Phantom and Hyperliquid Ask the CFTC Not to Treat DeFi Developers as Brokers

Two crypto firms have jointly asked the US Commodity Futures Trading Commission to declare that writing decentralized-finance software is not the same as running a brokerage, and to keep onchain protocol developers and non-custodial wallets — apps that never hold users’ funds or control their keys — off the agency’s registration rolls.

The wallet maker Phantom and the Hyperliquid Policy Center, an advocacy group tied to the Hyperliquid blockchain, set out the request in a joint comment letter dated July 9. It responds to a CFTC request for information on rules that may “unduly impede” fintech firms, which the agency issued under an executive order on financial-technology innovation.

The core of the argument is that software is not a market participant. The CFTC’s registration categories — for exchanges, clearinghouses, brokers and dealers — turn on functions performed by a person or entity, the letter notes, and “Software running on a public blockchain—even if it facilitates derivatives trading—is none of those things.” Such code, the firms wrote in the letter, has “no legal personality, no capacity to enter into contracts, and no ability to respond to regulatory inquiries.” Accordingly, the two argued, “onchain protocol software developers should not need to register as DCMs, SEFs, DCOs, FCMs, IBs, or SDs” — the CFTC’s acronyms for designated contract markets, swap execution facilities, derivatives clearing organizations, futures commission merchants, introducing brokers and swap dealers.

Instead, “registration requirements should apply to persons or entities actually handling customer orders or funds or entering into transactions with customers,” they wrote in the letter. The letter likens the point to traditional markets, where developers build matching engines and other trading infrastructure that registered firms deploy without the developers themselves being regulated as the exchange.

The firms asked the CFTC to take three steps: confirm that developing onchain protocol software alone triggers no registration; issue guidance letting the commission’s own registered markets use onchain infrastructure to run execution, clearing and settlement; and turn a March 2026 no-action letter granted to Phantom — which spared the non-custodial wallet from registering as an introducing broker — into a formal rule for similarly situated firms. The letter was signed by Phantom general counsel Kevin Jacobs and Hyperliquid Policy Center policy counsel Brad Bourque.

The stakes reach beyond the two firms. How the CFTC answers would help settle whether US-based DeFi protocols and wallets get treated as regulated intermediaries, and whether Americans can reach onchain derivatives markets onshore — Phantom notes its Hyperliquid integration is not available to US users today. The filing is a comment in a broader review, not a rule, and the agency has not said how it will respond.

Related Listen: DEX in the City: Why the Market Structure Bill May Not Be Good for DeFi

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