Author: shaundadevens
Compiled By: Baihua Blockchain
Hyperliquid still geoblocks the US market because its permissionless on-chain infrastructure conflicts with US market structure laws, which strictly confine futures trading to registered trading platforms, clearinghouses, and broker-dealers. The Hyperliquid Policy Center has urged the CFTC and SEC to modernize these regulatory frameworks, arguing that regulated entities, provided they take on corresponding compliance obligations, should be allowed to build products on HyperCore via builder and deployer seats. Now, with Trump's remarks confirming this direction, the path to Hyperliquid's onshoring via a permissioned HIP-3 DEX has become highly probable.
Core Details
Over the past year, much of our work on Hyperliquid has been to reposition it from a "decentralized perps exchange" to "modern market infrastructure: a globally accessible, composable platform for financial instruments encompassing perps, spot, and prediction markets.
Unlike monolithic crypto platforms like Coinbase and BN, which operate the full stack (user onboarding, custody, and trade execution) themselves, Hyperliquid's infrastructure layer resembles the separation of duties across entities in TradFi: a trading platform (DCM) lists contracts and matches trades, a clearinghouse (DCO) provides margin and ensures settlement, and a broker (FCM) handles user onboarding and routes trading access.
Similarly, Hyperliquid's modular tech stack embodies this exact separation. HyperCore (the trading and clearing layer) runs matching, margin accounting, and settlement as protocol-native logic, marks positions to market via validator oracles, and executes liquidations through a deterministic liquidation waterfall. Deployers must stake 500k slashable HYPE as insurance, are responsible for token listing, contract specs, leverage limits, and oracle configuration, and keep up to 50% of fees generated by their markets. Builders act as brokers, responsible for user onboarding and routing trading flow to HyperCore, earning a portion of trading fees.
However, Hyperliquid reconstructs these layers on-chain and enforces them via code: access and market creation are both permissionless, assets are fully self-custodied by users, other applications can be built on top, and all assets trade on a single global platform 24/7, eliminating geographic and legal fragmentation found in TradFi.
Hyperliquid's Regulatory Conundrum
Given this context, Hyperliquid's biggest challenge is regulation: US market structure laws are tailored for the traditional architecture, and every statutorily registered role is in structural conflict with Hyperliquid's foundational design. For example:
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A Designated Contract Market (DCM) must adhere to 23 core principles under CEA Section 5(d), including market surveillance and customer identification. HyperCore is accessible to anyone with a wallet.
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A Derivatives Clearing Organization (DCO) must compute margin via board-approved models with 99% confidence levels and settle via approved settlement banks (17 CFR §§39.13–39.14). HyperCore uses protocol logic for margin calculations and settles at the consensus layer.
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A Futures Commission Merchant (FCM) must segregate customer funds under CEA Section 4d. Hyperliquid users are self-custodied, which is fundamentally different from the custodial FCM model.
These stringent requirements are why even centralized, KYC'd exchanges like Coinbase are forced to register as an FCM and acquire an existing DCM for their US operations. Hyperliquid cannot replicate this model, as acquiring a DCM and conforming to legacy regulations would betray its mission to "rethink infrastructure from the ground up"; thus, it has chosen to geoblock itself from the world's largest capital market.
Nonetheless, Hyperliquid's goal is not to remain offshore indefinitely: In February 2026, it announced the formation of the Hyperliquid Policy Center (HPC), funded with 1 million HYPE (~$72.5M at current prices), to work on integrating this new market structure into US law. In July, HPC and Phantom petitioned the CFTC to confirm that publishing on-chain software does not, in itself, trigger licensing requirements, allowing existing licensees to run matching, settlement, and margin calculation on-chain infrastructure, and to establish exemptions permitting non-custodial wallets to route users to regulated derivatives. In August, HPC and TradeXYZ brought the same logic to the SEC, proposing a regulatory framework for Pre-IPO perps (like SpaceX and Cerebras already trading on Hyperliquid) alongside disclosure and accreditation rules needed for US investor access. Early signs suggest this strategy is gaining traction and US regulators are receptive, most notably with Trump's announcement that Chairman Selig plans to advance Hyperliquid onshoring.
HPC's strategy is not to demand opening Hyperliquid directly to US investors without KYC, but to advocate treating it as neutral infrastructure: if US firms can use it while fulfilling regulatory duties under current law, then it should be an option alongside traditional DCMs. For instance, brokers could route client flow to HyperCore provided they perform KYC; or deployers could take on the registered exchange role, retaining listing discretion, market surveillance, and emergency action powers.
Hyperliquid's Compliance Prototypes
As the policy lobbying in Washington progresses, Hyperliquid Labs has deployed updates on testnet that theoretically enable this compliant access. The prime example is the permissioned HIP-3 deployer: unlike Hyperliquid's native markets and existing HIP-3 deployments which are fully open, these new deployments are only accessible to whitelisted users. Such deployments provide a clear path for regulated entities to list markets, perform KYC, and whitelist compliant users for trading.
These compliance prototypes will manifest as fragmented order books, as all markets (e.g., BTC and RWA markets) would need to be relisted. However, whitelisted market makers will bridge liquidity between the two order books, thus eliminating fragmentation and allowing new deployments to inherit Hyperliquid's deep liquidity while maintaining their own order book. This independent order book model has precedent (e.g., early BN US and now Lighter on Robinhood Chain), but the difference is that because both markets on Hyperliquid run on the same L1, sharing collateral and margin without cross-chain or cross-exchange bridging, liquidity flows seamlessly between order books rather than being siloed.
These exchanges also include other parameters, such as the "PA" (Privileged Actions) permission in the payload, allowing the DEX to directly operate on user accounts: submitting reduce-only orders, canceling orders, and transferring USDC within the DEX, closely resembling an FCM's close-out authority over client accounts. These elements together outline the path forward: US brokers and institutions now have the tools to build compliant Hyperliquid products on HyperCore. This option is additive and complementary — Hyperliquid's native markets remain permissionless, and its role as neutral infrastructure is preserved.
Research View
Hyperliquid's recent moves in Washington indicate that achieving compliant US market access is a top current priority; however, it's equally clear that operating via its native KYC-less frontend is not compliant under current US law. We believe HPC's efforts point to a path for KYC-compliant access: allowing the use of Hyperliquid's backend provided the enterprise offering access fully complies with regulations. With enabling tools now live on testnet (permissioned HIP-3 deployers, PA account control), we expect this implementation to provide US investors a compliant on-ramp to Hyperliquid markets while preserving the protocol's status as neutral infrastructure.
