The U.S. Securities and Exchange Commission (SEC) recently unveiled a new crypto framework designed to bring clarity to digital asset regulations. But not everyone is on board. Hyperliquid, a fast-growing decentralized exchange, has stepped forward with a detailed critique, demanding five immediate fixes before the framework moves forward.
According to Hyperliquid, the current proposal contains critical flaws that could trap Web3 developers in compliance nightmares and slow down innovation across the entire crypto industry.
Why Hyperliquid Is Speaking Up
Hyperliquid operates as a decentralized perpetuals exchange, meaning it lets users trade crypto contracts directly from their wallets without a traditional middleman. Because of this, the platform sits at the heart of the DeFi (decentralized finance) movement, where code, not companies, handles transactions.
When the SEC released its latest crypto framework, Hyperliquid’s team reviewed it closely and concluded that the rules as written would hurt builders more than protect investors. The exchange is now asking for specific changes before the framework becomes law.
The Five Fixes Hyperliquid Is Demanding
While the full list is technical, here are the core themes Hyperliquid raised:
1. Clearer Definitions for Decentralized Protocols
Hyperliquid wants the SEC to clearly define what counts as a “decentralized” platform. Right now, the language is vague, and that vagueness could mean any DeFi project could be treated like a traditional company, even if it has no headquarters or CEO.
2. Protection for Non-Custodial Code
If developers simply write open-source code that others use, should they be liable for what users do with it? Hyperliquid says no. The exchange wants safe harbor protections for non-custodial developers, similar to how internet platforms aren’t held responsible for every website they host.
3. Smart Contract Clarity
Smart contracts are programs that run automatically on the blockchain. Hyperliquid argues the SEC must clarify whether these self-running programs themselves count as securities, since this could reshape how all DeFi apps are built.
4. Reasonable Compliance Pathways
The current proposal, according to Hyperliquid, creates unrealistic compliance burdens for small developer teams. The exchange is asking for scaled requirements that match the size and risk of each project.
5. Jurisdictional Boundaries
Since crypto is global, Hyperliquid wants the SEC to clarify when U.S. rules apply to non-U.S. developers building open protocols. Without this clarity, innovation could simply move overseas.
What Happens Next?
Hyperliquid’s critique adds weight to a growing chorus of voices in crypto asking regulators to collaborate with builders rather than police them. Whether the SEC listens will shape how decentralized finance grows in the United States for years to come.
For investors and developers watching closely, this is a reminder that regulation isn’t just a background story, it’s the foundation on which the next crypto cycle will be built. If you trade or hold crypto, staying informed on these debates is essential, and storing your assets safely matters too. Many users protect their holdings with a Ledger hardware wallet, while others prefer trusted platforms like Kraken or Bitvavo for everyday trading.
Conclusion
Hyperliquid’s five demands represent more than a single company’s complaints, they highlight the tension between traditional finance rules and the borderless nature of Web3. As the SEC weighs feedback, the crypto industry will be watching closely. Clear, fair rules could unlock a new wave of innovation. Overly strict ones could push it abroad.
