HPC and Phantom urge US regulators to separate software developers from finance firms

Hyperliquid Policy Center and Phantom delivered a joint comment letter to the US Commodity Futures Trading Commission on July 9, arguing that on-chain market rules must draw a clear line between software infrastructure builders and financial service operators. The distinction, the firms say, is critical to avoid stifling innovation in decentralized finance.

The firms compared the situation to internet service providers: just because an ISP carries data for a bank does not make it a financial institution. Similarly, a developer who writes code for a decentralized exchange should not face the same compliance burden as the entity that actually runs the trading platform. "Rules should apply to businesses that operate services, not to developers," the letter states.

They urged the CFTC to review its regulatory framework to reflect advances in financial technology. The goal, they said, is to let developers focus on building technology while allowing registered firms to innovate in the services they offer. Infrastructure development and financial service operation should be kept separate.

To illustrate, the letter cites a software engineer who builds an order-matching engine for a futures exchange but has no role in running the exchange itself. That engineer should not be regulated as a futures commission merchant, even if the engine powers regulated trading.

The comment letter comes as US regulators grapple with how to apply decades-old financial laws to blockchain-based markets. The CFTC has been increasingly active in overseeing crypto derivatives, but the line between technology provider and financial intermediary remains fuzzy. HPC and Phantom argue that blurring that line discourages development.

The CFTC has not yet publicly responded to the letter. The agency continues to accept public comments on its on-chain market regulation proposals, and this filing adds weight to the argument for a technology-neutral approach. Traders should watch for any CFTC guidance or rulemaking that adopts the developer-service provider distinction.