Hyperliquid Labs Advocates for Principle-Based Regulation in CFTC Comment Letters

On May 23, 2025, Hyperliquid Labs submitted two comment letters to the United States’ Commodity Futures Trading Commission (CFTC). These documents responded to the CFTC's official requests for feedback on perpetual derivatives and 24/7 trading operations. Hyperliquid Labs portrayed its involvement as part of advancing decentralized finance principles industry-wide, emphasizing transparency and efficiency in emerging digital finance networks. The announcement highlighted Hyperliquid’s aim to shape practical rules for on-chain markets, following the resolution of technical issues on the agency’s comment portal.

The CFTC extended its public comment deadline on May 22 after fixing portal issues that had prevented some participants from submitting feedback. The agency then invited stakeholders to share views on perpetual derivatives and 24/7 trading, accepting comments via email or through the agency’s online platform. This outreach effort aimed to gather insights on evolving digital market structures, demonstrating the regulator’s interest in new trading models and risk factors. Many market participants provided data and views to support thoughtful rulemaking, with the agency emphasizing transparency to build trust with users.

Hyperliquid Labs highlighted that the technical architecture supporting constant market operations on-chain relies on real-time price updates. Pre-funded on-chain positions eliminate delays and settlement risks from external transfers. Automated liquidations quickly handle undercollateralized accounts without triggering cascading losses. These features enable secure 24/7 trading with minimal human intervention. Design choices limit single points of failure and enhance overall system reliability. Every transaction, liquidation, and margin update is immutably recorded on-chain, allowing any participant to verify activity by running a personal node.

The letters also mentioned how network resilience is achieved through Decentralized Finance and a DeFi validator node arrangement. Each node operates independently to maintain continuous uptime despite individual failures. The protocol runs autonomously without requiring constant human monitoring or intervention. Market events such as trades and liquidations remain visible on-chain for accountability. This architecture removes single points of failure common in traditional systems. Real-time open data provides an alternative to centralized reporting models, allowing observers to track system performance without relying on external audits or third parties. Such transparency fosters user trust and informed decision-making in markets.

Hyperliquid Labs detailed the benefits of on-chain perpetual derivatives for market participants, noting that blockchains allow real-time and public record verification. Its modular design lets developers integrate derivatives into diverse financial tools. Users retain control of funds through self-custody without the need for intermediaries, lowering counterparty risks often seen in centralized exchanges. Hyperliquid Labs argued that these features support resilient market dynamics and user empowerment, emphasizing on-chain risk controls over rigid rules or definitions. According to Hyperliquid Labs, flexibility in oversight adapts to changing industry needs.

Hyperliquid Labs urged the CFTC to adopt principle-based regulation frameworks, suggesting that rules focus on actual risks and instrument behaviors. Such an approach balances innovation encouragement with vital consumer safeguards. Hyperliquid Labs emphasized that dynamic markets require adaptable oversight models industry-wide. This method could help regulators address emerging digital finance challenges. The proposal aimed to prevent rigid definitions from hindering market evolution. Recently, stakeholders have often recommended risk-based measures over static classification systems. Hyperliquid Labs called for ongoing dialogue between industry participants and regulators, arguing that this setup fosters a healthier, more reliable financial ecosystem overall.

Hyperliquid Labs positioned itself as a cooperative partner in evolving market discussions, underscoring how its blockchain offers real-world examples of decentralized finance applications. The comments shared insights on perpetual derivatives implementation and risk management strategies, showcasing models for secure 24/7 trading and operational resilience. The feedback aimed to assist the CFTC in crafting balanced rules, offering a blueprint for future rulemaking in complex digital finance environments. Such collaboration may help regulators shape frameworks that enable innovation responsibly.