Cumberland Expresses Concerns About Hyperliquid's Trading Plans in the US

Cryptocurrency company Cumberland has expressed caution regarding plans backed by Intercontinental Exchange (ICE) to introduce perpetual futures trading on the Hyperliquid platform in the U.S. Don Wilson, co-founder and CEO of Cumberland, noted that certain features of Hyperliquid's technology might conflict with the Commodity Futures Trading Commission (CFTC) regulations. He highlighted four issues and questioned whether these aspects align with the core principles of the CFTC. Wilson sees no advantage in trading perpetual futures on the blockchain if a similar service can be obtained through a centralized exchange like Coinbase. Perpetual futures allow users to gain leverage on assets without the need to hold the underlying spot assets. Coinbase, Kalshi, and other platforms are already regulated for their offerings.

Additionally, CFTC-regulated structures are partially opaque, and traders are unaware of whom they are trading with. However, Hyperliquid's order book is fully transparent, and wallets with trading operations can be tracked. In this context, Wilson posed a similar question to billionaire Stanley Druckenmiller, one of the deal's proponents: "Do you understand that if you trade on Hyperliquid, the whole world can track your positions and trades in real-time? Do you consider this an advantage?" Wilson also raised important questions about potential frontrunning of trades using Hyperliquid's priority fees and whether the U.S. order book would be merged with a more liquid global order book. He concluded that the plan for blockchain trading could lead to trading inefficiencies and regulatory challenges.

The reaction to Cumberland's stance on the Hyperliquid plan was mixed. Rebecca Rettig, Chief Legal Officer at Jito Labs, stated that there might be privacy solutions that could address the transparency issue. Nonetheless, she agreed that merging local and offshore order books is the most critical issue. However, this is unlikely, as Binance U.S., for example, has lower liquidity because it does not share an order book with the global Binance platform. Ark Invest also expressed skepticism about the effectiveness of a similar Hyperliquid plan in the U.S. Besides the ICE and Trade [XYZ] route, Hyperliquid is also considering a path with Kraken to enter the U.S. market. How the CFTC will address the raised issues and which path will be most viable for Hyperliquid remains unclear. Nonetheless, Hyperliquid has diversified its revenue from traditional trading fees to income from USDT reserves and perpetual futures (HIP-3, which is being explored by Kraken and ICE). Since July, Hyperliquid has doubled its monthly revenues—from approximately $60 million in July to nearly $120 million in September. If Kraken and ICE's plans for HIP-3 markets are approved, it could drive revenue growth and increase the value of HYPE. On Thursday, October 29, HYPE rose by 20% following an update from ICE but then lost its gains and was trading at $87 at the time of publication.