#What is the focus of the recent crypto industry appeal?
The recent appeal by two significant players in the cryptocurrency sector aims to clarify regulations surrounding onchain protocol software. Hyperliquid Policy Center and Phantom Technologies submitted a letter to the Commodity Futures Trading Commission, advocating that developers of onchain software should not be required to register as regulated entities solely for developing and publishing their code.
#What specific changes are Phantom and Hyperliquid requesting?
The joint letter outlines three primary requests, each addressing key challenges posed by current regulations.
First, they seek clarity from the CFTC confirming that merely developing and publishing onchain software does not necessitate registration. This means that creating smart contracts for derivatives trading should not equate developers to major financial institutions like JPMorgan.
Second, the letter requests updated guidance that would enable CFTC-registered exchanges to utilize onchain technology for their operations without undue hindrance.
Lastly, the letter aims to formalize a previous no-action relief granted to Phantom, which allowed them to connect users to regulated derivatives markets without requiring registration as a broker. This request emphasizes the need for lasting regulatory guidance rather than a temporary exemption.
#Why are these companies uniquely positioned to voice this argument?
Hyperliquid has developed a specialized Layer-1 blockchain focused on derivatives and financial activities, with a total token supply of one billion HYPE. Founded in early 2026, the Hyperliquid Policy Center was established to pursue clarity in regulatory matters affecting onchain markets.
Phantom, as a non-custodial wallet service, does not manage user funds or conduct trades, providing only access to blockchain activity. This operational distinction is critical from a regulatory perspective, since existing frameworks often assume that any entity connecting users to financial markets functions as a broker.
Phantom's earlier relief from the CFTC illustrates a recognition among regulators of the difference between tools facilitating access and those directly managing funds. The letter seeks to expand this understanding before the precedent loses significance.
#How does this impact the regulatory landscape?
Historically, the CFTC has not categorized creators of offchain trading software as regulated entities based solely on software creation. The current letter advocates this same perspective for developers of onchain systems, emphasizing the benefits such systems provide compared to traditional custodial structures. These advantages include reduced intermediary risks and improved settlement transparency, as well as the elimination of counterparty risks through self-custody.
#What does this mean for investors?
Regulatory ambiguity has long been seen as a barrier for institutional investors considering onchain derivatives. A clear framework from the CFTC allowing registered firms to utilize blockchain technology could significantly lower these barriers, making the landscape more appealing for institutional engagement. The transition from a status of being "technically not illegal" to one of being "explicitly permitted" is a noteworthy shift for compliance personnel overseeing substantial funds.
Given that Phantom has already received no-action relief, there appears to be a readiness among regulators to accommodate industry needs. However, formalizing these insights into recognizable guidance remains a distinct and deliberate challenge.