The Hyperliquid Policy Center: A Former SEC Attorney's Take on What This M Lobbying Play Means for DeFi Regulation

regulatory_rachel · February 18, 2026, 10:35pm

As someone who spent over a decade at the SEC before moving into crypto regulatory consulting, I’ve watched dozens of industry lobbying efforts come and go. But today’s announcement from Hyperliquid deserves serious attention from everyone building in DeFi. Let me break down what’s actually happening and why it matters.

What Was Announced

The Hyper Foundation — the nonprofit steward of the Hyperliquid protocol — has committed 1 million HYPE tokens (valued at approximately $29 million) to fund the newly established Hyperliquid Policy Center, a 501(c)(4) social welfare organization based in Washington, D.C. The foundation will unstake those tokens and convert them as needed to cover staffing, research, and outreach costs. The center’s stated mission is to help Congress and federal agencies understand how DeFi protocols work and to support the drafting of rules tailored to onchain markets.

The Team

Leading the center is Jake Chervinsky as Founder and CEO. Jake’s resume reads like a who’s-who of crypto policy: he was General Counsel at Compound Labs (where he helped pioneer the ‘progressive decentralization’ playbook), then served as Chief Policy Officer at the Blockchain Association (the industry’s most prominent advocacy group), and most recently was Chief Legal Officer at Variant Fund. Joining him are Brad Bourque (formerly of Sullivan & Cromwell) as policy counsel and Salah Ghazzal (previously policy lead at Variant) as policy director.

This is not an amateur operation. These are people who know how the sausage gets made on Capitol Hill.

Why This Is Different from Existing Lobbying Groups

We already have the DeFi Education Fund (DEF), the Blockchain Association, Coin Center, the Crypto Council for Innovation, and the Digital Chamber all operating in D.C. In 2025, the DeFi Education Fund alone met with 50+ Congressional offices, worked on 20+ draft bills, and engaged on 20+ regulatory submissions. So why does Hyperliquid need its own dedicated policy shop?

The critical difference is specificity and focus. The existing organizations advocate broadly for the crypto industry. The Hyperliquid Policy Center is laser-focused on one thing: building a legal framework for perpetual futures and decentralized derivatives markets in the United States. This is an area where current regulation is almost entirely absent or inappropriately borrowed from traditional finance frameworks.

Hyperliquid processes over $250 billion monthly in perpetual futures trades — it surpassed Coinbase in total notional trading volume in 2025 with roughly $2.6 trillion in volume. The protocol runs on its own L1 blockchain, eliminates gas fees, and operates without traditional intermediaries. Current CFTC and SEC frameworks simply were not designed for this kind of market infrastructure.

The Regulatory Landscape Right Now

The Senate Banking Committee’s 2025 market structure draft was a landmark — it included the strongest protections for software developers ever seen in legislative text. But perpetual futures remain in a regulatory gray zone. The CFTC has jurisdiction over derivatives, but how do you apply position limits, margin requirements, and reporting obligations to a smart contract that anyone can interact with permissionlessly?

This is the gap Hyperliquid’s policy center is designed to fill. By producing technical research and briefing lawmakers, they’re trying to get ahead of regulation rather than reacting to enforcement actions after the fact.

What Concerns Me

Here’s where I put on my regulator hat. A few things give me pause:

Regulatory capture risk. When the entity with the most to gain from favorable regulation is the one funding the research and policy recommendations, there’s an inherent conflict of interest. The 501(c)(4) structure provides some insulation, but let’s not pretend this is purely altruistic.
The token funding mechanism. The $29 million valuation is denominated in HYPE tokens. If those tokens appreciate due to favorable regulatory outcomes, the foundation effectively profits from its own advocacy. This circular incentive structure is something regulators will scrutinize.
Precedent effects. If Hyperliquid successfully shapes regulation to fit its specific architecture, it could inadvertently create barriers for competing protocols with different designs. Regulation written around one model tends to calcify that model as the standard.
The ‘write the rules’ framing. I know the headline is provocative, but there’s a real question about whether protocol-specific lobbying creates a two-tier system where well-funded protocols get favorable treatment while smaller DeFi projects can’t afford a seat at the table.

My Bottom Line

Despite these concerns, I think this is a net positive development. The alternative — DeFi derivatives markets operating in a complete regulatory vacuum — is neither sustainable nor desirable. Having knowledgeable advocates producing technical research for legislators is far better than having the CFTC rely on TradFi incumbents (who have their own lobbying operations) to define what DeFi derivatives regulation should look like.

The key will be transparency: Will the Hyperliquid Policy Center publish its research openly? Will it advocate for frameworks that benefit the entire DeFi derivatives ecosystem, or just Hyperliquid? Jake Chervinsky’s track record at the Blockchain Association suggests he understands the importance of broad-based advocacy, but the proof will be in the execution.

I’d love to hear what the rest of this community thinks. Are you comfortable with a protocol-funded lobbying operation representing DeFi’s interests in Washington?

blockchain_brian · February 18, 2026, 10:35pm

Rachel, I appreciate the thorough breakdown, but I think you’re being far too charitable here. Let me push back on a few points.

You frame this as a ‘net positive’ because the alternative is a regulatory vacuum. But that’s a false dichotomy. The third option — which I’d argue is the correct one — is that DeFi protocols should be sufficiently decentralized that they don’t need lobbying because there’s no central entity for regulators to target in the first place.

The fact that Hyperliquid feels it needs a $29 million lobbying arm tells you something important about the protocol’s actual decentralization. If Hyperliquid were truly a permissionless, immutable smart contract system with no identifiable team steering it, who would regulators talk to? The code speaks for itself.

What really bothers me about the 501(c)(4) structure is the opacity. Unlike a 501(c)(3), they don’t have to disclose their donors publicly. Yes, we know about the Hyper Foundation grant, but what if other interested parties — market makers, institutional traders with massive perp positions — also funnel money in? We’d never know.

Your point about regulatory capture is well-taken but understated. This isn’t just a risk — it’s the explicit goal. Hyperliquid is spending $29 million precisely because it wants regulation shaped around its architecture. And Jake Chervinsky, for all his expertise, moves from Compound to Blockchain Association to Variant to Hyperliquid. That’s not independent policy research; it’s an industry insider representing industry interests while wearing an academic hat.

The one thing I’ll concede: the CFTC absolutely needs better technical education on how decentralized derivatives work. If the Hyperliquid Policy Center publishes genuinely useful research that helps lawmakers understand the difference between a centralized exchange and a decentralized protocol, that benefits everyone. But I’ll believe it when I see it.

startup_steve · February 18, 2026, 10:35pm

Brian, I hear you on the ideological concerns, but I think you’re letting perfect be the enemy of good here. We don’t live in a world where regulators simply ignore $250 billion in monthly trading volume because the code is decentralized. That’s not how Washington works, and pretending otherwise isn’t a strategy — it’s wishful thinking.

Every major industry lobbies. Oil and gas, pharma, banking, tech — they all spend enormous sums to ensure the people writing regulations at least understand what they’re regulating. The crypto industry is actually late to this game. The legacy finance lobby has been shaping derivatives regulation for decades through organizations like ISDA, FIA, and the Securities Industry and Financial Markets Association. If DeFi doesn’t have its own voice in that conversation, the rules will be written by people who see all crypto as a threat to their business model.

Here’s the business reality: Hyperliquid is not spending $29 million out of the goodness of its heart. It’s making a calculated investment. If the U.S. creates a workable framework for decentralized perpetual futures, Hyperliquid could potentially access the U.S. retail market legally — a market it currently can’t serve due to regulatory uncertainty. That’s an enormous revenue opportunity. And if it works, it opens the door for dYdX, GMX, and every other perp DEX too.

The comparison I keep coming back to is Coinbase’s investment in Stand With Crypto and its PAC spending. Was that self-interested? Absolutely. Did it also benefit the broader crypto ecosystem by getting pro-crypto candidates elected? Undeniably yes. I expect the Hyperliquid Policy Center to follow a similar pattern — self-interested advocacy that has positive externalities for the whole space.

One thing Rachel didn’t mention: the timing is extremely strategic. With the market structure bill still being drafted and the CFTC looking at how to handle DeFi derivatives, there’s a narrow window to shape the conversation. $29 million is actually quite modest compared to what TradFi spends on derivatives lobbying annually.

defi_diana · February 18, 2026, 10:36pm

Coming at this from the risk management angle, there’s a dimension of this conversation that nobody’s addressed yet: what happens to DeFi protocol design if regulation gets it wrong?

I spent eight years building pricing models on Wall Street before moving to DeFi, and I can tell you from experience that traditional derivatives regulation is deeply intertwined with the infrastructure it regulates. CFTC rules assume the existence of central counterparties, clearinghouses, designated contract markets, and registered intermediaries. If those assumptions get blindly applied to DeFi, we’ll end up with protocols that are ‘decentralized’ in name only — forced to reintroduce intermediary layers just to comply.

This is why I’m cautiously optimistic about the Hyperliquid Policy Center. Their stated early priority is building a legal framework specifically for perpetual futures. Perps don’t even exist in traditional U.S. markets — the CFTC has no regulatory template for them. Someone needs to explain to lawmakers that a perpetual futures contract settled on an L1 blockchain is fundamentally different from a CME futures contract, and doing that requires people who understand both the technology and the policy landscape.

That said, Rachel’s concern about precedent effects is the one that keeps me up at night. Hyperliquid’s architecture — an app-specific L1 with an integrated order book and on-chain matching engine — is very different from, say, GMX’s AMM-based perp model, or dYdX’s move to Cosmos. If regulation is designed around Hyperliquid’s specific model, it could inadvertently disadvantage alternative approaches.

The $29 million question (pun intended) is whether the Hyperliquid Policy Center will advocate for technology-neutral regulation or Hyperliquid-optimized regulation. Jake Chervinsky’s background at the Blockchain Association, where he had to represent diverse interests, gives me some hope. But the funding source creates an obvious gravitational pull.

I’d also note that the market implications are significant. DeFi perpetual futures trading is approaching $10 billion in daily volume, with Hyperliquid commanding a dominant share. Clear U.S. regulation could unlock institutional participation that dwarfs current volumes. The stakes are much higher than $29 million.