The cryptocurrency landscape is evolving rapidly, and industry leaders are calling on US regulators to ensure the rules of the road keep pace. Recently, prominent crypto wallet provider Phantom and the Hyperliquid Policy Center submitted a joint request to the US Commodity Futures Trading Commission (CFTC), asking the agency to rethink how it handles decentralized finance. Their primary goal is to exempt blockchain protocol developers and non-custodial wallet providers from outdated regulations that were originally designed for traditional financial intermediaries.
Why Crypto Innovators Are Seeking CFTC Exemptions
In response to a CFTC request for information regarding fintech regulations, these crypto companies outlined a clear distinction between decentralized technology and traditional banking. They are asking the agency to officially confirm that developers do not need to register as financial entities simply for writing and publishing onchain software. Furthermore, they want to ensure that non-custodial wallet providers are not unfairly classified as introducing brokers. The core of their argument is straightforward: current CFTC regulations were built for custodial institutions that actually hold customer assets and directly process trades. In contrast, onchain protocols simply provide the infrastructure for users to transact peer-to-peer, meaning the developers never control user funds or manually execute orders.
Phantom and Hyperliquid believe that heavy registration requirements should be strictly reserved for entities that actively handle customer money. To bridge the gap between traditional finance and decentralized tech, they are also pushing the CFTC to issue guidance that would allow already-regulated derivatives firms to utilize blockchain infrastructure for back-end functions like trade execution, settlement, margining, and recordkeeping. If the regulatory body fails to adopt these modernizations, the groups warn that American users will remain walled off from the growing global onchain derivatives market. Without a clear, fair, and updated regulatory framework, they argue that the United States risks pushing vital technological innovation entirely offshore.
The Growing Clash Between Traditional Exchanges and DeFi
This push for regulatory clarity arrives right as the debate over onchain derivatives is reaching a boiling point between crypto-native companies and traditional financial giants. Earlier this year, traditional heavyweights like Intercontinental Exchange (ICE) and CME Group began urging regulators to take a closer look at decentralized platforms like Hyperliquid. They specifically raised concerns that unregulated energy derivatives on decentralized networks could introduce market manipulation risks. However, traditional exchanges aren’t just playing defense—they are also eager to adapt and compete. ICE leadership recently advocated for a level playing field that would allow traditional, regulated exchanges to offer the same 24/7 onchain perpetual futures that crypto platforms currently provide, noting that existing rules currently lock them out of this lucrative market.
Meanwhile, CME Group has been aggressively expanding its own regulated crypto derivatives portfolio. They recently introduced futures tied to specific altcoins like Avalanche and Sui, launched CFTC-regulated Bitcoin volatility futures, and introduced market-cap weighted index futures. Yet, despite their own expansion into digital assets, CME actively sued the CFTC earlier this year over the agency’s approval of crypto perpetual futures, claiming the regulator overstepped its legal authority under the Commodity Exchange Act. This ongoing friction highlights the urgent need for updated rules. As both decentralized innovators and traditional exchanges fight for dominance, the CFTC finds itself tasked with modernizing policies to accommodate new technology without stifling innovation or compromising market integrity.
