Hyperliquid and Phantom Ask US Regulators to Stop Treating Wallets Like Brokers

If you’ve ever used a wallet like Phantom to trade tokens directly from your own device, you’ve relied on a legal gray area that regulators have never fully clarified. This week, Hyperliquid Policy Center (HPC) and Phantom sent a joint letter to the U.S. Commodity Futures Trading Commission (CFTC) asking it to spell out, once and for all, that simply writing and publishing onchain software doesn’t make you an unregistered exchange, according to Blockonomi.

That might sound like a niche legal argument, but it touches almost every self-custody wallet, decentralized exchange, and DeFi app you use. If regulators decided that building this kind of software required the same registration as a stock exchange, many teams could be forced to block U.S. users or shut down entirely — something that’s already pushed several crypto projects offshore in the past.

Why developers say they’re being treated unfairly

The letter compares protocol developers to internet service providers, arguing that “no one confuses either person for the other” — meaning the people who build the underlying technology shouldn’t be lumped in with the brokers who actually take customer orders. An internet provider just supplies the cables; it doesn’t decide what gets said over them. HPC and Phantom argue that publishing open-source onchain software should be treated the same way.

According to the letter, developers have been left “guessing whether they may be treated as operating an unregistered exchange,” a level of uncertainty that has, in the firms’ telling, driven companies to build outside the U.S. rather than risk running afoul of American rules. HPC and Phantom credit current CFTC Chairman Selig’s leadership with opening the door to a more predictable approach.

The filing also draws a line between how traditional finance works and how onchain systems work. In legacy markets, your money passes through a broker, then an exchange, then a clearinghouse before a trade settles. Onchain systems, the letter says, “let users hold their own funds and trade directly with one another” — which is exactly why HPC and Phantom think they deserve different regulatory treatment, not a rulebook designed for middlemen who never touch your assets.

What the two firms are actually asking for

The letter lays out three concrete requests. First, confirm that publishing protocol software alone doesn’t trigger exchange registration requirements. Second, create a clear pathway for already-registered exchanges to plug in onchain infrastructure without starting from scratch. Third, turn an existing “no-action letter” that currently shields Phantom from certain rules into a permanent, formal regulation everyone in the industry can rely on.

That last point matters most for smaller teams. A no-action letter is essentially regulators saying “we won’t come after you for this specific thing,” but it can be narrow and doesn’t automatically protect anyone else. Codifying it into a real rule would give smaller non-custodial wallet providers what the letter calls “durable certainty rather than having to ask, one at a time, for relief” — meaning every small wallet startup wouldn’t need its own individual sign-off from regulators.

Why this matters for your bags

HPC and Phantom frame the request as a way to build consumer protections “by design rather than by decree,” meaning the rules of the blockchain itself do some of the protective work that brokers and clearinghouses currently do by law. They also note the changes fall within the CFTC’s existing authority, so no new legislation from Congress would be needed.

For everyday holders, the practical upside would be more legal certainty for the wallets and DeFi platforms you already use, potentially fewer geo-blocks for U.S. users, and a clearer path for regulated exchanges to eventually offer onchain products alongside traditional ones. Nothing here is guaranteed — it’s a comment letter, not a rule — but it’s a sign that the industry sees an opening with the current CFTC leadership to get long-standing gray areas resolved.

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