Woofun AI reports that Phantom and the Hyperliquid Policy Center submitted a joint request to the CFTC on July 9, demanding the removal of regulations they argue "unduly impede" fintech firms from integrating with registered derivatives markets. This filing represents a strategic pivot for Phantom, which seeks to position itself not as a custodian of assets, but as the essential software interface facilitating direct trade execution between users and regulated venues. By challenging existing frameworks, Phantom aims to construct a compliant pathway for American traders to access on-chain perpetual futures without surrendering control of their private keys or funds. The core objective is to embed regulated financial instruments, including event contracts and perpetual futures, directly into the wallet applications users already employ for token storage, thereby merging self-custody with institutional-grade market access.

Structurally, the proposed model redefines the role of the wallet provider by eliminating the traditional custodial layer. In this architecture, Phantom acts solely as the interface, submitting user orders directly to registered firms that retain control over asset holding, execution, and routing. Users maintain exclusive control over their private keys and funds, while the registered venues handle the actual trade processing. This separation ensures that the wallet does not touch the assets or the execution logic, effectively decoupling the user experience from the custodial responsibilities that currently define most regulated financial interactions. The system relies on a direct link between the user’s wallet and the registered entity, bypassing the need for an intermediary to hold or manage the underlying capital during the trading process.

Per Woofun AI, the filing outlines strict compliance conditions to mitigate regulatory risk, including mandatory conflict disclosures, comprehensive risk disclosures, and independent user access to the registered collaborator.

Additionally, the proposal requires robust recordkeeping, marketing controls, and joint liability arrangements with the collaborators Phantom connects with. These conditions are designed to ensure transparency and accountability, addressing potential conflicts of interest and ensuring that users are fully informed of the risks associated with trading derivatives through a non-custodial interface. The joint liability clause specifically aims to clarify responsibility in the event of disputes or failures, creating a shared burden between the wallet provider and the registered venue. These measures are intended to satisfy regulatory concerns while preserving the user-centric benefits of self-custody.

The regulatory scope of this request is limited, applying only to staff at the Market Participants Division and resting on the specific facts presented by Phantom. It does not constitute a binding position for the full Commission, and the CFTC’s own letter explicitly states that different facts could void the position.

Furthermore, the division retains the authority to modify, suspend, terminate, or restrict the relief at any time. This provisional nature highlights the experimental status of the proposed model, which is subject to ongoing review and potential adjustment based on market developments and regulatory feedback. The lack of a binding commission-wide decision means that the precedent set by this filing is tentative and may not be universally applicable to other wallet providers or market structures.

July’s filing asks the CFTC to develop a broader, codified version of the registered-market-access model logic for any wallet in Phantom’s position. This request seeks to formalize a framework that mirrors traditional financial structures, where a futures broker sits between an investor and the market. In the traditional model, an introducing broker solicits and accepts orders, while futures commission merchants and clearinghouses handle customer funds, margin, and settlement. The March relief describes Phantom’s role as front-end software that lets users route orders directly to registered entities, without Phantom touching funds, orders, or execution. By codifying this model, the CFTC would provide a clear regulatory pathway for non-custodial wallets to integrate with regulated derivatives markets, potentially standardizing the industry approach to self-custodied trading.

The economic impact of such a shift could be substantial, given the scale of the global derivatives market. The 2025 global perpetual futures volume was $61.7 trillion, so even 1% of that volume migrating into regulated US channels equals roughly $617 billion, and 5% amounts to over $3 trillion. Wallet access eliminates a custody handoff, allowing traders to keep tokens in their own wallets while using them in derivatives positions. This integration reduces friction and cost, potentially attracting a significant portion of the global trading volume to US-regulated venues. The ability to trade derivatives without moving assets to a centralized exchange could drive massive capital inflows, reshaping the competitive landscape for both traditional brokers and crypto-native platforms.

However, the model introduces complex risk allocation and operational challenges. If a user gets liquidated, misreads a funding rate, or clicks through a risk disclosure without absorbing it, responsibility must be sorted out among the wallet, the registered venue, the clearing entity, and the user. The CFTC’s May advisory supplies the risk language for this scenario, citing reduced liquidity, wider spreads, more manipulation risk, and operational and cybersecurity exposure that demands real-time surveillance at a level most consumer-facing apps are only beginning to build. The continuous nature of perpetual futures trading amplifies these risks, requiring robust infrastructure to monitor and mitigate potential market abuses. The lack of a clear liability framework could lead to disputes and regulatory scrutiny, particularly if users suffer losses due to technical failures or inadequate risk disclosures.

A bullish outcome would let more regulated venues connect directly with non-custodial wallets under broader CFTC guidance. Perpetual futures, event contracts, and tokenized derivatives are starting to appear as ordinary in-wallet crypto products, with brokerage products fading from the user's daily experience. Wallets are picking up pricing power, user ownership, and transaction revenue that offshore venues currently hold. The outcome will shape where regulated crypto derivatives live: inside broker and exchange accounts, or in the wallet apps investors already use. The harder part is bringing that convenience to market without discarding protections that took decades to build. This tension between innovation and regulation will define the next phase of crypto infrastructure development, with significant implications for user safety and market integrity.