Phantom and Hyperliquid Press CFTC on Onchain Derivatives: What Accounting Firms and CFOs Must Track Now
Crypto wallet provider Phantom and the Hyperliquid Policy Center have submitted formal recommendations to the US Commodity Futures Trading Commission, asking the agency to overhaul how it treats blockchain protocol developers and non-custodial wallet providers under existing derivatives regulation. The move lands at a moment when both DeFi platforms and traditional exchanges are pressing the CFTC for clarity, and it raises concrete questions for accounting firms, auditors, and CFOs whose clients are active in onchain derivatives markets. Getting the regulatory classification right is foundational to getting the DeFi accounting right.
What Phantom and Hyperliquid Are Asking the CFTC to Do
The two organisations responded to a CFTC request for information on regulations affecting fintech companies. Their submission centres on a core argument: existing CFTC rules were built for custodial intermediaries that hold customer assets and route orders through centralised systems. Onchain protocols operate differently. Users transact directly, with no intermediary controlling their funds or executing their trades on their behalf.
The Three Specific Asks
The joint submission requests three concrete regulatory actions from the CFTC.
First, the companies want the agency to confirm that blockchain protocol developers are not required to register with the CFTC purely because they write or maintain onchain software. The argument is that writing code is not the same as operating a derivatives market or handling customer funds, and that treating developers as market participants would deter open-source contribution and push development offshore.
Second, they ask the CFTC to issue guidance allowing already-regulated derivatives exchanges, clearinghouses, and intermediaries to use blockchain infrastructure for core functions: trade execution, clearing, settlement, margining, and recordkeeping. Critically, the ask is that these regulated entities could do so while continuing to comply with their existing obligations, rather than facing a regulatory dead zone where no framework covers onchain activity clearly.
Third, the submission asks the CFTC to codify exemptions preventing non-custodial wallet providers from being classified as introducing brokers. An introducing broker designation would impose registration, capital, and reporting obligations on software that, by design, never touches client funds.
The Broader Regulatory Context
The Phantom and Hyperliquid submission does not arrive in a vacuum. It sits inside a widening debate about how onchain derivatives should be treated under the Commodity Exchange Act, involving traditional exchange operators as well as DeFi-native platforms.
Traditional Exchanges Entering the Conversation
ICE chief executive Jeffrey Sprecher publicly called for a level playing field that would let regulated exchanges offer 24/7 onchain trading, arguing that current rules prevent established venues from competing with platforms like Hyperliquid on equal terms. Sprecher disclosed that ICE had already held exploratory discussions with Hyperliquid to understand how onchain derivatives markets operate in practice.
CME has taken a different route, expanding its regulated crypto derivatives offering this year. The exchange launched futures tied to Avalanche and Sui, introduced CFTC-regulated Bitcoin volatility futures, and listed Nasdaq CME Crypto Index futures, a market-cap weighted contract tracking seven digital assets. Even with that expansion, CME has publicly contested the CFTC's approval of crypto perpetual futures offered by other platforms, arguing the regulator may have exceeded its authority under the Commodity Exchange Act.
Hyperliquid Under Scrutiny
Hyperliquid's expansion into commodity-linked perpetual futures attracted separate regulatory attention earlier this year. In May, concerns were raised with regulators that the platform's energy derivatives posed market integrity and manipulation risks. The Hyperliquid Policy Center's participation in the CFTC comment process is, in part, a direct response to that scrutiny.
Why This Matters for DeFi Accounting and Financial Reporting
For accounting firms and CFOs, the regulatory classification the CFTC ultimately adopts will have direct consequences for how onchain derivatives positions are recorded, valued, and disclosed. The current absence of clear guidance creates real uncertainty in crypto accounting software workflows and audit engagements.
Instrument Classification and Fair Value Measurement
Whether an onchain derivatives position is treated as a CFTC-regulated contract or sits in a regulatory grey zone affects how it is classified on the balance sheet. Under US GAAP, derivatives are generally recognised at fair value under ASC 815, with changes flowing through the income statement unless hedge accounting is applied. If a position is on a platform that does not yet have clear CFTC status, auditors must make judgements about whether hedge accounting documentation can be established and whether the counterparty risk disclosures under ASC 820 are adequate.
FASB's fair value guidance for crypto assets (ASC 350-60, effective for fiscal years beginning after December 2024) addresses spot holdings but does not resolve the treatment of onchain derivatives directly. The CFTC's regulatory posture will feed into how standard-setters and auditors interpret the scope of existing guidance.
Entity Classification and Consolidation Risk
The question of whether a protocol developer or a non-custodial wallet is a regulated entity also has consolidation implications. If a client entity has an ownership or governance interest in a DeFi protocol, and that protocol is subsequently determined to be a regulated intermediary, the client may face unexpected consolidation requirements under ASC 810 or IFRS 10. Accounting teams need to document, now, the basis on which they have concluded that protocol-related interests do not create control or variable interest entity relationships.
Recordkeeping and Audit Trail Requirements
The submission specifically requests CFTC guidance allowing regulated entities to use onchain infrastructure for recordkeeping. If that guidance materialises, it would represent a shift in how firms can satisfy their books-and-records obligations. Blockchain-based recordkeeping, where transaction data is immutable and timestamped, could in principle satisfy or supplement traditional recordkeeping requirements. Accounting firms advising registered intermediaries should monitor whether the CFTC issues any formal statement on this point, as it would affect system requirements for digital asset accounting software and audit evidence standards.
Tax Implications for US Clients with Onchain Derivatives Exposure
Regulatory classification by the CFTC also has downstream tax consequences. Section 1256 of the Internal Revenue Code provides favourable 60/40 long-term and short-term capital gains treatment for regulated futures contracts, with mark-to-market treatment at year end. Whether an onchain perpetual futures contract or other derivative qualifies for Section 1256 treatment depends in part on whether it is traded on a qualified board or exchange as defined by the Commodity Exchange Act.
Clients trading on platforms that lack clear CFTC recognition may be unable to claim Section 1256 treatment, meaning gains and losses are taxed under the default capital gains rules, with short-term rates applying to positions held under a year. CFOs and tax advisers need a clear position on the regulatory status of each platform used by the entity before year-end tax provisioning. The CFTC's response to the Phantom and Hyperliquid submission, whether it issues formal guidance, a no-action letter, or remains silent, will be a key data point for that analysis.
Separately, if a non-custodial wallet provider were reclassified as an introducing broker, the information reporting obligations that flow from that status, including potential 1099 issuance requirements, could affect how transaction data reaches tax teams. Accounting firms running crypto bookkeeping software integrations should track whether any platforms used by clients face that kind of reclassification.
The Offshore Risk and What It Means for Firms with International Clients
The Phantom and Hyperliquid submission frames the status quo as one where American users are effectively excluded from onchain derivatives markets, while trading activity and innovation migrate to offshore venues. For accounting firms and CFOs, that framing has a practical edge: if US clients trade onchain derivatives through non-US platforms to avoid the regulatory uncertainty, those positions still need to be reported, valued, and disclosed under US GAAP and US tax rules, often with less data quality than positions on regulated domestic venues.
Firms should confirm that their crypto accounting software workflows can ingest transaction data from non-US onchain platforms and that the data is sufficient for fair value measurement and tax lot tracking. Gaps in data from offshore venues are a recurring audit finding, and the CFTC's current regulatory ambiguity is one factor pushing trading in that direction. For more on how regulators are approaching enforcement in this space, see our coverage of the CFTC enforcement action on a crypto pool operator and the SEC crypto rule changes on the 2026 regulatory agenda.
Practical Steps for Accounting Firms and CFOs
The CFTC has not yet responded to the Phantom and Hyperliquid submission. The request for information process does not bind the agency to any particular outcome. But the volume and profile of participants engaging in the CFTC's onchain derivatives consultation signal that formal guidance, in some form, is coming. Firms that wait for final rules before updating their processes will be behind the curve.
Actions to Take Now
Document the regulatory status of every onchain derivatives platform used by clients or by the entity itself. Note whether the platform is a CFTC-registered designated contract market, a registered swap execution facility, or an unregistered venue. That classification drives both the accounting treatment and the available tax positions.
Review client engagement letters and audit programmes to confirm they capture onchain derivatives positions explicitly. ASC 815 and IFRS 9 both require disclosure of the notional amounts, fair values, and risk management objectives for derivative instruments, and onchain positions are not exempt from those requirements simply because they settle on a blockchain.
Engage with the CFTC's public comment and guidance processes. The request for information that prompted the Phantom and Hyperliquid submission is open to all market participants. Accounting firms with significant DeFi-exposed clients have an interest in ensuring that any guidance the CFTC issues is workable for the accounting and audit functions, not only for trading desks.
Monitor CME's contest of the CFTC's authority on perpetual futures. If that challenge produces a court ruling or a Congressional response, it could reshape the legal foundation on which any CFTC onchain derivatives guidance rests.
Frequently Asked Questions
Does the CFTC's current framework cover onchain perpetual futures?
The CFTC has jurisdiction over derivatives on commodities, including crypto assets it treats as commodities. Whether a specific onchain perpetual futures product falls under that jurisdiction depends on the product's structure and the platform's registration status. The agency has approved some crypto perpetual futures products but has not issued a general framework for onchain derivatives, which is the gap the Phantom and Hyperliquid submission is seeking to close.
How does regulatory uncertainty affect DeFi accounting for balance sheet purposes?
Uncertainty about whether an onchain derivatives position is on a regulated venue affects hedge accounting eligibility under ASC 815 and IFRS 9, fair value hierarchy classification under ASC 820, and counterparty risk disclosures. Accounting teams should document their classification judgements and the regulatory assumptions underlying them, and revisit those judgements if the CFTC issues new guidance.
Could a non-custodial wallet provider be treated as an introducing broker?
That is precisely the risk the Phantom submission is asking the CFTC to foreclose by codifying an exemption. Under current CFTC rules, an introducing broker is an entity that solicits or accepts orders for futures contracts. If a wallet interface is characterised as soliciting trades, the introducing broker label could apply. No formal CFTC ruling has made that determination, but the absence of an explicit exemption creates legal exposure that the submission is trying to remove.
What is the Section 1256 issue for US taxpayers trading onchain derivatives?
Section 1256 of the Internal Revenue Code grants mark-to-market tax treatment and a 60/40 long-term and short-term capital gains split to regulated futures contracts. To qualify, the contract must generally be traded on a qualified board or exchange. Onchain derivatives on unregistered platforms likely do not qualify, meaning gains are taxed under standard capital gains rules. Tax advisers should confirm platform status before year-end and advise clients accordingly.
When might the CFTC respond to the Phantom and Hyperliquid submission?
The CFTC's request for information does not set a mandatory response timeline. The agency may issue a concept release, a no-action letter, a proposed rule, or remain silent. Given the level of industry engagement and the parallel Congressional activity on digital asset market structure, a formal agency response within the next twelve to eighteen months is plausible, but accounting teams should not plan their workflows around a specific date.
Source: Cointelegraph Regulation