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Initially announced on April 5, 2022, via No More Robots' "Hypnospace Next" presentation, Dreamsettler was to be a sequel/follow-up to Hypnospace Outlaw (Game), this time based on the computing and internet of the mid-2000s, rather than the mid-to-late '90s inspiration of the original. Instead of an internet moderator, the player would have been a detective, solving mysteries presented by users of the sleeptime internet system "Sleepnet".
The game's scope was greatly increased from Hypnospace Outlaw's. Some features detailed included a more complex music player, a functional in-universe e-mail manager, and "Oomph", a player akin to early Flash Player.
On March 14, 2025, series creator Jay Tholen announced that Tendershoot (Company)'s funds were struggling, and opened a Patreon to help fund continued development of the game. Three months later, on June 20, 2025, Tholen announced via Patreon and Youtube that development of Dreamsettler had been cancelled. In his video about the cancellation, Tholen cited issues with development, particularly noting funding, scope, and his own approaches to development.
Alongside the announcement of the game's cancellation, Tholen noted the possibility of releasing the latest development version.