Author: shaunda devens
Compiled by: Plain Talk Blockchain
Disclaimer: This is republished content. Readers can find more information via the original link. If the author has any objections to the form of republication, please contact us, and we will make modifications as requested by the author. Republication is for informational sharing only and does not constitute any investment advice, nor does it represent the views or position of WuBlockchain.
Full text as follows:
To this day, Hyperliquid still implements geographic blocking (geoblocked) for the U.S. market because its permissionless on-chain infrastructure conflicts with U.S. market structure laws—which strictly confine futures trading to registered trading platforms, clearinghouses, and brokers. The Hyperliquid Policy Center has urged the CFTC (Commodity Futures Trading Commission) and SEC (U.S. Securities and Exchange Commission) to modernize these regulatory frameworks, arguing that regulated entities should be allowed to build products on HyperCore through builder and deployer seats, provided they undertake corresponding compliance obligations. Now, corroborated by the Trump statement, achieving Hyperliquid's onshoring through a permissioned HIP-3 DEX has become the most likely path.
I. Core Details
Over the past year, much of our work on Hyperliquid has been to reposition it from a "decentralized perpetual contract trading platform" to "modern market infrastructure": a globally accessible, composable financial instruments platform covering perpetual contracts, spot, and prediction markets.
Unlike monolithic crypto platforms like Coinbase and BN that manage the entire process in-house (from user onboarding, custody, to trade execution), Hyperliquid's infrastructure layer more closely resembles the separation of duties across entities in traditional finance (TradFi): the trading platform (DCM) is responsible for listing contracts and matching trades, the clearinghouse (DCO) provides margin and ensures settlement, and the broker (FCM) handles user onboarding and trade routing.
Similarly, Hyperliquid's modular tech stack embodies this exact separation of duties. HyperCore (the trading and clearing layer) runs matching, margin calculation, and settlement as protocol-level logic, marks positions to market based on validator oracles, and executes liquidations through a deterministic liquidation waterfall mechanism. Deployers must stake a slashable deposit of 500,000 HYPE, are responsible for token listing, setting contract specifications, leverage limits, and oracle configurations, and retain up to 50% of the fees generated by their markets. Builders act in the broker role, responsible for guiding user onboarding and routing trade flow to HyperCore, receiving a share of the trading fees.
However, Hyperliquid reconstructs these layers on-chain and enforces them through code: onboarding and market creation are permissionless, assets are fully self-custodied, other applications can be built on top, and all assets trade on a single global platform 24/7, eliminating the geographic and legal fragmentation of traditional finance.
II. Hyperliquid's Regulatory Dilemma
Against this backdrop, Hyperliquid's biggest challenge lies in regulation: U.S. market structure laws are tailored for traditional architecture, and each statutorily defined role structurally conflicts with Hyperliquid's underlying design. For example:
• A Designated Contract Market (DCM) must adhere to 23 Core Principles under Section 5(d) of the Commodity Exchange Act (CEA), including market surveillance and customer identification. Anyone with a wallet can access HyperCore.
• A Derivatives Clearing Organization (DCO) must calculate margin using board-approved models with 99% confidence levels and settle through approved settlement banks (17 CFR §§39.13–39.14). HyperCore calculates margin via protocol logic and settles at the consensus layer.
• A Futures Commission Merchant (FCM) must segregate customer funds per CEA Section 4d. Hyperliquid users self-custody, which is fundamentally at odds with the custodial FCM model.
It is these stringent requirements that have forced even centralized, KYC-enforcing exchanges like Coinbase to register as FCMs and acquire existing DCM companies for their U.S. operations. Hyperliquid cannot replicate this model because acquiring a DCM and conforming to existing regulations would betray its mission to "reform the underlying infrastructure"; thus, it chose to geoblock itself, exiting the world's largest capital market.
Nonetheless, Hyperliquid's goal is not to remain offshore permanently: In February 2026, it announced the formation of the Hyperliquid Policy Center (HPC), funded with 1 million HYPE (approximately $72.5 million at current prices), dedicated to integrating this new market structure into U.S. law.
In July, HPC and Phantom jointly petitioned the CFTC to confirm that publishing on-chain software itself does not trigger licensing requirements, allowing existing licensed entities to run matching, settlement, and margin calculation on-chain infrastructure, and to establish exemptions for non-custodial wallets routing users to regulated derivatives. In August, HPC and TradeXYZ brought the same logic to the SEC, proposing a regulatory framework for Pre-IPO perpetual contracts (like SpaceX and Cerebras, which are already trading on Hyperliquid), complete with the necessary disclosure and eligibility rules for opening them to U.S. investors. Early signs indicate this strategy is working and U.S. regulators are receptive, with the most visible marker being Trump's announcement that Chairman Selig plans to push for Hyperliquid's onshoring.
HPC's strategy is not to demand direct access to U.S. investors on Hyperliquid without KYC, but to argue for its recognition as neutral infrastructure: if U.S. companies can use it while fulfilling their regulatory duties under existing law, then it should be an available option alongside traditional DCMs. For instance, a broker could route client trade flow to HyperCore as long as it fulfills its KYC obligations; or a deployer could take on the role of a registered trading platform, retaining listing discretion, market surveillance, and emergency powers.
III. Hyperliquid's Compliance Use Cases
As lobbying efforts advance in Washington, Hyperliquid Labs has rolled out testnet updates that theoretically enable such 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 accessible only to whitelisted users. Such deployments provide a clear path for regulated entities to list markets, enforce KYC, and whitelist compliant users for trading.
These compliance use cases will manifest as fragmented order books because 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, eliminating fragmentation so that new deployments can inherit Hyperliquid's deep liquidity while maintaining independent order books. This independent order book model has precedent (like the early BN US and current Lighter deployments on Robinhood Chain), but the difference is that because both markets on Hyperliquid run on the same L1, sharing collateral and margin—requiring no cross-chain or cross-exchange transfers—liquidity can flow seamlessly between order books rather than being siloed.
These trading platforms also include other parameters, such as the "PA" (Portfolio Authority) operation within the payload, allowing the DEX to directly operate on user accounts: submitting reduce-only orders, canceling orders, and transferring USDC within the DEX, which closely resembles the close-out authority FCMs have over client accounts. These elements collectively build the evolutionary path forward: U.S. brokers and institutions now have the tools to build compliant Hyperliquid products on HyperCore. This option is additive—Hyperliquid's native markets remain permissionless, and its status as neutral infrastructure remains unchanged.
IV. Research Perspective
Hyperliquid's recent moves in Washington indicate that gaining compliant entry into the U.S. domestic market is a current top priority; yet it is equally clear that operating directly through its native, no-KYC front-end is not compliant under current U.S. law. We believe HPC's efforts outline a path to KYC-compliant access: permitting the use of Hyperliquid's underlying infrastructure, provided the enterprises offering access fully adhere to regulations. With enabling tools landing on testnet (permissioned HIP-3 deployers, PA account control), we anticipate this implementation will provide U.S. investors with a compliant channel to participate in Hyperliquid markets, while maintaining the protocol's nature as neutral infrastructure.
