#What is the Significance of the Recent Joint Comment to the CFTC?
Phantom Technologies and the Hyperliquid Policy Center have taken a noteworthy step by submitting a joint comment to the Commodity Futures Trading Commission (CFTC). This initiative seeks to prompt the CFTC to revise its regulations governing onchain market infrastructure. Their commentary responds to the agency's earlier request for information regarding any existing regulations that could hinder financial technology firms from collaborating with regulated financial intermediaries.
Both Phantom and Hyperliquid pointed out that the current regulatory framework is primarily designed with custodial market structures in mind. In traditional models, intermediaries manage customer orders and funds. Onchain markets, however, present a unique opportunity where users can trade directly and maintain control over their assets.
#How do the Groups Propose to Change the Regulatory Landscape?
The groups are advocating for the CFTC to clarify that developing or contributing to onchain protocol software should not automatically necessitate registration with the Commission. They argue that registration should only be required for entities that directly manage customer orders or funds, or who engage in transactions with customers. In contrast, software protocols and independent developers should be exempt from these constraints.
Additionally, Phantom and Hyperliquid recommended that the CFTC establish a clear pathway for registered exchanges, clearing organizations, and intermediaries to utilize onchain infrastructure for regulatory purposes. This would allow designated contract markets to employ onchain protocols for essential functions such as matching and execution. Moreover, derivatives clearing organizations could leverage these protocols for margining, settlement, clearing, and default management.
#What Other Recommendations Were Made?
In their filing, the groups urged the CFTC to formalize its previous no-action letter issued to Phantom. This letter provided relief for Phantom, a non-custodial wallet provider that only offers technical access to regulated markets. Phantom and Hyperliquid believe that creating a formal rule would grant similar wallet providers greater certainty in their operations.
Phantom has clarified that it does not manage user funds, control private keys, execute trades between users, or serve as an intermediary for transactions. HPC identifies itself as an advocacy group, committed to developing a regulated path for Americans to access onchain markets, including those on Hyperliquid.
Currently, Phantom integrates Hyperliquid through its interface, although this functionality is not accessible to users in the United States. The groups are actively collaborating to advance regulatory measures that would enable Americans to access onchain derivatives markets under CFTC oversight.