Papertrade faces criticism over leverage caps and token transferability changes

Papertrade, a high-leverage trading venue on Hyperliquid’s HyperEVM network, is facing scrutiny following changes to its operational rules. Jason Pagoulatos, head of markets at Delphi Digital, characterized the platform's decision to restrict off-contract token transferability as a “bait and switch,” noting that the change occurred after approximately $140 million in deposits had been made.

While Papertrade’s team argued that preventing the free transfer of the PAPER token is necessary to mitigate price manipulation risks—specifically to prevent attackers from using short positions to fund market attacks—Pagoulatos noted that the shift in terms after users had already committed capital is a “bad look.”

Additionally, concerns have been raised regarding potential leverage caps. Analysts suggest that limiting leverage could reduce the platform's appeal to users seeking high-risk, high-reward opportunities, potentially undermining demand for the PAPER token. Market sentiment reflects this uncertainty, with prediction markets showing a decreased probability of the PAPER token's fully diluted valuation exceeding $25 million one day after launch.