Hyperliquid — the decentralized perpetuals venue that’s drawn intense market interest for its speed and design — is now confronting tightening regulatory scrutiny in both the US and the UK. Derek Edwards, managing partner at Collab+Currency and co‑founder of Glitch Marfa, laid out five possible paths for the project as US oversight of crypto perps hardens.
Why the squeeze matters
Regulatory pressure has accelerated after recent US moves: the CFTC approved Kalshi’s BTCPERP contract and indicated a path for certain Coinbase‑linked Deribit perpetuals to be treated as foreign futures. Those developments put Hyperliquid’s core product squarely in the part of the market US regulators are trying to bring onshore. Edwards called Hyperliquid “a killer product,” but said the project faces complications across three layers — the product layer (perpetuals themselves), the network and token layer (HYPE and governance), and the collateral layer (USDC and on‑ramps). In his view, distributing perps in the US increasingly requires “a fully regulated venue, compliant customer funds path, approved product scope, surveillance, disclosures, and accountable corporate counterparties.” Without that, routing US users into an offshore venue could draw enforcement attention.
The five routes Edwards outlined
1) Stay offshore and block US users
- The simplest technical option: retain the existing offshore platform and effectively exclude US users, like Binance’s main exchange ultimately had to.
- Pros: preserve product experience and current network model. Cons: forgo US institutional access and remain exposed to persistent regulatory risk.
2) Create a US‑regulated wrapper (e.g., “Hyperliquid US™”)
- Run an affiliate or partner entity that offers regulated perps while the offshore venue continues serving global crypto‑native users.
- Pros: access to US customers under a compliant structure. Cons: requires separation of customer funds, product scope, and revenue capture — and risks turning token economics into the profits of a corporate entity, which raises securities‑law concerns. Edwards says this would likely force “a significant rewrite of how the Hyperliquid network works for US participation.”
3) Progressive decentralization under the CLARITY Act framework
- Use legislative safe harbors designed to let protocols “progressively decentralize” until tokens are no longer under coordinated control, potentially shifting classification away from securities toward a digital commodity.
- Pros: potentially cleaner token classification. Cons: heavy operational costs — broader validator sets, decentralized listings, oracles and risk controls, limits on emergency powers, diluted ownership and governance‑led upgrades — and it still wouldn’t automatically permit offering perps directly to US users because market access and token classification are separate legal problems.
4) Fully centralize and reclassify HYPE as a security
- Convert the project into a regulated corporate model: treat HYPE as a security and move value capture to equity, licensing or regulated‑entity revenue.
- Pros: maximum regulatory clarity and direct access to US markets. Cons: fundamentally undermines the protocol’s current thesis and user value proposition; Edwards calls this “probably the weakest option game theoretically.”
5) Lobby for bespoke policy
- Push for a tailored regulatory framework or more flexible CFTC approach that accounts for crypto‑native perp venues.
- Pros: could create sustainable market access without upending the protocol. Cons: uncertain, politically fraught, and still may not resolve HYPE’s status under CLARITY or other securities laws.
Regulatory pressure is already tangible
The risk isn’t hypothetical. CME Group and Intercontinental Exchange have urged US regulators to scrutinize Hyperliquid over market‑manipulation and sanctions‑evasion concerns. In the UK, the Financial Conduct Authority warned in May that Hyperliquid may be providing or promoting financial services without authorization. At the same time, Coinbase’s role as the official USDC treasury deployer on Hyperliquid ties the protocol more closely to US‑regulated collateral rails — a factor that complicates the collateral layer of compliance.
Where this leaves Hyperliquid
Edwards’ breakdown makes clear there’s no easy path that preserves the platform exactly as it is while opening US markets. Each option carries tradeoffs between product design, legal exposure and commercial access. For now, the market is watching both regulatory moves and the protocol’s strategic choices.
At press time, HYPE traded around $61.63.
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