Hyperliquid and Multicoin Back CFTC Framework for Prediction Markets

The Hyperliquid Policy Center and venture capital firm Multicoin Capital have formally submitted a joint opinion to the Commodity Futures Trading Commission (CFTC), supporting the development of a comprehensive regulatory framework for prediction markets. This move comes as the U.S. regulator evaluates new rules to govern event-based contracts, a sector that has seen significant growth within the decentralized finance (DeFi) ecosystem. The joint submission advocates for standardized federal oversight to provide long-term legal certainty for market participants and developers.

Push for Federal Oversight and Uniform Standards

A primary focus of the submission is the demand for uniform federal regulation led by the CFTC. Hyperliquid and Multicoin argue against a fragmented approach where individual states might classify these markets as gambling. They believe that federal preemption is necessary to ensure market stability and prevent a patchwork of conflicting local laws.

By establishing a single federal standard, the industry hopes to avoid the legal ambiguity that often plagues emerging blockchain-based financial products.

The joint opinion emphasizes several key procedural recommendations:

• The inclusion of clear standards within the regulatory text to prevent policy reversals during changes in government administrations.
• An objective interpretation for determining if underlying settlements involve sensitive areas, such as armed conflict or illegal gambling.
• The requirement for the CFTC to publicly disclose its full reasoning when approving or denying specific contracts at the end of a review period.

Impact on On-Chain Derivatives and Innovation

Hyperliquid, which has already deployed on-chain outcome-based contracts, suggests that technologically neutral rules will benefit the broader derivatives market. This includes not only prediction markets but also perpetual futures and other synthetic assets hosted on blockchain networks. The goal is to create a regulatory environment that recognizes the unique nature of decentralized ledgers while maintaining traditional market integrity.

Uniform, technologically neutral federal rules will be beneficial for prediction markets and other on-chain derivatives such as perpetual futures.

The proponents argue that prediction markets serve as valuable tools for price discovery and risk management. By providing a transparent platform for hedging against real-world events, these markets offer utility that transcends simple speculation.

In conclusion, the collaboration between the Hyperliquid Policy Center and Multicoin Capital signals a proactive effort by the crypto industry to engage with U.S. regulators. By advocating for transparency and federal consistency, these organizations aim to solidify the role of prediction markets within the regulated financial landscape, ensuring that on-chain innovation can proceed with a clear understanding of compliance requirements.