Hyperliquid’s rapid ascent has prompted a significant regulatory warning from the UK’s Financial Conduct Authority (FCA), raising consumer protection concerns as the platform intensifies its focus on traditional financial markets.
The FCA has added Hyperliquid and its associated entity, the Hyper Foundation, to its warning list, indicating potential unauthorized provision of financial services in the UK. This follows a May 21 notice advising users to avoid dealings with the firm and exercise caution against potential scams.
“You should avoid dealing with this firm and beware of scams.”
The regulator specifically highlighted the Hyper Foundation website, Hyperliquid’s trading application, and its social media platforms as part of its unauthorized operations. It also emphasized that users would be excluded from the Financial Ombudsman Service and the Financial Services Compensation Scheme in the event of financial losses.
This regulatory action coincides with Hyperliquid’s strategic expansion into markets that increasingly intersect with traditional finance. As a decentralized, non-custodial derivatives exchange, the platform enables users to trade perpetual futures—contracts that provide leveraged exposure without fixed expiration dates.
Over the past year, Hyperliquid has solidified its position as a key offshore crypto derivatives hub, offering traders the ability to maintain open positions indefinitely while speculating on price fluctuations. In the UK, where the FCA prohibited the sale of crypto derivatives to retail investors in 2021 and tightened financial promotion rules for crypto assets in 2023, Hyperliquid’s activities have drawn particular attention.
Traditional Exchanges Respond to Hybrid Market Challenges
The UK warning arrived alongside growing concerns from major U.S. derivatives operators, including CME Group and Intercontinental Exchange. Last month, executives from these firms raised issues with the Commodity Futures Trading Commission (CFTC) regarding Hyperliquid’s expanding perpetual futures market.
They cautioned that the platform could pose risks to traditional commodities markets, particularly oil, due to its lack of identity verification and potential for price manipulation, coordinated trading, or sanctions evasion. Additionally, they warned that activity on Hyperliquid might influence global oil benchmarks if state-backed entities or sanctioned actors utilized the platform.
This regulatory pushback underscores the broader debate over decentralized finance (DeFi) and its integration with conventional financial systems.
Historically, most DeFi platforms focused on crypto liquidity. However, Hyperliquid’s HIP-3 markets have shifted this paradigm by enabling synthetic exposure to stocks, commodities, and private companies. Notably, the platform reported $3 billion in real-world asset open interest, with HIP-3 setting monthly open-interest records since its October 2025 launch.
The platform’s 24/7 trading model has further attracted traders seeking immediate responses to earnings, geopolitical events, policy changes, and macroeconomic data that could impact oil, equities, and private-market sentiment outside standard trading hours.
For CME and ICE, which operate under strict regulatory frameworks including approved contracts, clearing requirements, and customer-protection standards, Hyperliquid’s model represents a significant deviation. The platform relies on public blockchain records, open access, and minimal traditional gatekeepers, contrasting sharply with the oversight mechanisms of established exchanges.
CFTC’s Regulated Perpetual Futures Framework
Despite these concerns, the U.S. regulatory environment has been evolving, with the CFTC beginning to create pathways for regulated perpetual futures—central to Hyperliquid’s growth. Last month, the CFTC approved Kalshi’s Bitcoin perpetual futures contract for listing on a registered derivatives venue. It also issued policy guidance on perpetual derivatives and 24-hour trading, while providing interpretive guidance and no-action relief for Coinbase’s access to certain Deribit perpetual products via an affiliate.
These actions signal that U.S. regulators are open to integrating perpetual futures into regulated markets when offered through approved venues. This shift is critical for Hyperliquid, as perpetual futures remain central to its operations and the broader offshore crypto derivatives market.
Regulated entities like Kalshi and Coinbase now have clearer avenues to serve U.S. customers through established market infrastructure. Hyperliquid, however, remains excluded from this framework and blocks access for U.S. residents.
Nevertheless, the Hyperliquid Policy Center welcomed the CFTC’s moves, stating they represent a long-overdue recognition that perpetual derivatives can enhance price discovery and risk management. The group argued that regulatory uncertainty had previously driven the market offshore, diminishing U.S. competitiveness in global derivatives.
A former Boston Fed President, Eric Rosengren, has highlighted a broader trend toward lower-cost, 24-hour trading of financial assets. He noted that liquidity is increasingly shifting toward decentralized exchanges, aligning with Hyperliquid’s appeal to professional traders seeking speed, accessibility, and reduced friction.
According to Rosengren:
“Hyperliquid has active markets for many commodities, stocks, pre-IPO stocks, as well as crypto. The gold, silver, and oil markets have been active on weekends due to the administration’s tendency to make announcements over the weekend. 24-7 exchanges mean 24-7 trading.”
Challenges Ahead for Hyperliquid
Market analysts note that the regulatory pressure leaves Hyperliquid confronting a critical question about the sustainability of its current model if it seeks deeper access to regulated markets.
Derek Edwards, a venture capital partner at Collab Currency, described Hyperliquid as a “killer product” but highlighted several constraints if the platform aims to engage U.S. users and institutions directly.
He outlined five potential paths forward: remaining offshore, building a regulated U.S. subsidiary, decentralizing further under market-structure legislation, centralizing into a traditional corporate exchange, or lobbying for a tailored regulatory framework. However, none of these options offers an easy solution.
Edwards noted that staying offshore would allow Hyperliquid to maintain its current product offerings while continuing to serve global crypto traders. However, this path would leave U.S. institutional demand to regulated firms offering perpetual futures through approved venues.
Alternatively, establishing a regulated U.S. subsidiary could provide entry into the world’s largest capital market but would likely require separate customer funds, narrower product listings, and a compliance framework distinct from the global platform. However, challenges would arise from mixing domestic customer collateral with offshore margin, as well as potential regulatory scrutiny of revenue models tied to token buybacks or burns.
Further decentralization could help Hyperliquid address token-classification issues under emerging legislation like the CLARITY Act. This would likely require broader validator participation, more decentralized listings, and reduced governance-driven upgrades. While this could strengthen the regulatory case, it might also slow the platform’s growth, which has historically benefited from rapid product development and execution.
Conversely, centralization could provide regulators with a clearer corporate counterparty but might weaken the network’s value proposition tied to the HYPE token. Finally, lobbying for a customized regulatory framework could offer a route as the CFTC becomes more accommodating of perpetual futures and 24-hour trading, though this process may be time-intensive and leave unresolved questions about token classification and derivatives rules.