Hyperliquid and Pyth Ally Urge SEC to Scrap Rule 611 for Onchain Markets

Woofun AI reports that the Hyperliquid Policy Center, alongside Douro Labs as a core contributor to the Pyth Network, has formally submitted a joint comment letter to the U.S. Securities and Exchange Commission (SEC) demanding the repeal of Rule 611. This regulatory intervention argues that the current framework is fundamentally misaligned with decentralized trading landscapes, necessitating a shift toward tailored onchain market guidance.

The structural disconnect stems from Rule 611's origins within Regulation NMS, a regime engineered for traditional financial markets where centralized exchanges aggregate quotes to ascertain the best available price. Such a centralized quote architecture is incompatible with onchain order books, which operate outside conventional exchange infrastructures.

Furthermore, automated market makers (AMMs) determine prices through liquidity pools at the precise moment of execution, rather than relying on pre-aggregated quote systems. Applying a rule designed for centralized aggregation to these decentralized mechanisms creates a functional mismatch that the submitters argue is both impractical and detrimental to market efficiency.

To resolve this friction, the joint submission advocates for the development of principles-based best execution guidance specifically calibrated for onchain environments. This approach aims to provide necessary regulatory clarity without imposing outdated infrastructure requirements that do not exist in decentralized systems. By shifting from rigid, infrastructure-specific mandates to outcome-oriented principles, the SEC could accommodate the unique operational realities of blockchain-based trading. The proposal suggests that regulatory frameworks should focus on the quality of execution outcomes rather than the specific technological architecture used to achieve them.

Notably, the letter draws a sharp distinction between general onchain trading mechanics and the treatment of specific asset classes, particularly tokenized U.S. stocks. The groups insist that investor protection rules must remain fully applicable to these assets, regardless of whether the settlement model is onchain or traditional. Exempting tokenized equities from conventional safeguards would undermine market integrity and expose investors to unnecessary risks. This stance reinforces the argument that while trading infrastructure may evolve, the fundamental obligation to protect investors in equity markets must remain unchanged.

Per Woofun AI, this submission reflects a broader trend in the crypto and digital assets sector, where industry participants increasingly engage in direct dialogue with regulators to shape rulemaking. The evolving stance of the SEC on decentralized finance indicates a period of regulatory experimentation and adaptation. This comment letter adds to the growing body of industry feedback seeking to align legal frameworks with technological realities. The outcome of this specific rulemaking process will likely influence how future regulatory approaches to decentralized finance are structured and implemented.

A repeal of Rule 611 would significantly reduce the compliance burden for platforms operating in the onchain space, potentially enabling more efficient execution and fostering innovation.

However, the call for new guidance also highlights the urgent need for regulatory clarity, a demand that has persisted within the industry for years. Without coherent rules, blockchain-based markets face uncertainty that could hinder their integration with traditional financial systems. The balance between reducing friction and maintaining oversight remains a critical variable in this regulatory debate.

As more traditional financial instruments become tokenized, the necessity for adaptable and coherent rules becomes increasingly urgent. The joint effort by Hyperliquid Policy Center and Douro Labs represents a focused attempt to align U.S. securities regulation with the operational realities of onchain finance. The SEC's response will be pivotal in determining whether the United States can establish a regulatory environment that supports innovation while preserving market integrity. This marks a critical juncture for the future of decentralized markets in the U.S.