Four Pillars Weekly: Democrats Control Congress, Individual Stock Perpetual Contracts Approved, Where Is U.S. Crypto Policy Heading?

TechFlow Overview:During the U.S. midterm elections on November 3, the Democratic Party reclaimed control of both the Senate and the House of Representatives. A "divided government" has stalled comprehensive market structure legislation into a congressional deadlock. Although Congress's focus is shifting toward investigation hearings on conflicts of interest, administrative rulemaking by the SEC and CFTC continues.

Meanwhile, the CFTC has historically approved the listing of regulated single-stock perpetual futures contracts, while Wall Street giants like ICE are accelerating their entry into on-chain derivatives. This week's newsletter also covers evolving listing data on Korean CEXs, reflections on Binance's $6.36 billion security incident, and Hyperliquid's core performance report for the first half of the year.

Major News: Democratic Sweep of Congress Puts U.S. Crypto Regulation on What Path?

What Happened?

In the U.S. midterm elections held on November 3, the Democratic Party successfully secured control of both the Senate and the House of Representatives, flipping at least 7 seats in the Senate and gaining a net increase of over 20 seats in the House.

When the new Congress officially takes office in January 2027, Democrats will have full control of the legislative agenda and major key congressional committees, thereby gaining greater leverage to check the administration's priorities for the remainder of President Trump's term.

This election result significantly diminishes the prospects for comprehensive cryptocurrency legislation, particularly the CLARITY Act. The bill aims to establish a federal digital asset market structure framework and clarify the regulatory jurisdictional boundaries between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The bill previously passed the House in July 2025 but failed to advance in September of the same year after a procedural vote in the Senate fell short at 49 to 50. Negotiations between the two parties on stablecoin yield rewards, DeFi developer liability, and ethics clauses regarding conflicts of interest for government officials had long been stagnant.

With control of Congress now in Democratic hands, scrutiny of the Trump family's crypto business ventures is expected to intensify. Several Democratic lawmakers have previously expressed concerns over potential conflicts of interest involving World Liberty Financial (WLFI), its issued USD1 stablecoin, and the TRUMP meme coin.

Whether the president's family financial interests influenced the direction of this administration's digital asset policy is expected to become a priority for the new Congress to investigate.

Meanwhile, despite congressional legislative stagnation, federal regulators continue to advance the crypto regulatory framework. In August this year, the SEC proposed the Regulation Crypto Assets, introducing targeted registration exemptions for specific token offerings and conditional safe harbors tied to the "investment contract" classification.

Following suit, the CFTC launched rulemaking proceedings for the Cryptocurrency Transaction Regulation (CTX) and Cryptocurrency Asset Market Regulation (CAM) in October, aiming to establish a dedicated regulatory framework for retail-oriented crypto commodity trading.

Analyst Commentary

The most direct impact of the midterm elections is more likely to be a slowdown in congressional crypto legislation rather than a complete reversal of U.S. crypto policy. Even when Republicans controlled both chambers of Congress, the CLARITY Act failed to pass.

Now, with Democrats leading the legislative agenda, pushing the bill forward in its current form will be quite difficult without significantly strengthening consumer protection, illicit finance prevention, and conflict-of-interest clauses.

The Trump family's deep involvement in crypto is likely to remain a core political obstacle. For Democrats, voting for industry-friendly legislation could easily be perceived as indirectly benefiting the president's personal commercial interests. Consequently, Congress's focus may shift from broad market structure reforms to investigative accountability, hearing oversight, and stricter anti-conflict-of-interest safeguards.

However, slowed legislative progress does not mean institutional development in the U.S. crypto market will come to a standstill. Both the SEC and CFTC have demonstrated a clear willingness to utilize existing statutory authority to build a clear regulatory framework through administrative interpretations, rulemaking, and exemption relief.

As reflected in the SEC's Regulation Crypto Assets proposal and the CFTC's push for CTX and CAM, substantive regulatory advancement remains feasible in the current climate even without comprehensive congressional legislation.

Of course, this method of regulatory advancement has its limitations. Compared to laws formally enacted by Congress, administrative rules and interpretations by regulatory agencies are more susceptible to disruptions from future administration turnovers or shifts in committee leadership. Furthermore, regulators themselves are constrained by the boundaries of their existing statutory authorities.

Yet, as long as the current leadership of the SEC and CFTC maintains its current policy resolve, gradual institutional rulemaking is likely to become the core force driving regulatory clarity in the near term.

Ultimately, the core question after the midterm elections is not merely whether the CLARITY Act can make a comeback, but whether the SEC and CFTC can translate their ongoing initiatives into final rules and deliver substantive market access. Congressional gridlock may slow down comprehensive reform, but it may well fail to halt the overall trend of digital assets moving toward a mature regulatory framework.

CFTC Opens Doors for U.S. Single-Stock Perpetual Futures Contracts

What Happened?

On November 3, the U.S. Commodity Futures Trading Commission (CFTC) cleared obstacles for the first time, allowing perpetual futures contracts linked to single stocks to trade on U.S.-regulated exchanges. Under the new framework, licensed futures exchanges registered with both the SEC and CFTC for securities-futures trading can launch perpetual contracts tracking individual stock performance.

Unlike traditional futures, perpetual contracts have no fixed expiration date, allowing traders to gain price exposure without actually holding the underlying stock. While such products have expanded rapidly on offshore crypto platforms like Hyperliquid, domestic implementation in the U.S. has long been hindered by regulatory uncertainty between the SEC and CFTC.

Under the Commodities Futures Modernization Act of 2000, contracts authorized for release are legally defined as "Security Futures," subject to joint regulation by both the SEC and CFTC.

Market participants have quickly responded. On November 5, Kalshi became the first U.S. platform to launch regulated single-stock perpetual futures, initially covering over 50 companies including NVIDIA, Meta, and Palantir, recording over $300 million in trading volume shortly after launch.

Payward, the parent company of Kraken, is also preparing to roll out single-stock perpetual contracts through its regulated exchange, Bitnomial, targeting 10 major U.S. stocks initially. Additionally, Coinbase Derivatives and the affiliated exchange of Crypto.com are advancing similar product listings.

Traditional financial institutions are also actively entering the space. On October 29, ICE, the parent company of the New York Stock Exchange, announced a strategic investment and partnership with Trade[XYZ], a perpetual futures platform built on Hyperliquid. The two parties plan to jointly build U.S.-regulated trading venues and clearing infrastructure leveraging Hyperliquid's underlying technology.

Furthermore, Hyperliquid Strategies, a publicly listed company holding the HYPE token, is applying for a Futures Commission Merchant (FCM) license to establish a compliant pathway for connecting to the Hyperliquid perpetual market. Both initiatives remain pending regulatory approval.

However, this regulatory decision has faced legal resistance. An industry consortium comprising the Chicago Board Options Exchange (CBOE) and Citadel Securities, among others, has filed a lawsuit challenging the CFTC's statutory authority to approve single-stock perpetual contracts under the current framework.

Analyst Commentary

The significance of this decision far exceeds simply adding a new derivative tool. Originally emerging as an intrinsically crypto-native trading tool, perpetual futures are beginning to establish their compliant trading structure status within the mainstream U.S. financial system.

Following the approval of bitcoin perpetual futures earlier this year, this further extension to single stocks indicates that perpetual contracts are increasingly recognized as flexible, universal trading instruments capable of spanning multiple asset classes.

Particularly noteworthy is the substantial participation of established traditional financial institutions. The partnership between ICE and Trade[XYZ] sends a clear signal: traditional exchanges have begun to view decentralized trading infrastructure as a strategic opportunity rather than merely a competitive threat.

By combining on-chain order matching technology with regulated clearing, customer identity verification, and compliance systems, these institutions are exploring a hybrid model that bridges crypto-native market design with traditional financial regulatory mechanisms.

This development presents both opportunities and challenges for decentralized perpetual exchanges like Hyperliquid and Lighter. Once the regulated domestic U.S. market takes shape, it is expected to unlock vast retail and institutional capital flows that were previously locked out of offshore perpetual platforms due to policy barriers.

Notably, Hyperliquid has already positioned itself early through its HIP-3 protocol, which allows external deployers to open multi-asset perpetual markets on its infrastructure, positioning it to directly benefit from this legalization trend.

However, it is important to note that acceptance of perpetual contracts by the regulatory system does not automatically grant DEXs approval to serve U.S. customers. Platforms seeking access to compliant markets must still satisfy exchange licensing registration, custody, market surveillance, and clearing compliance requirements.

Therefore, future competition will depend not only on matching execution speed and trading fees, but also on the ability to seamlessly integrate existing on-chain infrastructure into compliant market architectures. Lighter faces a similar development window but still lacks a comparable path for compliance breakthroughs.

Legal challenges from entrenched vested interests in traditional financial markets may also delay implementation timelines. Nevertheless, overall, the CFTC's move represents a substantive shift in mainstream regulatory attitudes toward perpetual contracts. Traditional stock markets largely operate around fixed trading hours and spot ownership, whereas perpetual contracts provide an alternative interface for traders to flexibly manage exposure across assets.

In the long run, perpetual futures have the potential to evolve from crypto-exclusive derivatives into universal trading interfaces for stocks, commodities, forex, and other financial assets. As the U.S. takes the lead in introducing them to regulated markets, other jurisdictions may follow suit; if this trend persists, perpetual futures could become a crucial component of global financial market connectivity and trading infrastructure.

Other Important Industry News This Week

Crypto Ecosystem

• NEAR Governance Vote Approves Proposal to Cut Token Issuance Inflation Cap to 1.6%
• Binance CFO Steps Down Nine Days After Record Hack, Co-CEO Says Transition Was Planned Six Months Ago

Institutions & Regulation

• CFTC Approves Single-Stock Perpetual Futures Trading in the U.S. for the First Time
• Democratic Sweep of Congress Forces Crypto Industry to Rethink Washington Lobbying and Policy Strategy
• Samsung Wallet Launches USDC Accounts on Solana for U.S. Galaxy Users
• Hyperliquid Strategies Files Application to Become a CFTC-Registered FCM, Discloses $13.3 Million Quarterly Revenue
• Trump Administration Moves Closer to Removing Barriers Allowing Crypto Asset Allocation in 401(k) Retirement Plans

Financing & M&A

• Payward-Affiliated Funds and Clients Purchase AAVE Token Stakes on the Secondary Market
• Bullish Capital Partners with 21Shares to Generate Yield on Bitcoin via Stacks; Third Tranche of Bitcoin Staking Bonds Sells Out
• Aave Labs Acquires Financial Engineering Team Avon, Continuing to Expand in On-Chain Fixed-Rate Lending

Data Focus: How Regulation Reshaped the Listing Landscape on Korean CEXs

Original research report link: How Regulation Reshaped Korea CEX Listings (Four Pillars)

Fig: The proportion of "Korea-only listed" new coins in KRW trading pairs on Upbit and Bithumb dropped from 85% in August 2019 to 9% in 2024 (currently 18% in 2026, including regulatory milestones). Data sources: Bonanza Lab, SurfAI, Binance, Upbit, Bithumb, DAXA, FSC

Four Pillars Weekly Deep Dive: Reflections on the Binance Exploit

Original research report link: Reflections on the Binance Exploit (Four Pillars)

Fig: Title cover image for Four Pillars' special feature "Reflections on the Binance Exploit"

• Starting at 5:04 AM on October 30, 2026, hot wallets distributed across 10 public chains used by Binance were hacked, with total stolen assets reaching $6.36 billion, setting a record high for such theft incidents. The vast majority of assets were transferred within just 20 minutes. The FBI attributes the incident to the North Korean hacker group TraderTraitor. As with several recent exchange attacks by this group, the breach did not compromise a single private key but rather the exchange's internal signing infrastructure.
• Less than an hour after the incident, Tether and Circle swiftly froze approximately $2.4 billion in stolen stablecoins. After the Arbitrum Safety Council and multiple token projects subsequently enabled admin privileges to assist, over $2.8 billion in stolen assets have been frozen or recovered. Binance self-funded $6.34 billion to fully cover payouts without external borrowing, and restored withdrawals in stages starting November 1 using Proof of Reserves. By Binance's own metrics, net asset outflows on day one were contained to roughly 2.1% of total assets. However, it must be pointed out that this stabilization largely depended on the fact that the affected entity was the financially robust Binance; a smaller exchange with weaker financial buffers would hardly avoid triggering a bank run facing such a blow.
• Of the capital flowing out of Binance after withdrawals reopened, roughly 90% did not migrate to other top-10 centralized exchanges, highlighting a growing market demand for self-custody. However, as demonstrated by recent incidents like the Ledger hardware tampering and Trust Wallet malicious update, personal wallets are also far from being absolute safe havens. The more frequently such thefts and supply-side attacks occur, the stronger the user demand becomes for open-source wallets with system designs and internal architectures that can be publicly audited.

2026 First Half-Year Hyperliquid Report

Original research report link: 2026 H1 Hyperliquid Half-Year Report (HRC / Four Pillars)

Fig: Cover of the "2026 H1 Hyperliquid Half-Year Report" released jointly by Four Pillars and GLC Research's Hyperliquid Research Collective

• Hyperliquid recorded protocol revenue of $351 million in H1, up 6.4% year-over-year; during the same period, bitcoin prices fell 33%, while HYPE surged 155%. Although revenue dropped 38% compared to the record-setting second half of 2025, growth momentum at quarter-end improved significantly: June monthly revenue climbed to $71 million, marking the best single-month performance since last November. The protocol collectively invested $288 million in HYPE buybacks during H1. Combined with strong earnings resilience and continuous capital returns, this is driving the market to increasingly re-evaluate HYPE's intrinsic value from an operational fundamentals perspective.
• The HIP-3 mechanism significantly broadened the addressable market for trading platforms. H1 saw $324 billion in GMV facilitated through HIP-3, accounting for 25.1% of the platform's total matched volume, with this share rising to 32.0% in Q2 as asset categories successfully expanded to commodities, stock indices, and single stocks. However, relative to the massive nominal volume, its direct revenue contribution remains modest: influenced by fee-subsidy pricing models, HIP-3 contributed only 7.4% of total platform protocol revenue, with native crypto perpetual contracts still dominating at 85.6%. Effectively monetizing the trading activity of multi-asset classes into protocol profits will be the key opportunity going forward. Meanwhile, monitor deployer concentration closely (in June, Trade[XYZ] alone accounted for 97% of HIP-3 total volume).
• The USDC Yield Calibration Mechanism introduces considerable potential incremental returns for token holders. By period-end, the total stablecoin supply on HyperEVM reached $5.6 billion, with USDC making up 96%. Per the AQAv2 arrangement, approximately 90% of reserve interest yield, after cost adjustments, will be allocated to the Assistance Fund. Based on prevailing benchmark rates and stablecoin balances, the annualized cash contribution from this interest is estimated at $135 million to $200 million, potentially providing an additional buyback pool alongside trading fees. However, H1 reports have not yet confirmed this income recognition, and actual economic distribution remains pending verification as of publication; key sensitivity factors include stablecoin float, interest rate levels, and final profit-sharing ratios.
• Accompanying a slight contraction in net circulating supply, institutional adoption further strengthens demand for HYPE allocations. As of June 30, cumulative net inflows into three U.S. spot ETFs reached $309 million; by report metrics, ETFs, publicly traded treasury companies, and the Assistance Fund collectively hold roughly 82 million HYPE tokens, representing 8.2% of total supply. Restraint in team vesting similarly benefits the supply side, with the team extracting only 4.7% of granted unlocks in H1. Despite the currently supportive supply-demand dynamics, the $4.3 billion worth of fully vested but unclaimed tokens remains an undeniable potential supply overhang.
• This half-year report is authored by the Hyperliquid Research Collective (HRC), initiated jointly by GLC Research and Four Pillars, dedicated to independent investment research on the Hyperliquid ecosystem.

This Week's Brief Commentary (Comments)

• No One Needs Blockchain
• Monad's Quantum Cadence: Why Is Monad's Quantum Strategy Different From Ethereum's?
• Why Was Mantle Mentioned in Anthropic's FlashProve (And a Discussion on zk-SNARKs)
• Can Injective SICI Become the Henry Hub of Compute?

Macro Environment & Core On-Chain Metrics

The monitoring charts below are supported by data provided by CryptoQuant. For deeper analysis of relevant underlying raw data, CryptoQuant offers a complete suite of on-chain and market data intelligence solutions tailored for institutional participants.

Fig: Market Overview Dashboard (including total crypto market cap & BTC dominance, 30-day RSI for BTC/ETH/SOL, 90-day BTC futures open interest by exchange, BTC & ETH 90-day price trends & liquidation flows). Data sources: CoinMarketCap, CoinGecko, CryptoQuant

Fig: Bitcoin Supply & Demand Dynamic Metrics Dashboard (including BTC NUPL, Puell Multiple, daily net flows & cumulative scale of BTC spot ETFs over the past 90 days, weekly net additions & cumulative holdings of top 15 public company BTC treasuries). Data sources: CryptoQuant, Farside Investors, BitcoinTreasuries.net

Fig: On-Chain Capital Flows, Protocol Economics & RWA Overview Combo Panel (including total stablecoin supply & net change, top chain TVL share, DeFi stablecoin yields vs 3-month U.S. Treasuries, protocol revenue & chain fees with P/S ratio rankings, RWA asset weekly net inflows & segmented TVL distribution). Data sources: DefiLlama, Treasury.gov, rwa.xyz

Join the official Coincamps community:

X: https://x.com/coincamps

Telegram: https://t.me/coin_camps