulatory scrutiny as an entity that can. That’s not a radical position. It’s kind of a basic proportionality argument.
But the CFTC’s current rules don’t really make that distinction. The existing framework treats the space with a broad brush, and that creates friction. Developers building DeFi infrastructure have to think hard about whether their code makes them a regulated entity. Wallet providers that offer access to onchain derivatives markets face similar uncertainty. That uncertainty, Phantom and Hyperliquid say, slows everything down — and not in a good way.
DeFi has grown fast. The whole sector has moved well ahead of the regulatory vocabulary used to describe it. Regulators globally have struggled to map traditional financial concepts — custody, intermediation, settlement — onto protocols that work through smart contracts and permissionless access. It’s a hard problem, and it’s not unique to the U.S. But the CFTC sits at a particularly important junction here, given how much of the onchain derivatives market touches U.S. users and U.S.-linked infrastructure.
The Broader Regulatory Pressure on DeFi
Phantom and Hyperliquid aren’t the only ones making noise about this. The push to get regulators to distinguish between custodial and non-custodial services has been building across the industry for a while. Non-custodial wallets — where users hold their own private keys — don’t fit neatly into the “money transmitter” or “broker-dealer” boxes that existing law was built around. Same goes for protocol developers who write code but don’t operate the resulting platform in any traditional sense.
The companies stress that developers and providers without control over customer funds shouldn’t face the same level of scrutiny as centralized exchanges or brokers. That’s probably the cleanest version of their ask. And it’s an ask that, if granted, could meaningfully reduce compliance costs for a wide slice of the DeFi ecosystem.
Whether the CFTC sees it that way is unclear. The commission has been active on crypto enforcement in recent years, and there’s no obvious signal yet on how it’ll handle requests like this one. No timeline has been given. No public comment period has been announced. The industry is basically waiting.
And the stakes aren’t small. If the CFTC rules against the exemption — or just stays silent long enough — it could push more development activity offshore. That’s been a recurring pattern in crypto regulation: uncertainty in one jurisdiction creates opportunity in another. Phantom and Hyperliquid seem to be betting that making the case directly, on the record, is better than watching that play out again.
Both companies are essentially arguing that a more flexible regulatory environment would bring more participation, more development, and more legitimate market activity into the U.S. ecosystem. Whether that argument lands with the CFTC is another question entirely.
The commission has yet to comment on the request, and no response timeline has been made public.
Frequently Asked Questions
What exactly are Phantom and Hyperliquid asking the CFTC to do?
They’re asking the CFTC to exempt blockchain developers and non-custodial wallet providers from regulations currently designed for traditional financial intermediaries, arguing those rules don’t fit entities that never control customer funds.
Has the CFTC responded to Phantom and Hyperliquid’s request?
No. The CFTC has not yet commented on the request, and it’s unclear what steps the commission will take or when a response might come.
