The Center for Hyperliquidity Policy filed a joint comment letter with the SEC and CFTC

The Hyperliquid Policy Center is a policy advocacy organization founded by Jake Chervinsky, focusing on regulatory clarity for on-chain derivatives and blockchain infrastructure.

8/25/20264 min read

Prioritize Structure over Infrastructure.

The core argument in HPC's letter challenges a feature considered arbitrary and commercially disadvantageous in the current US derivatives regulatory mechanism: that identical financial products, bearing the same economic risk profile, are treated differently based solely on whether the reference asset is classified as a commodity (under the jurisdiction of the CFTC) or a security (under the jurisdiction of the SEC).

Bitcoin-based perpetual contracts and stock-based perpetual contracts are instruments with similar economic characteristics: both have no expiration date, both use periodic funding payments to maintain correlation between the contract price and the spot price of the underlying asset, both allow closing positions through offsetting transactions instead of physical or cash settlement on a fixed date, and both expose holders to price fluctuations of the underlying asset with leverage determined by the margin. Under current US law, Bitcoin perpetual contracts fall under the CFTC's commodity futures jurisdiction, while stock-based perpetual contracts raise the question of whether they should be considered securities-based swaps (under SEC jurisdiction), futures contracts (under CFTC jurisdiction), or securities futures products (under the SEC-CFTC coordination framework). The uncertainty surrounding this classification has prevented both types of perpetual contracts from being deployed on a large scale on domestically regulated trading platforms.

The HPC's argument for prioritizing structure over the underlying asset calls on regulators to address this uncertainty by considering the economic nature of the product rather than its reference asset. Accordingly, if a product exhibits the functional characteristics of a futures contract—including standardized terms, fungibility, forward-looking nature, and a mechanism for exiting a position through a counter-transaction—then it should be regulated as a futures contract, regardless of whether the underlying asset is a commodity or a security.

Four specific petitions submitted to the SEC and CFTC.

The comments outline four specific regulatory actions that these agencies are recommended to take; each action addresses a different aspect of the jurisdictional and legal framework gaps currently hindering the deployment of perpetual contracts on domestically regulated trading platforms.

First, HPC proposes that authorities certify that equity perpetual contracts qualify to be listed as security futures under the existing SEC and CFTC framework. This framework governs financial instruments that share characteristics of both securities and futures contracts and is jointly regulated by the two agencies. Previously, the security futures framework primarily applied to futures contracts on single stocks and narrow index futures contracts; HPC argues that equity perpetual contracts – which share characteristics with futures contracts – fully fit within the scope of this framework under existing legal jurisdiction without the need for new legislation.

Secondly, the document suggests that authorities maintain flexibility for exchanges in deciding on product listings. The goal is to prevent classification frameworks from creating barriers to innovation in derivative product design, which could occur if authorities require prior approval for each new perpetual contract market structure.

Third, HPC proposes that authorities adopt uniform classification standards for different types of underlying products and assets. This directly addresses the current unequal treatment, which leads to different management outcomes for structures of similar economic nature, simply because of differences in the classification of underlying assets as commodities or securities.

Fourth, the document proposes that authorities modernize the securities futures contract framework to accommodate newer contract structures, including perpetual contracts. This proposal stems from the fact that the current framework was established before perpetual contracts became a significant market segment, and therefore the existing rules may not be fully compatible with the operating mechanisms of perpetual contracts based on funding rates.

The text also suggests that agencies provide initial clarity through explanatory guidelines, policy statements, and actions taken by agency staff, rather than requiring a full rule-making process (including public notification and consultation). This approach allows markets to develop under clearer rules at a faster pace than the typical formal rule-making process.

Assessment and Conclusion

President Trump's statement that CFTC Chairman Selig is working to bring Hyperliquid to the US market in a "fully legal and compliant" manner indicates that the executive branch has established a position on the policy outcome that the HPC petition supports, even without specifying the particular legal path Selig is pursuing. Trump's endorsement provides a "political shield" for the CFTC to issue guidance that favors on-chain perpetual contract platforms without being perceived as a concession to industry pressure; instead, it is seen as a step toward implementing the executive branch's announced digital asset management agenda.

This support also provides crucial information about Hyperliquid's political standing in Washington: a platform operating entirely overseas, not allowing access to US users, previously placed on the MAS (Singapore) investor advisory list and warned by the FCA (UK), and facing legal opposition from CME regarding its product type, is now receiving direct support from the White House to legally enter the US market. This political position is significant commercially, as it shows that the CFTC may have the flexibility in its regulatory work to issue guidance favorable to HPC's petition without facing political opposition from the executive branch, even if those guidelines face legal challenges from CME in court.

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