DeFi Pioneers Petition CFTC to Rewrite Rules for Blockchain-Based Derivatives

In a coordinated push that could reshape how digital asset derivatives are regulated, leading decentralized wallet provider Phantom and derivatives platform Hyperliquid have formally submitted a petition to the Commodity Futures Trading Commission. The two firms argue that existing rules, written long before blockchain-based trading existed, are stifling innovation and leaving retail participants without adequate protections in the rapidly growing on-chain derivatives market.

The Core Ask

The petition does not call for a blanket exemption from oversight. Instead, it requests that the CFTC initiate a rulemaking process to create a tailored framework for decentralized finance (DeFi) derivatives platforms. Key points in the filing include:

• Recognizing smart contracts as legally enforceable execution mechanisms under certain conditions.
• Establishing clear custody standards for non-custodial wallets that facilitate margin trading.
• Creating a sandbox period for novel on-chain settlement models that differ from traditional clearinghouses.

“We believe the current regulatory uncertainty is the biggest barrier to safe, transparent derivatives markets,” a spokesperson for the coalition said. “Our proposal provides a blueprint that balances innovation with the investor protections the CFTC was created to enforce.”

Why Traditional Rules Don’t Fit

Existing CFTC regulations were designed for centralized intermediaries, such as futures commission merchants and central counterparties. On-chain derivatives, by contrast, rely on automated market makers, self-custody, and immutable settlement. The petition argues that applying legacy rules outright would either force DeFi protocols to operate in gray areas or push activity into unregulated offshore venues.

“The CFTC has shown willingness to engage with crypto innovation through its recent pilot programs. This petition is a logical next step toward a coexistence model that benefits domestic markets,” noted an industry analyst familiar with the filing.

Both Phantom and Hyperliquid have been at the forefront of user-friendly DeFi experiences. Phantom’s wallet boasts millions of monthly active users, while Hyperliquid’s order-book-based on-chain exchange processes billions in volume. Their joint regulatory overture signals that even the fastest-growing DeFi platforms see regulatory clarity as essential for long-term sustainability.