Hyperliquid Policy Center, Phantom Urge CFTC To Ease Onchain Software Registration Rules

TLDR:

• HPC and Phantom filed a joint letter urging CFTC to clarify registration rules for developers.
• The letter asks CFTC to give registered exchanges a path to adopt onchain infrastructure.
• HPC and Phantom want the Phantom no-action letter codified into a permanent formal rule.
• The filing responds directly to a CFTC request on rules hindering market participants.

Hyperliquid Policy Center and Phantom have urged the CFTC to clarify that publishing onchain protocol software does not require registration.

The two firms submitted a joint comment letter this week addressing onchain market infrastructure. Their filing asks regulators to modernize outdated rules built around custodial intermediaries.

It calls for a clear registration pathway for exchanges adopting onchain systems. The letter also pushes to codify the existing Phantom no-action letter into formal policy.

HPC And Phantom Detail Registration Concerns

Hyperliquid Policy Center and Phantom compare software developers to internet service providers. The letter states “no one confuses either person for the other” between builders and brokers.

An internet provider supplies cables that let brokers take customer orders. The letter argues protocol developers deserve the same clear distinction under CFTC rules.

Digital asset builders have not received consistent treatment from past CFTC leadership. The letter notes developers were left “guessing whether they may be treated as operating an unregistered exchange.”

This ambiguity pushed many companies to build their products offshore instead. HPC and Phantom credit current leadership under Chairman Selig with shifting this approach.

Onchain markets differ structurally from traditional custodial trading systems, the letter notes. Legacy markets pass customer funds through brokers, exchanges, and clearinghouses sequentially.

The filing states onchain systems “let users hold their own funds and trade directly with one another.” Hyperliquid Policy Center and Phantom say regulation should reflect this fundamental difference.

Three recommendations anchor the joint submission to the Commission. Confirm first that publishing protocol software alone does not require registration.

Second, create pathways for registered exchanges to adopt onchain infrastructure directly. Third, convert the Phantom no-action letter into what the filing calls “a formal rule.”

Firms Frame Request As Path To Onshore Growth

HPC and Phantom present their proposal as a route to bring innovation onshore. The letter states protections can be built in “by design rather than by decree.”

Regulated intermediaries would continue handling responsibilities that code alone cannot resolve. This structure preserves protections while modernizing infrastructure for onchain derivatives markets.

The letter responds to a CFTC request asking which rules hinder market participants. HPC and Phantom write, “this is our answer, and it is within the Commission’s own authority to act on.”

They state the requested changes fall within the Commission’s existing regulatory authority. No new legislation would be required to implement these clarifications.

Codifying the Phantom no-action letter would benefit smaller non-custodial wallet providers broadly. The filing notes such firms would gain “durable certainty rather than having to ask, one at a time, for relief.”

Firms would gain lasting certainty instead of requesting individual relief repeatedly. This reduces friction for developers building non-custodial financial technology tools.

Existing registrants also stand to benefit from the proposed regulatory pathway. Exchanges and clearinghouses could retire legacy systems for transparent onchain alternatives instead.

Compliance obligations would remain intact under the new registration framework. HPC and Phantom describe this transition as advantageous for American consumers.

The joint letter reflects continued engagement between digital asset firms and federal regulators.

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