Hyperliquid faces an increasing range of regulatory restrictions in the US and UK, even as decentralized perpetual venue continues to attract significant market interest. Derek Edwards, managing partner at Collab+Currency and co-founder of Glitch Marfa, said the project now appears to have five potential routes as US oversight of cryptocurrency offenders begins to tighten.
In a mail At The immediate backdrop is the changing US derivatives regime after the CFTC approved Kalshi’s BTCPERP contract and separately paved the way for some Coinbase-linked Deribit perpetual bonds to be treated as foreign futures contracts.
This is important because Hyperliquid’s core product is located directly in the segment that market regulators are now bringing to shore. As Edwards explained, organized distribution of criminals in the United States would require “a fully regulated venue, a compliant path to client funds, approved product range, monitoring, disclosures, and accountable corporate counterparties.” He warned that without this infrastructure, offering Hyperliquid liquidity to US customers could be seen as directing users to an unapproved offshore location.
The five options for hyperfluidism
The first option, in his view, is the simplest but most restrictive: Hyperliquid could ignore the US market and remain abroad. Edwards compared this route to the major exchange Binance, which was eventually forced to ban US users more aggressively after years of light restrictions. Such an approach could preserve Hyperliquid’s existing product experience, but would also leave US institutional access on the table.
The second path will be a regulated packaging in the United States. Under this model, the main offshore venue will continue to serve native cryptocurrency users globally, while a separate subsidiary or partner provides regulated services through a compliant structure. Edwards called this “Hyperliquid US™” and said that “in an ideal world” it would be the ideal outcome for targeting US users. But the trade-off is likely to be a beneficial decoupling of customer funds, product scale and value for HYPE from the mainnet.
This chapter is of central importance in the interest in securities law. If revenue flows from a regulated corporate venue into buybacks, burns or assistance fund mechanisms, it could start to look as if token holders were economically participating in the profits of an operating company, Edwards said. “This model would likely require a significant rewrite of how the Hyperliquid Network operates in order for the United States to participate,” he wrote.
The third path is decentralization under the framework of the CLARITY Law. Edwards said the bill provides a potential major path for protocols to “progressively decentralize” so that the network and token no longer come under “coordinated control.” In theory, this could help in the symbolic shift from a securities framework to a digital goods classification.
However, for Hyperliquid, Edwards felt that this route would incur operational costs. The project will likely need to scale validation tools, decentralize rosters, decentralize oracles and risk controls, reduce emergency discretion, dilute controlled ownership, and make promotions more governance-based. That would be a big change for a platform whose market appeal depends in part on quick product decisions by a highly competent core team.
He added that decentralization will not solve everything decisively. “The Clarity Act’s decentralization framework is not an alternative solution to DCM/DCO. Even if the hyperliquid network eventually manages to meet the Clarity’s decentralized governance framework, this will not automatically allow the hyperliquid to provide direct services to US users.” In other words, token classification and access to financial derivatives markets remain two separate issues.
The fourth path would be the most compliant but also the most damaging to the current network thesis: centralization of the company, restructuring HYPE as securities and shifting value towards equity, licensing or revenues of regulated entities. Edwards described this as “perhaps the weakest options game in theory,” because it flies in the face of the idea that the protocol’s activity and economics are consistent with HYPE as a digital commodity.
The fifth option is to apply pressure. Edwards pointed to the political action around Hyperliquid as evidence that the industry may be pushing for a framework dedicated to where the original cryptocrimes were committed. However, he cautioned that even a more flexible approach from the CFTC would not automatically solve the hype problem. Classification under CLARITY.
Compression is not purely theoretical. CME Group and Intercontinental Exchange It has already urged US regulators to scrutinize Hyperliquid over the risks of market manipulation and sanctions evasion, while the UK’s Financial Conduct Authority warned in May that Hyperliquid may be offering or promoting financial services without a licence. Meanwhile, Coinbase has moved to become… Official publisher of USDC Treasury Hyperliquid deepens the protocol’s connection to US-regulated infrastructure at the side layer.
At press time, HYPE was trading at $61,628.
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