Developers of the Phantom crypto wallet and researchers at the Hyperliquid Policy Center (HPC) urged the U.S. Commodity Futures Trading Commission (CFTC) to revise the regulatory framework for on-chain infrastructure by exempting software developers from requirements intended for financial intermediaries.
Phantom, the developer of the non-custodial crypto wallet, and the Hyperliquid Policy Center, a research organization, submitted a joint response to the CFTC on improving the regulatory framework for FinTech firms. The authors argued that the current rules were designed for the traditional financial system, which relies on layers of intermediaries, and don’t reflect the nature of on-chain markets, where users retain control of their own assets and transact directly with one another.
The document responded to the CFTC’s request for information, in which the regulator invited market participants to identify rules that hinder FinTech innovation and the adoption of new technologies in the financial sector. The Commission plans to use the feedback to evaluate whether changes to the current regulatory framework are needed.
According to the authors, the current framework doesn’t provide sufficient legal certainty for on-chain infrastructure developers and encourages innovative projects to move outside the U.S. They also argued that registered U.S. market participants can’t modernize their existing trading and clearing systems by using public blockchain networks, despite the potential benefits those technologies offer.
The organizations proposed three key regulatory changes:
- Confirm that developing and publishing software for on-chain protocols doesn’t require registration as an exchange, clearinghouse, or another regulated market participant.
- Establish a framework allowing registered exchanges, clearinghouses, and brokers to use on-chain infrastructure for trade execution, clearing, and settlement while remaining compliant with existing regulatory requirements.
- Codify the regulatory approach previously applied by the CFTC to Phantom and extend it to all providers of non-custodial wallets and interfaces.
In March 2026, the CFTC issued a no-action letter to Phantom stating that the company wasn’t required to register as an Introducing Broker because it doesn’t custody customer funds, execute trades, or act as a financial intermediary, and instead only provides a software interface that enables access to regulated markets.
The authors also argued that regulatory requirements should apply to firms providing financial services rather than software developers building infrastructure for on-chain markets. In their view, such an approach would allow U.S. exchanges and clearinghouses to adopt blockchain technology without compromising existing risk management and customer protection requirements. It would also accelerate the modernization of derivatives market infrastructure and help keep innovative projects in the U.S.
Separately, the heads of the CFTC and the U.S. Securities and Exchange Commission (SEC) agreed to coordinate and divide supervisory responsibilities to eliminate overlapping regulation and harmonize oversight in areas where the two agencies’ jurisdictions intersect.
