The Establishment of the Hyperliquid Policy Center: A Strategic Move in Decentralized Finance Regulation
On February 18, 2026, Hyperliquid inaugurated its Policy Center in Washington, D.C., with an initial endowment of one million HYPE tokens, valued at approximately $28 million. This initiative is spearheaded by Jake Chervinsky, a prominent legal expert in the cryptocurrency domain who has devoted considerable efforts to shaping the industry’s engagement with Capitol Hill.
The Hyperliquid Policy Center is structured as a 501(c)(4) nonprofit organization, emphasizing its commitment to advancing the discourse surrounding decentralized finance (DeFi) and perpetual derivatives. This endeavor transcends the conventional approach of merely employing lobbyists; it represents a paradigm shift wherein policy infrastructure is fundamentally integrated into the product offering itself.
Significance of Regulatory Engagement in DeFi
This strategic pivot underscores a pivotal transformation within the DeFi landscape: the era characterized by the belief that “code routes around regulation” is waning. Instead, regulatory engagement is evolving into a critical component of competitive advantage—essentially forming a “moat” around operations. The focal point of this regulatory battleground is the derivatives market, particularly perpetual futures—a segment that remains largely unregulated within U.S. jurisdiction.
– **Market Context**: In the last 30 days alone, Hyperliquid has recorded a staggering $256 billion in perpetual futures volume, with open interest surpassing $5 billion.
– **Regulatory Scrutiny**: As platforms establish themselves as vital infrastructure for leveraged trading, they inevitably attract increased regulatory scrutiny. The United Kingdom exemplifies this trend by maintaining restrictions on retail crypto-derivatives despite easing access to other digital asset markets.
The Commodity Futures Trading Commission (CFTC) has initiated enforcement actions against entities such as bZeroX and Ooki DAO for facilitating illegal off-exchange digital asset trading. Perpetual contracts dominate the cryptocurrency derivatives landscape, accounting for approximately 75% of all trading activity, primarily due to existing ambiguities in onshore regulations.
Perpetual contracts are characterized by their non-expiring nature and reliance on continuous funding rates rather than conventional settlement mechanisms. This simplicity contributes to regulatory challenges: such contracts do not align seamlessly with extant commodity futures regulations. Chervinsky elucidates that while perpetuals provide “more direct exposure to the underlying asset” compared to traditional derivatives, their unique structure complicates regulatory oversight significantly.
The establishment of the Hyperliquid Policy Center aims to clarify these complexities for lawmakers before potential prohibitions are enacted by default.
Opportunities and Imperatives for DeFi in Washington
In recent discussions, Treasury Secretary Scott Bessent has emphasized the urgent need for Congress to pass comprehensive legislation regarding cryptocurrency market structure by spring 2026. He has cautioned that failure to act could lead to fragmentation within the legislative coalition supporting such measures.
– **Ongoing Legislative Developments**:
– The SEC and CFTC convened a joint harmonization session on January 27, signaling serious intent to draft coherent regulatory frameworks.
– The CLARITY Act, which passed the House in July 2025 and is currently under consideration by the Senate Banking Committee, seeks to establish a federal market structure for digital commodities while defining terms such as “mature blockchains.”
However, it is important to note that analysis from the Congressional Research Service explicitly indicates that CLARITY excludes derivatives from its framework. Thus, even if broader market structure legislation is enacted, issues surrounding leveraged perpetual contracts remain unresolved.
Meanwhile, regulatory clarity surrounding stablecoins is progressing, demonstrated by the passage of the GENIUS Act in July 2025, which lays out federal guidelines for stablecoin issuance and management. Standard Chartered forecasts indicate that stablecoin supply could escalate to $2 trillion by 2028.
The dichotomy between evolving regulations for payment systems versus persistent ambiguity surrounding trading infrastructures encapsulates the forthcoming conflict within U.S. crypto policy.
Lobbying Trends and Expenditure in Cryptocurrency Advocacy
Lobbying expenditures within the digital asset sector surged by 66% in 2025, reaching $40.6 million according to data from OpenSecrets. In contrast, traditional financial institutions allocated $86.8 million towards lobbying efforts during the same period.
As cryptocurrency organizations adopt strategies reminiscent of traditional finance—characterized by sustained institutional presence, technical research initiatives, and relationship cultivation—the Hyperliquid Policy Center’s $28 million funding significantly surpasses annual expenditures typically seen among established crypto advocacy groups. For instance:
– The Digital Chamber expended approximately $5.6 million in 2024.
– The Blockchain Association’s lobbying efforts totaled around $8.3 million.
Notably, Hyperliquid is not an isolated entity within this landscape; several organizations have emerged with similar objectives:
– The DeFi Education Fund has been operational since 2021.
– The Ethereum Protocol Advocacy Alliance was established in November 2025.
– The Solana Policy Institute is also active in this arena.
These organizations are not merely ad hoc legal defense funds; they represent institutionalized policy frameworks operating as 501(c)(4) entities with dedicated staff and structured engagements on Capitol Hill.
Implications of Establishing a Policy Moat
In this evolving regulatory environment, DeFi platforms are now competing across three critical dimensions:
1. **Market Design**: Encompassing user experience, liquidity provision, and fee structures.
2. **Compliance Design**: Involving adherence to regulatory mandates concerning reporting and governance.
3. **Narrative Design**: Pertaining to how “decentralization” is defined within legal frameworks.
While CLARITY introduces concepts of registration for digital commodity exchanges and brokers, it explicitly excludes derivatives from its purview—leaving perpetual contracts mired in regulatory uncertainty.
The practical ramifications are significant: even if Hyperliquid’s protocol retains global accessibility, U.S.-facing interfaces may face mounting pressure to comply with registration-like standards encompassing surveillance protocols, disclosure requirements, segregation mandates, and Know Your Customer (KYC) procedures.
A pivotal question arises regarding whether U.S. enforcement will target compliant intermediaries or focus on control points such as operators and governance participants—an approach suggested by historical enforcement patterns observed from the CFTC.
Potential Scenarios for Future Regulatory Landscape
The forthcoming six to eighteen months will be crucial in determining U.S. regulatory approaches toward decentralized derivatives. Three potential scenarios emerge:
1. **Regulated Access Paths Emerge**:
– Triggered by successful passage of spring 2026 legislation and continued harmonization efforts between SEC and CFTC.
– Regulatory posture evolves into a “yes, but” framework where compliance expectations shape operational standards.
– Result: Consolidation of trading volume among venues capable of meeting compliance requirements—resulting in fortified policy moats.
2. **Front-End Chokepoint Crackdown Intensifies**:
– Enforcement prioritizes control points following limited legislative progress.
– A shift toward an “enforcement-first” posture leads to increased geofencing and potential degradation of U.S.-facing access.
– Result: Fragmentation of liquidity as users migrate offshore; compliance becomes a competitive differentiator amidst heightened legal risk perceptions.
3. **Legislative Breakdown Leads to Offshore Dominance**:
– Coalition fractures resulting from stalled or inadequately addressed provisions concerning derivatives.
– An absence of clarity leaves perpetual contracts in limbo while stablecoins gain regulatory definition.
– Result: Continued dominance of offshore venues; U.S.-based participation constrained; regulatory uncertainty persists as an ongoing concern rather than being resolved.
In all scenarios presented above, proactive policy engagement remains essential. Early involvement during rule-making processes yields more significant influence compared to reactive responses post-enforcement actions.
| Scenario | Trigger / Policy Catalyst | Regulatory Posture | What Happens to US Access | Market Outcome |
|—————————————-|—————————————————————————————————————|—————————————————-|—————————————————————|——————————————————————————————————————|
| Regulated Access Paths Emerge | Spring 2026 market-structure momentum holds; SEC/CFTC harmonization continues | “Yes, but” regime | US-facing front ends adopt KYC gating and tighter controls | Volume consolidates into compliant venues; policy moats form; increased institutional legibility |
| Front-End Chokepoint Crackdown | Enforcement focuses on control points post-limited legislative progress | “Enforcement-first” posture | Increased geofencing; US users pushed offshore | Trading persists but routes around US; liquidity fragments; compliance becomes critical |
| Legislative Breakdown → Offshore Dominance | Coalition fractures; stalled CLARITY Act without derivatives provisions | “No clear pathway” regime | US access remains gray/limited | Offshore venues dominate; US participation structurally constrained while DC remains a recurring risk |
Acknowledgment of Regulatory Realities
Historically, the cryptocurrency sector has championed decentralization as a form of regulatory arbitrage—constructing systems designed to circumvent traditional oversight mechanisms. However, this narrative faces increasing scrutiny as protocols process billions in daily trading volume while generating substantial revenue streams for token holders amid a globally accessible marketplace offering leveraged products.
Hyperliquid’s proactive positioning within Washington acknowledges this evolving reality: DeFi is entering an era characterized not merely by ideological convictions but also by immediate operational imperatives necessitating engagement with regulatory frameworks.
While debates unfold within D.C., jurisdictions such as Hong Kong are moving forward with plans to issue stablecoin licenses by March 2026. Concurrently, initiatives like the European Union’s Markets in Crypto-Assets (MiCA) regulation provide live frameworks for token governance. The U.K.’s approach illustrates a simultaneous relaxation of certain crypto products alongside stringent controls over derivatives—emphasizing that other nations may seize opportunities amidst U.S. indecision.
The next competitive advantage will not solely hinge upon technological superiority or liquidity depth; rather it will encompass robust compliance architectures capable of satisfying regulators’ expectations alongside narrative frameworks that resonate with legislative bodies—and relationships enabling industry stakeholders to shape policy-making processes proactively before being compelled into compliance reactively.
The efficacy of this strategy will soon be tested; should Hyperliquid’s Policy Center successfully carve out a regulatory pathway for on-chain perpetuals within the U.S., it may prompt analogous initiatives across other protocols within the DeFi ecosystem. Conversely, should these efforts falter, it will serve as an instructive case study illustrating significant but ultimately costly signaling endeavors within an uncertain regulatory landscape.
As such, DeFi’s journey into Washington marks not merely an exploratory venture but rather a critical juncture facing industry participants—a moment where market dynamics will ultimately reveal whether Washington was prepared for such engagement or if it remains entrenched in an era of ambiguity.
