Kappa Lab

Who should own compliance on an on-chain market? Two people who run very different markets gave opposite answers on the same podcast last month. On @Bloomberg's Odd Lots on 15 October, @HyperliquidX co-founder and CEO Jeff Yan ( @chameleon_jeff ) said: "The regulation sits at the layer where there are controls, and indeed the deployers are the ones that exercise these controls." A few days later, on the same show, @CMEGroup CEO Terry Duffy pushed back: "You have an obligation to make certain that you're policing these markets as an institution, not just as the user." Some notes: - Yan's model: firms that deploy markets on Hyperliquid under HIP-3 define the contracts and supply the oracle prices. They inherit the chain's order book and clearing. He compared the chain to internet protocols, which carry financial apps without being regulated as those apps. - A version of this is already taking shape. On 26 October, @HyperliquidX named @krakenfx's parent, Payward, as its intended first CFTC-regulated deployer, under a new HIP-3* setup. Payward's regulated exchange would run the markets, and only onboarded US accounts on an allowlist could trade. It still needs regulatory approval. - Duffy's objections: no KYC, high leverage, and automatic liquidations that can cascade. - Today, Hyperliquid's terms bar US persons from its interface. Yan was blunt about workarounds: an American using a VPN is breaking the terms of service. Both are right about something. Duffy is right that someone has to know the client, watch the market and own the outcome when liquidations run. Yan is right that the someone doesn't have to be the base layer. My read: put the duties on the firms creating markets, and keep the protocol neutral. That's broadly how finance already works. Brokers, exchanges and clearing members carry the obligations. The wires underneath don't. The catch is that the operator layer has to be real. If "deployer" means a small team with no surveillance and no default process, Duffy's point stands. For market makers, this isn't abstract. We quote the same assets across venues with very different rulebooks. Clear lines on who checks the client, who monitors the market and who handles a default make it easier to commit size, and size is what makes a market worth trading. Our job at @KappaLab_io doesn't change. Bring liquidity wherever those lines are clear. Curious where people building venues land on this. Protocol, or the firms on top?

trade[XYZ] and ICE, owner of the New York Stock Exchange, are joining forces to bring 24/7 perpetual futures on Hyperliquid to the United States. In just over a year, our markets on Hyperliquid have surpassed $650 billion in volume. They provide continuous price discovery for stocks, indices, and commodities, and have become trusted reference points for retail and institutions alike when traditional markets are closed. Much of the world trades them. Until now, Americans could only watch. We intend to change that. Subject to CFTC approval, trade[XYZ] and ICE plan to establish a new, dedicated U.S. market, with novel exchange and clearing infrastructure built on Hyperliquid. Planned contracts span equities, indices, commodities, FX, and crypto, with access through participating brokers and platforms. We’ll share more on products, eligibility, and timing as approvals progress. ICE brings more than 25 years of experience operating regulated markets, clearing, and managing risk. trade[XYZ] brings the product development, market design, and technology behind the most liquid and robust markets on Hyperliquid. Innovation and the protections of U.S. regulation shouldn’t be a trade-off. Together, we plan to prove it. ICE is making a strategic investment in trade[XYZ] and joins us in building towards the future of Hyperliquid. A small group of market luminaries is joining as well, beginning with Stan Druckenmiller. For more than four decades, few investors have anticipated the great turns in markets as often as Stan. We’re proud to have him with us for the next one. We’re building the U.S. market in parallel with our existing HIP-3 markets, which we’ll continue to expand and innovate on. We expect both to flourish. They each have a long road map ahead, from new asset classes to new ways to trade them. To the Hyperliquid community, whether you were here before us or came because of us, thank you. You took a chance on new markets and you made them matter. You’ll forever be a part of this story. Anything. Anytime. On ICE[XYZ].