Hyperliquid, trade[XYZ] petition SEC for IPOP rules after $1.46B volume

Hyperliquid Policy Center and trade[XYZ] petitioned the SEC on August 18 to create a regulatory framework for pre-IPO perpetual contracts, or IPOPs, after the markets generated $1.46 billion in cumulative trading volume.

Five active IPOP markets currently operate on Hyperliquid through trade[XYZ]'s HIP-3 deployment, including SpaceX (SPCX) and Cerebras (CBRS), whose pre-IPO perpetual prices have closely tracked their actual IPO opening levels. The contracts are cash-settled derivatives that reference anticipated public company listings, settling in USDC rather than delivering actual shares.

The comment letter includes specific recommendations on disclosures, listing standards, leverage limits, and safeguards against market manipulation. Open interest stood at $106 million as of early June, with the SpaceX IPOP launched on May 18 becoming one of the most closely watched contracts. The proposal also advocates for retail investor access, a market historically reserved for venture capital funds and institutional allocators.

The petition follows a July 14 meeting between HPC and the SEC's Crypto Task Force, part of a deliberate multi-touch engagement strategy. The SEC and CFTC must now determine whether IPOPs should be classified as security futures or security-based swaps, a decision that will shape whether this emerging derivatives class grows within US regulatory boundaries or migrates to less regulated jurisdictions.

What the IPOP framework proposes

The contracts don't grant ownership rights, voting power, or any allocation in the actual IPO. What they provide is a continuous, market-implied valuation for private companies that operates around the clock. HPC, founded in February 2026 under CEO Jake Chervinsky, argues this democratizes access to pre-IPO price discovery without requiring anyone to hold actual pre-IPO shares.

The proposal calls on both the SEC and the Commodity Futures Trading Commission to clarify the regulatory treatment of equity-linked perpetual contracts. One central question is whether these products should be treated as security futures or security-based swaps, since different classifications trigger different regulatory regimes under the Commodity Exchange Act and the Securities Exchange Act.

Investor protection and manipulation risks

Because private companies aren't subject to the same public reporting requirements as listed companies, information available to traders could be limited, creating a potential information imbalance. The proposal addresses this through disclosure standards and listing requirements tied to company size, available financial information, and institutional interest.

Market manipulation remains a major concern. Private companies lack the transparency of publicly listed corporations, and a small amount of trading activity could move prices significantly. The framework would need strong surveillance and enforcement mechanisms to prevent traders from spreading rumors about valuations or upcoming IPO timelines.

The proposal puts US regulators in a position where they must balance innovation with investor protection. A clear framework could encourage responsible development of pre-IPO derivatives; unclear rules could push these products toward less regulated jurisdictions. The debate is likely to intensify as private companies remain private for longer and investors seek greater access to pre-IPO opportunities. For Hyperliquid, the outcome will determine whether its IPOP markets become a regulated bridge between private financing rounds and public stock exchanges, or remain confined to offshore venues.

This article is for informational purposes only and does not constitute investment advice.