Hyperliquid Market in the USA: Why DeFi Services Struggle to Exit the Regulatory Gray Zone

The Hyperliquid market in the USA has become one of the main topics for the DeFi industry: decentralized finance projects want to work with American users, but even the potential adoption of the CLARITY Act does not eliminate key legal risks for them.

The consideration of the CLARITY Act in the US Senate has been postponed until September. This bill is intended to clarify the rules for the cryptocurrency market, but it only partially addresses some rapidly growing sectors, primarily Decentralized Finance. Therefore, major DeFi projects, including Hyperliquid and Morpho, are already seeking separate solutions through dialogue with American regulators.

The main problem is that the traditional oversight system does not align well with the logic of on-chain services. In classical finance, asset storage, transaction accounting, clearing, and settlements are typically performed by regulated intermediaries. In DeFi, many of these functions are taken over by Blockchain, and users often control their funds through wallets.

What the CLARITY Act Needs to Address

The CLARITY Act is designed as an attempt to separate the powers of two key US agencies. The bill aims to define which parts of the cryptocurrency spot market fall under the jurisdiction of the US Securities and Exchange Commission (SEC) and which fall under the Commodity Futures Trading Commission (CFTC).

For the cryptocurrency market, this is an important step: the industry has long awaited clearer rules. However, for DeFi services, the document does not become a universal solution. Their products are structured differently than traditional exchanges or brokerage platforms, so market participants are seeking additional exceptions, clarifications, and new regulations that would take into account the specifics of on-chain infrastructure.

Why Hyperliquid Needs a Separate Approach

Hyperliquid is an on-chain platform for trading perpetual futures. Unlike centralized exchanges, where key operations are conducted through the company's infrastructure and regulated intermediaries, here, order matching, clearing, and settlements are conducted on a public blockchain, and users operate with their wallets. This combination of derivatives, self-custody of assets, and on-chain settlements makes the project notable for the DeFi market and complex for regulators.

Currently, Hyperliquid does not have a registered platform for trading derivatives in the USA with the CFTC. American users also cannot trade through the platform's interface. One possible option for the project is to obtain permission for licensed companies in the USA to offer clients perpetual futures on Hyperliquid markets, where order matching, clearing, and settlements occur on a public blockchain.

Hyperliquid lobbyists have held meetings with representatives of the CFTC and SEC in recent months. Jake Chervinsky, head of the Hyperliquid Policy Center, explained that his organization is trying to convince regulators to either adapt existing rules for blockchain services or create new regulations for them.

In early July, the Hyperliquid Policy Center, along with the developer of the Phantom crypto wallet, sent a letter to the CFTC with comments. It proposed allowing regulated companies to use on-chain markets for order matching and settlements for transactions. The authors of the letter also called for exempting developers and applications that do not hold client funds from the obligation to register.

According to Jake Chervinsky, the most workable solution would be for the CFTC to allow registered companies to offer trading of perpetual futures through blockchain. In May, the commission already approved the launch of similar products in the USA for Kalshi and Coinbase. Discussions of new proposals with exchanges and market participants are ongoing.

Where Rules Lag Behind On-Chain Markets

Even supporters of this approach acknowledge: for regulators, this is a challenging task. On-chain markets like Hyperliquid raise questions that existing legislation was not originally designed to address.

In Hyperliquid, the model differs from the traditional one used by brokers and exchanges:

• Users store assets in wallets themselves;
• Transaction records are maintained on the blockchain;
• The role of regulated intermediaries in asset storage and transaction recording is diminishing.

However, existing regulations are based on a different model: it is assumed that regulated organizations, such as brokers or exchanges, are responsible for asset storage and transaction recording.

There is also another complex layer. Users of Hyperliquid trade perpetual futures on various types of assets:

• Cryptocurrencies;
• Commodities, such as oil and silver;
• Equity-related assets, including SpaceX: contracts tied to real assets accounted for over 30% of the platform's trading volume in the second quarter.

While futures contracts on commodities typically fall under the jurisdiction of the CFTC, perpetual contracts related to equities may be subject to securities laws. This is already the domain of the SEC. It is precisely because of such overlaps that DeFi platforms find it challenging to integrate into the existing system without specific clarifications.

In mid-July, a delegation from Hyperliquid met with the SEC's cryptocurrency working group. The meeting discussed the platform's technology, its protocol, and user base. For the Hyperliquid ecosystem, including investor interest in HYPE, such consultations are crucial: the future stance of regulators will determine how freely the project can develop in the U.S. market.

Decentralized Lending Remains in a Gray Area

A similar uncertainty persists in the realm of decentralized lending. The CLARITY Act hardly touches this segment, leaving future decisions within the framework of existing laws to the discretion of regulators.

In recent years, cryptocurrency custodians have significantly grown in popularity. Morpho's deposit volume nearly doubled over the year and now exceeds $12 billion. Such services are becoming an important part of on-chain finance, but there is still no clear legal framework for them.

Morpho's chief legal counsel, Chris Robbins, met with SEC representatives in July to discuss the agency's approach to cryptocurrency custodians. In his opinion, if the CLARITY Act is not passed, regulators may introduce new rules to close this gray area.

In July, the SEC warned that certain operations with cryptocurrency custodians might fall under securities legislation. The agency also stated that it is examining the need to adjust existing rules. Custodians of such custodians, including Gauntlet and Steakhouse Financial, allocate funds to generate returns and manage risks.

Coinbase and Robinhood have already integrated Morpho into their applications. As a result, users can place tokens in the protocol and earn income. For traditional financial organizations, the adoption of the CLARITY Act could signal greater certainty and simplify dealings with credit on-chain pools.

Theoretically, custodians registered as investment funds could emerge in this market. This scenario is important for investment companies and other players in the traditional financial sector who are eyeing DeFi but are not ready to enter an area with unclear rules.

For now, the market is moving faster than legislation. Hyperliquid, Morpho, and other DeFi services are trying not to wait for a complete overhaul of the American regulatory system but are negotiating directly with agencies. The outcome of these negotiations could determine how accessible on-chain finance will be to the largest financial market in the world.