Phantom and Hyperliquid Push CFTC to Distinguish Onchain Protocols from Brokers

Phantom wallet and the Hyperliquid Policy Center have jointly submitted comments to the U.S. Commodity Futures Trading Commission urging regulators to stop applying traditional broker and exchange rules to decentralized onchain protocols. The push comes in response to a June 2026 Request for Information from the CFTC and Securities and Exchange Commission on financial innovation, signaling mounting industry frustration with regulatory frameworks that treat code-based systems like licensed intermediaries.

The groups are asking the CFTC to establish clear distinctions between onchain derivatives protocols, wallet providers, and traditional regulated markets. Rather than classifying decentralized platforms as unregistered exchanges or brokers, the advocates argue that onchain protocols operate fundamentally differently from centralized intermediaries and should receive tailored regulatory treatment that accounts for their technical architecture and lack of custody over user funds.

Onchain protocols don't hold customer assets, don't match orders through proprietary systems, and don't control market access in the way traditional exchanges do. A user interacting with an onchain derivatives protocol executes transactions directly on a blockchain via a smart contract, not routing orders through a centralized matching engine operated by a regulated entity. Wallet providers like Phantom simply enable users to sign transactions; they don't facilitate trades or hold collateral.

This advocacy reflects a broader regulatory tension that has defined the CFTC's approach to crypto for years. The agency has previously pursued enforcement actions against onchain platforms, including actions against dYdX in 2021 and Opyn in 2022, both times arguing that these protocols operated as unregistered derivatives exchanges. Those cases created legal uncertainty that has chilled innovation in decentralized derivatives, even as centralized exchanges like Binance and Crypto.com operate with explicit regulatory licenses in multiple jurisdictions.

The June RFI itself signals the CFTC and SEC recognize they need clearer guidance. By soliciting industry input, the agencies are essentially acknowledging that existing regulatory categories don't neatly fit decentralized infrastructure. The question now is whether the agencies will actually differentiate between onchain protocols and traditional brokers, or whether they'll interpret the RFI as an opportunity to extend existing rules further into the decentralized space.

For wallet providers, the stakes are particularly high. If the CFTC decides that Phantom, MetaMask, and similar non-custodial wallets bear responsibility for preventing access to unregistered trading venues, those providers could face pressure to restrict functionality or implement gating mechanisms. That would effectively give regulators control over what users can access, even when users are interacting with code rather than a licensed intermediary.

The Phantom and Hyperliquid submission represents one of the first coordinated industry responses to the RFI. Other protocols and infrastructure providers are expected to submit their own comments before the deadline. The CFTC and SEC will then face a choice: issue guidance that acknowledges the fundamental differences between onchain protocols and traditional finance, or double down on applying legacy frameworks to new technology. The outcome will likely determine whether decentralized derivatives continue to develop in the U.S. or migrate further offshore.