Crypto Market- Hyperliquid Caught in Controversy: JELLY Futures Delisted Amid Market Scandal
Crypto Market– The US Senate passed a significant motion on March 26, 2025, aimed at revoking the IRS DeFi broker rule introduced during the Biden administration. This motion, which received a 70-28 vote in favor, will now head to President Donald Trump’s desk. Trump has already expressed his support for abolishing the rule, which would have required decentralized finance (DeFi) protocols to report their financial activities to the IRS.
The rule in question sought to obligate DeFi platforms, such as decentralized exchanges, to report crypto sales and identify participants in the transactions. Critics argued that the rule would stifle crypto innovation by imposing burdensome regulations on decentralized platforms. Supporters of the repeal, including the White House’s AI and crypto czar David Sacks, claim it would prevent potential tax evasion loopholes.
The Senate’s decision follows a similar move made by the House of Representatives earlier in March. The bill, if signed into law by President Trump, will mark a significant shift in how DeFi platforms operate within the US regulatory framework.
In the world of decentralized finance, another controversy emerged as Hyperliquid, a popular decentralized exchange, delisted perpetual futures tied to the JELLY token. The exchange cited “evidence of suspicious market activity” related to the token’s trading patterns. Hyperliquid’s parent organization, the Hyper Foundation, has promised to reimburse most affected users for losses incurred during the incident.
The incident started when a trader opened a large $6 million short position on JELLY and then artificially pumped its price, deliberately triggering a self-liquidation. This action threatened to cause a massive liquidation if JELLY’s market cap had reached $150 million. Hyperliquid’s intervention saved the platform from potential catastrophic losses, but the exchange’s handling of the incident has drawn criticism.
Gracy Chen, CEO of cryptocurrency exchange Bitget, expressed concern, labeling Hyperliquid’s response as “FTX 2.0” due to its perceived centralization. Despite positioning itself as a decentralized exchange, Hyperliquid’s decision-making process appeared overly controlled by a small group of validators, leading to doubts about its true decentralized nature.
Polymarket Faces Backlash Over Controversial $7 Million Bet
Polymarket, a leading decentralized prediction market platform, is facing scrutiny after a controversial outcome in a high-profile bet about a US-Ukraine mineral deal. The market in question asked if US President Donald Trump would agree to a rare earth mineral deal with Ukraine before April 2025. Despite the deal not happening, the market was settled as a “Yes,” sparking outrage from users.
The issue seems to stem from a potential “governance attack,” where a whale from the UMA Protocol allegedly used their voting power to manipulate the oracle and influence the outcome of the bet. This manipulation allowed the whale to profit from the false resolution of the bet.
According to crypto researcher Vladimir S., the whale controlled 25% of the votes by casting 5 million tokens across three accounts. Polymarket has since pledged to take measures to prevent similar incidents in the future.
Concerns About Governance Manipulation in DeFi Platforms
These recent events in the crypto world highlight growing concerns about governance manipulation and the risks associated with centralized decision-making in decentralized platforms. The Hyperliquid and Polymarket controversies underscore how certain actors can exploit vulnerabilities in decentralized finance systems for their own benefit.
While DeFi promises a more decentralized and open financial ecosystem, incidents like these demonstrate the ongoing challenges in ensuring fair governance and transparency within these platforms. Industry observers are calling for stricter regulations to ensure that DeFi platforms remain trustworthy and equitable for all users.
The events of the past week serve as a reminder of the fragile nature of governance within DeFi protocols. As more platforms grow and attract mainstream attention, ensuring robust and transparent governance systems will be crucial in maintaining their legitimacy and the trust of their user base.
In the case of the IRS DeFi broker rule, the Senate’s decision to potentially repeal the regulation signals a shift towards a more relaxed regulatory approach for the crypto industry. However, the pushback from certain sectors highlights the ongoing debate about how to balance innovation with regulatory oversight.
For platforms like Hyperliquid and Polymarket, it remains to be seen how they will address the concerns raised by these controversies. Will they be able to rebuild user trust, or will they become cautionary tales for the DeFi community?
As the crypto market continues to evolve, the coming months could prove pivotal in determining the future direction of decentralized finance and its governance structures.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
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