Phantom & Hyperliquid tell CFTC: devs aren't brokers, please stop treating code like Wall Street 🏗️

Crypto wallet provider Phantom and the Hyperliquid Policy Center have asked the US Commodity Futures Trading Commission to exempt blockchain protocol developers and non-custodial wallet providers from regulations designed for traditional financial intermediaries, according to a letter filed in response to a CFTC request for information on regulations affecting fintech firms.

The companies made three specific requests: confirm that blockchain protocol developers do not have to register solely for creating onchain software, issue guidance allowing regulated derivatives firms to use blockchain infrastructure, and codify an existing exemption preventing non-custodial wallet providers from being treated as introducing brokers. Phantom received no-action relief as a self-custodial wallet in March 2026, and an industry coalition made a similar argument in April.

Phantom and the Hyperliquid Policy Center argued that existing CFTC regulations were designed for custodial financial intermediaries that hold customer assets and process trades, while onchain protocols allow users to transact directly without intermediaries controlling funds or executing orders. They said registration requirements should apply to entities that handle customer funds or execute trades, rather than to developers who create blockchain software or contribute to open-source protocols without controlling how the software is used.

The groups also asked the CFTC to clarify that registered derivatives exchanges, clearinghouses and intermediaries can use onchain infrastructure for functions including trade execution, clearing, settlement, margining and recordkeeping, provided they continue to comply with existing regulations. They warned that the alternative is the status quo, in which "American users continue to be walled off from onchain derivatives markets," while innovation continues to take place offshore. Some of the issues raised are being deliberated in the CLARITY Act, and the SEC is separately exploring an "innovation exemption" for tokenized assets trading.

The push comes as traditional exchanges push back on DeFi exemptions. In May, Intercontinental Exchange and CME Group reportedly urged regulators to scrutinize Hyperliquid's expansion into commodity-linked perpetual futures, arguing that the decentralized platform's energy derivatives posed market integrity and manipulation risks. Two weeks later, ICE CEO Jeffrey Sprecher called for a "level playing field" that would allow regulated exchanges to offer 24/7 onchain perpetual futures, and said ICE had held exploratory discussions with Hyperliquid. CME has continued expanding its own regulated crypto derivatives business, including futures tied to Avalanche and Sui, CFTC-regulated Bitcoin volatility futures and a Nasdaq-related product launch. CME has also sued the CFTC over its approval of Kalshi's crypto perpetuals, arguing the contracts are swaps rather than futures, and the CFTC is reconsidering how it defines swaps. Citadel Securities and an umbrella body representing traditional exchanges have opposed DeFi exemptions, particularly for tokenized asset trading, arguing regulators should treat every platform as a broker based on function rather than technology.