Wall Street products are approaching perpetual.

Written by: Liam Akiba Wright

Translated by: Baihua Blockchain

In an episode of Galaxy Brains released on June 18, Galaxy's Alex Thorn discussed the current crypto cycle, the migration of perpetual contracts to compliant onshore markets, prediction markets, and Hyperliquid's no KYC model with BN founder Zhao Changpeng.

In a clip released on June 16, Thorn clarified this distinction: CZ praised Hyperliquid's product, stating that BN could not compete with a niche built on "no KYC + decentralized narrative"; at the same time, he mentioned that from his own experience, he would not personally operate such a model.

This discussion quickly became more than just "CZ says BN cannot compete in Hyperliquid's lane." Subsequent public opinion focused more on his assessment of Hyperliquid's model—he stated that this model is "awesome," but added that he assumes this project must "have very capable lawyers." This remark directly brought the discussion back to the regulatory level: it implies that the platform's competitive advantages are closely tied to legal and compliance risks.

This distinction transformed a product-level compliment into a market structure issue. Today, a derivatives platform faces a larger conflict: which aspects of on-chain perpetual trading platforms can be replicated by regulated trading platforms, and which aspects cannot be replicated.

Hyperliquid's moat is not just faster trading speed, a more native crypto experience, or trader loyalty. Its true uniqueness lies in its ability to provide a market similar to perpetual futures, while being significantly different in access mode from centralized trading platforms that must comply with global market expectations.

If on-chain perpetuals continue to grow because they feel more open, faster, and require less intermediaries, then the core of policy conflict will become: can this "openness" still hold up when facing scrutiny? Regulators will inquire whom the platform is serving, what products it offers, and when a trading venue claims to be decentralized, who should ultimately be held responsible.

The Access Advantage Pointed Out by CZ

CZ's remarks carry significant weight because BN has always been the most representative trading platform for global crypto derivatives, and he clearly separated "appreciating a product" from "willingness to bear operational risks." In other words, Hyperliquid can be an excellent product, but the lane it is running in is one that BN is reluctant to enter.

And this is at the core of this market structure dispute. Regulated platforms can certainly enhance their matching engines, extend trading hours, introduce more crypto-related contracts, and design products closer to perpetual exposures.

But what is more difficult to replicate is that trading experience which does not require the same identity verification, jurisdiction screening, or centralized compliance gatekeeping—these are the inherent demands that come with being a regulated trading platform.

Therefore, the terms and onboarding documents of Hyperliquid itself also become part of its operational risks. The specific wording around access rights, qualified users, restricted regions, and user obligations is precisely where the trading model shifts from being a "product issue" to becoming a "policy subject."

A product can be technically decentralized on some levels, but it may still attract regulatory scrutiny due to questions like "who is operating the front end," "who is promoting access," and "how to prevent users from restricted markets from participating."

The clearest implication of CZ's statement is that Hyperliquid is actually competing from a completely different risk position. BN can compete on liquidity, listing capability, brand, and infrastructure levels.

But for BN, participating in competition by abandoning the compliance posture that currently defines its global operational model is much harder.

The real-world consequences are also straightforward: if what traders value most is the access capability that does not require KYC, then the front-runner in this lane is likely to become the platform that is most easily questioned about whether "this model can continue expanding without becoming more like traditional trading platforms."

The impact of this access model extends beyond seasoned derivatives traders. Its trading advantages are actually built on a very straightforward user commitment: setting fewer barriers between traders and a highly leveraged market.

This commitment can certainly bring liquidity, but it also gives regulators a clear entry point—to examine who is controlling this market and which users are being reached.

Why Legal Risks Are Clearly Visible

This type of legal risk does exist, but there are boundaries. CZ expresses personal views, not regulatory decisions; currently, the clearest official signal is a warning from the UK, rather than US enforcement action.

The UK's Financial Conduct Authority (FCA) has issued a warning page regarding Hyperliquid, which was first published on May 21 and updated on June 7. The warning states that this company may be providing or promoting financial services without permission and may be conducting business targeted at UK users.

As of the time of publication, this warning remains in effect and continues to define Hyperliquid as an "unauthorized entity that may be targeting UK users." This has become one of the most pronounced cases in public examples: regulators are beginning to view a large on-chain perpetual trading platform more as a financial service provider rather than as neutral software infrastructure.

The UK's Warning on Hyperliquid Reveals the Regulatory Challenges Behind Its Impact on Wall Street

This warning has put Hyperliquid's "Wall Street ambitions" under the regulatory microscope; CZ's statement adds another layer of concern. Regulators are likely to inquire further: does the no KYC stance that makes the platform difficult to replicate also make it hard to be "normalized," hard to fit into the existing regulatory framework?

The history of the US also makes this risk profile clearer, even though Hyperliquid is not in the same case. In 2022, the Commodity Futures Trading Commission (CFTC) sued bZeroX and Ooki DAO, accusing them of being involved in illegal over-the-counter digital asset trading, failing to meet registration obligations, and violations of the Bank Secrecy Act related to leveraged and margin commodity trading aimed at retail investors.

The insights provided by this case are limited but clear: US derivatives regulators have previously asserted that even if a structure has decentralized or DAO characteristics, it may still fall under the scope of regulation.

This precedent cannot be directly applied to Hyperliquid but illustrates why regulators focus attention on "access." If a platform's offered products functionally resemble derivatives and reach users that regulators believe should be filtered and protected, then the debate's focus may shift from "code and community" to "promotion, platform control, and accountability."

The assertion of "decentralization" itself is a double-edged sword. The more convincing a platform can demonstrate that it does not belong to traditional intermediary models, the more space it has to refute being treated as traditional intermediaries.

Conversely, the more users engage with it through recognizable front ends, promotional channels, market incentives, and specific control mechanisms, the easier it becomes for regulators to question: who is really responsible for this market.

For traders, "decentralization" will ultimately turn into a practical issue rather than a rhetorical one. The more a platform relies on visible interfaces, incentive mechanisms, and user flows, the easier it becomes for officials to focus on those areas that still appear to be governed by human, policy, and market design decisions.

Onshore Products Are Changing the Benchmark

The other half of competitive risk comes from product design in regulated markets. This episode of Galaxy introduced CZ's comments by paralleling Hyperliquid with "CME and Cboe promoting perpetual products to onshore markets."

The product gap between offshore, crypto-native trading platforms and regulated markets is not static and unchanging.

Cboe announced in November 2025 that its futures trading platform will launch continuous futures products aimed at Bitcoin and Ethereum.

These Bitcoin and Ethereum continuous futures on the trading platform are traded as products under the US regulatory framework, aiming to provide an experience similar to "perpetual exposure" through long-term contracts along with daily funding adjustments.

At the same time, the policy disputes surrounding the regulation of crypto perpetual futures and how related trading venues should be classified are also heating up. Prediction markets, quasi-perpetual products, and continuous futures are continually pressuring the boundaries of existing market categories.

If Regulators Can Unify Rules, US Traders May Finally Get Domestic Perpetuals

However, this comparison ultimately depends on product design and legal identity. Regulated continuous futures differ significantly from Hyperliquid-style on-chain perpetuals in aspects such as custody, margin arrangements, venue control, access mechanisms, and operators' legal identities.

However, the more regulated platforms bring continuous crypto exposures to onshore markets, the more the competitive logic will shift. At that point, whether Hyperliquid can maintain an advantage will depend on whether its entire set of combinations—including access methods, on-chain settlement, and market culture—remains sufficiently distinct.

CZ's remarks hit this critical point. If regulated trading platforms can bridge some product gaps while retaining KYC and venue regulation, then Hyperliquid's advantages will increasingly concentrate on that portion—which is precisely the part that regulated players are least willing to replicate.

This is indeed good for differentiation, until it becomes the point most unacceptable to regulators.

The policy game around prediction markets adds another layer of complexity. As quasi-perpetual exposures, event contracts, and continuous futures increasingly approach regulated venues, regulators and courts will gain more opportunities to define which rules different products should belong to.

The CME Lawsuit Challenges: Can Kalshi's Bitcoin Leverage Expansion Push It Toward a "Everything Trading Platform"

This also makes the distinction between "product form" and "access model" more critical. Hyperliquid can attract users with a different trading experience, but it is also this experience that makes each change in future regulatory expressions particularly important.

A regulated platform can reduce the "product gap" without changing the "access gap." This is why CZ's comment can transcend the typical trading platform's argument.

If the onshore market continues to evolve, the remaining advantages will increasingly concentrate on the characteristics facing the most significant policy pressure: who can trade, from where they trade, and what reviews they must go through.

Any Changes in Access Rules Will Redefine This Moat

Hyperliquid's publicly stated wording has become more crucial today: including its service terms, user onboarding, jurisdiction screening rules, front-end control methods, and any changes that describe "which users are eligible to use" the platform in the future.

If the platform shifts to stronger identity verification or stricter geographical restrictions, then the product itself may still exist, but this will test how much of its moat comes from access advantages rather than execution efficiency.

Regulatory wording will form a second critical observation indicator. Another warning similar to the FCA, a statement from US regulators, enforcement actions against a specific derivatives platform, or court disputes surrounding quasi-perpetual products will all be more meaningful than vague discussions about "whether this platform is sufficiently decentralized."

What truly matters is how regulators ultimately define the problem: whether it is the product itself, the users being reached, the operators, the front-end interface, or the lack of necessary review mechanisms.

The onshore market is the third observation indicator. If CME, Cboe, Kalshi-like platforms, or other regulated markets continue to increase crypto exposures that are closer to perpetual trading experiences, then the competition facing Hyperliquid will become one side with stronger legal certainty and the other side with a more lenient access experience.

Only when traders consistently perceive that the value of "access premium" outweighs "regulatory discount" will this position be a powerful market position.

CZ's statements, in an unusually straightforward manner, highlight this tension. The reason Hyperliquid's moat exists is perhaps precisely because BN cannot replicate it.

The unresolved risk lies in whether, when on-chain perpetuals become significant enough for regulators and regulated trading platforms to ignore, this moat can withstand the resulting legal pressures.