Hyperliquid Pursues U.S. Compliance Through HIP-3 Permissioned DEX

Author: Shaunda Devens

Compile: Blockchain in Plain Language

Disclaimer: This article is republished content; readers can visit the original link for more information. If the author has any objections to the republishing format, please contact us, and we will make modifications as requested. Republishing is for informational purposes only and does not constitute investment advice or reflect the views or position of Wu Shuo.

The full text is as follows:

Hyperliquid continues to geoblock the U.S. market because its permissionless on-chain infrastructure conflicts with U.S. market structure laws that strictly limit futures trading to registered exchanges, clearinghouses, and brokers. The Hyperliquid Policy Center has urged the CFTC and SEC to modernize these regulatory frameworks, arguing that regulated entities should be permitted to build products on HyperCore through builder and deployer slots, provided they assume corresponding compliance obligations. Today, under the validation of Trump’s statements, onshoring Hyperliquid through a licensed HIP-3 DEX has become the most likely path forward.

Over the past year, most of our work on Hyperliquid has been to redefine its positioning from a “decentralized perpetuals trading platform” to a “modern market infrastructure”: a globally accessible, composable platform for financial instruments encompassing perpetuals, spot, and prediction markets.

Unlike monolithic crypto platforms like Coinbase and Binance that handle end-to-end operations—including user onboarding, custody, and trade execution—Hyperliquid’s infrastructure layer resembles the separation of duties in traditional finance (TradFi): the trading platform (DCM) lists contracts and matches trades, the clearinghouse (DCO) provides margin and ensures settlement, and the futures commission merchant (FCM) handles user onboarding and facilitates trade access.

Similarly, Hyperliquid’s modular tech stack embodies the exact same separation of responsibilities. HyperCore (the trading and clearing layer) executes order matching, margin accounting, and settlement as core protocol logic, performs mark-to-market on positions based on validator oracles, and enforces liquidations through a deterministic liquidation waterfall mechanism. Deployers must stake 500,000 HYPE as slashable collateral to manage token listings, set contract specifications, leverage limits, and oracle configurations, while retaining up to 50% of fees generated by their markets. Builders act as brokers, guiding user onboarding and routing trading flow to HyperCore in exchange for a share of trading fees.

However, Hyperliquid has重构 these layers on-chain and enforced them through code: access and market creation are permissionless, assets are fully user-self-custodied, other applications can be built on top, and all assets are traded 24/7 on a single global platform, eliminating the fragmentation inherent in traditional finance across geographic and legal boundaries.

Under this context, Hyperliquid’s greatest challenge is regulation: U.S. market structure laws are tailored to traditional architectures, and each statutory registration role conflicts structurally with Hyperliquid’s underlying design. For example:

• The 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. In contrast, anyone can access HyperCore simply by holding a wallet.

• Derivatives Clearing Organizations (DCOs) must calculate margin using a model approved by the board with a 99% confidence level and settle through an approved clearing bank (17 CFR §§39.13–39.14). HyperCore, by contrast, calculates margin using protocol logic and settles at the consensus level.

• Futures commission merchants (FCMs) must segregate and hold customer funds under Section 4d of the CEA. Hyperliquid users, however, maintain self-custody, which differs significantly from the custodial FCM model.

It is precisely these stringent requirements that have forced even centralized KYC platforms like Coinbase to register as FCMs and acquire existing DCMs for their U.S.-based operations. Hyperliquid cannot replicate this model, as acquiring a DCM and complying with existing regulations would contradict its mission to innovate the underlying infrastructure; therefore, it has chosen to implement geographic restrictions 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) and committed $72.5 million worth of HYPE (at current prices, equivalent to 1 million HYPE) to integrate this new market structure into U.S. law.

In July, HPC and Phantom jointly petitioned the CFTC to confirm that the mere deployment of on-chain software does not trigger licensing requirements, permitting existing licensed entities to operate matching, settlement, and margin accounting on on-chain infrastructure, while establishing exemptions that allow non-custodial wallets to route users to regulated derivatives. In August, HPC and TradeXYZ applied the same logic to the SEC, proposing a regulatory framework for pre-IPO perpetual contracts—such as those already trading on Hyperliquid for quasi-public assets like SpaceX and Cerebras—alongside the necessary disclosures and eligibility rules required to open access to U.S. investors. Early indicators suggest this strategy is working, with the most prominent sign being Trump’s announcement that Chairman Selig plans to advance the localization of Hyperliquid.

HPC’s position is not to advocate for direct access to Hyperliquid by U.S. investors without KYC, but rather to treat it as a neutral infrastructure: if U.S. companies can fulfill their regulatory responsibilities under existing laws while using it, Hyperliquid should be considered an option alongside traditional DCMs. For example, brokers could route client order flow to HyperCore after fulfilling KYC obligations, or deployers could assume the role of a registered trading platform, retaining discretion over listing, market surveillance, and emergency controls.

As lobbying efforts in Washington advance, Hyperliquid Labs has rolled out an update on the testnet, theoretically enabling this type of compliant access. A prime example is the HIP-3 deployer with permission management: 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 pathway for regulated entities to launch markets, perform KYC, and whitelist compliant users for trading.

These compliance instances will manifest as separate order books, as all markets (e.g., BTC and RWA markets) require relisting. However, whitelisted market makers will act as liquidity bridges between the two order books, eliminating liquidity fragmentation and enabling the new deployments to inherit Hyperliquid’s deep liquidity while maintaining independent order books. This model of independent order books has precedent (such as the early BN US deployment and Lighter’s current deployment on Robinhood Chain), but unlike those cases, both markets on Hyperliquid operate on the same L1, sharing collateral and margin—eliminating the need for cross-chain or cross-platform transfers—allowing liquidity to flow seamlessly between order books rather than being isolated or siloed.

These trading platforms also include additional parameters, such as the "PA" operation permission within the payload, which allows DEXs to directly perform actions on user accounts: submitting reduce-only orders, canceling orders, and transferring USDC internally within the DEX—similar to the close-out authority that FCMs hold over client accounts. Together, these elements form the foundation for future evolution: U.S. brokers and institutions now have the tools to build compliant Hyperliquid products on HyperCore. This option is complementary and additive—the native markets of Hyperliquid remain permissionless, and its position as a neutral infrastructure remains unchanged.

Hyperliquid’s recent actions in Washington indicate that entering the U.S. market through compliant channels is currently a top priority; however, it is equally clear that operating directly through its native, non-KYC frontend is not compliant under current U.S. law. We believe HPC’s efforts point to a viable path for KYC-compliant access: allowing the use of Hyperliquid’s underlying infrastructure by entities that fully comply with regulatory requirements. As enabling tools roll out on testnet—with licensed HIP-3 deployers and PA account control—we expect this approach to provide U.S. investors with a compliant channel to participate in Hyperliquid markets, while preserving the protocol’s nature as a neutral infrastructure.