Hyperliquid's Path to U.S. Compliance: From No License to Licensed HIP-3

Modular reconstruction to streamline compliance channels.

Written by: shaundadevens
Compiled by: Baihua Blockchain

Hyperliquid still implements geographic blocking in the U.S. market due to its unlicensed on-chain infrastructure conflicting with U.S. market structure laws, which strictly limit futures trading to registered trading platforms, clearinghouses, and brokers. The Hyperliquid Policy Center has urged the CFTC (Commodity Futures Trading Commission) and SEC (Securities and Exchange Commission) to modernize these regulatory frameworks, advocating that as long as regulated entities fulfill their compliance obligations, they should be allowed to build products on HyperCore through builder and deployer seats. With the confirmation from Trump's statement, achieving Hyperliquid's onshoring through the licensed HIP-3 DEX has become a likely path.

Core Details

Over the past year, much of our work on Hyperliquid has been redefining its positioning from a "decentralized perpetual contract trading platform" to a "modern market infrastructure": a globally accessible, composable financial tool platform covering perpetual contracts, spot, and prediction markets.

Unlike fully self-operated crypto platforms like Coinbase and BN (which cover user access, custody to trade execution), Hyperliquid's infrastructure layer resembles the separation of responsibilities 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 access and trade routing.

Similarly, Hyperliquid's modular tech stack reflects the same separation of responsibilities. HyperCore (the trading platform and clearing layer) operates matching, margin accounting, and settlement as the underlying logic of the protocol, with positions marked to market based on validator oracles, and executes liquidations through a deterministic clearing waterfall mechanism. Deployers are required to stake a forfeitable margin of 500,000 HYPE, responsible for token listings, setting contract specifications, leverage limits, and oracle configurations, retaining up to 50% of the fees generated by their market. Builders act as brokers, guiding user access and routing trade flow to HyperCore to earn a share of the trading fees.

However, Hyperliquid has reconstructed these layers on-chain and enforced them through program code: access and market creation can be permissionless, assets are fully self-custodied by users, and other applications can build on top of it, with all assets traded 24/7 on a single global platform, eliminating the geographical and legal fragmentation of traditional finance.

Hyperliquid's Regulatory Dilemma

In this context, Hyperliquid's biggest challenge lies in regulation: U.S. market structure laws are tailored for traditional architectures, and each statutory registration role has a structural conflict with Hyperliquid's underlying design. For example:

Designated Contract Markets (DCM) must adhere to 23 core principles under Section 5(d) of the Commodity Exchange Act (CEA), including market surveillance and customer identification. However, anyone can access HyperCore simply by holding a wallet.

Derivatives Clearing Organizations (DCO) must calculate margins using models approved by the board with a 99% confidence level and settle through approved clearing banks (17 CFR §§39.13--39.14). HyperCore relies on protocol logic to calculate margins and completes settlements at the consensus level.

Futures Commission Merchants (FCM) must segregate customer funds according to Section 4d of the CEA. Hyperliquid's users self-custody, which is vastly different from the custodial FCM model.

These stringent requirements have forced even centralized KYC trading platforms like Coinbase to register as FCMs and acquire existing DCM companies for their U.S. operations. Hyperliquid cannot replicate this model, as acquiring a DCM and conforming to existing regulations would contradict its intention to "innovate underlying infrastructure"; thus, it has chosen to implement geographic blocking and exit the world's largest capital market.

Nevertheless, Hyperliquid's goal is not to remain permanently in offshore markets: in February 2026, it announced the establishment of the Hyperliquid Policy Center (HPC) with a capital injection of 1 million HYPE (approximately $72.5 million at current prices), aiming to integrate this new market structure into the U.S. legal system. In July, HPC, along with Phantom, petitioned the CFTC to confirm that the release of on-chain software itself does not trigger licensing requirements, allowing existing licensed entities to operate matching, settlement, and margin accounting on the on-chain infrastructure, and establishing 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 (such as SpaceX and Cerebras, which are set to trade on Hyperliquid) along with the necessary disclosures and qualification rules for U.S. investors. Early signs indicate that this strategy is working and that U.S. regulators are open, with the most notable sign being Trump's announcement that Chairman Selig plans to promote Hyperliquid's onshoring.

HPC's strategy does not require opening Hyperliquid directly to U.S. investors without KYC, but advocates for it to be viewed as neutral infrastructure: if U.S. companies can fulfill regulatory duties under existing laws while using it, then it should be an option alongside traditional DCMs. For instance, brokers can route client trade flow to HyperCore as long as they fulfill KYC obligations; or deployers can take on the role of registered trading platforms, retaining discretion over token listings, market surveillance, and emergency powers.

Hyperliquid's Compliance Examples

With the advancement of lobbying in Washington, Hyperliquid Labs has launched updates on the testnet, theoretically providing a pathway for this compliant access. A typical example is the HIP-3 deployers with permission management: unlike the fully open native markets and existing HIP-3 deployments of Hyperliquid, these new deployments are only open to whitelisted users. Such deployments provide a clear path for regulated entities to launch markets, execute KYC, and whitelist compliant users for trading.

These compliance examples will manifest as decentralized order books, as all markets (e.g., BTC and RWA markets) need to be relisted. However, whitelisted market makers will build liquidity bridges between the two order books, eliminating liquidity fragmentation, allowing new deployments to inherit Hyperliquid's deep liquidity while having independent order books. This independent order book model has precedents (such as early BN US and the current deployment of Lighter on the Robinhood Chain), but unlike before, both markets on Hyperliquid operate on the same L1, sharing collateral and margins, allowing liquidity to flow seamlessly between order books rather than being isolated.

These trading platforms also include other parameters, such as the "PA" operation permissions in the payload, allowing DEX to execute operations directly on user accounts: submitting reduce-only orders, canceling orders, and transferring USDC internally within the DEX, which is quite similar to the close-out authority that FCM has over customer accounts. These elements collectively build the evolutionary path for the future: U.S. brokers and institutions now have the tools to build compliant Hyperliquid products on HyperCore. This choice is complementary and additive—Hyperliquid's native markets remain permissionless, and its positioning as neutral infrastructure has not changed.

Research Perspective

Hyperliquid's recent actions in Washington indicate that entering the U.S. domestic market in a compliant manner is currently a core priority; however, it is equally clear that operating directly through its native KYC-free front end is not compliant under current U.S. laws. We believe that HPC's efforts point to a pathway for achieving KYC-compliant access: allowing the use of Hyperliquid's underlying infrastructure as long as the enterprises providing access services fully comply with regulatory requirements. As enabling tools land on the testnet (permitted HIP-3 deployers, PA account control), we expect this approach to provide a compliant channel for U.S. investors to participate in the Hyperliquid market while maintaining the protocol itself as neutral infrastructure.