The Hyperliquid Policy Center said it has asked the U.S. Securities and Exchange Commission to modify parts of its proposed Regulation Crypto Assets framework before the agency’s October 20 comment deadline. In a comment letter announced on October 19, the group said it supports the overall direction of the proposal but believes several issues remain unclear for decentralized networks, developers and token holders.
The SEC introduced the framework in August 2026 as a proposed set of registration exemptions for certain crypto-related investment contracts. Under the draft, qualifying projects could raise up to $5 million over four years through a startup exemption, or as much as $75 million in 12 months under a separate fundraising exemption, though neither pathway has been finalized and the final rule could change.
Five recommendations ahead of the SEC deadline
Hyperliquid’s policy arm said its submission focuses on five areas: token airdrops, secondary trading, developer safe harbors, token buybacks and the duration of federal preemption from some state securities registration requirements. The group’s position is not that the SEC should abandon the proposal, but that the agency should revise it to better reflect how decentralized crypto systems are built and used.
The filing arrived one day before the close of the SEC’s public consultation under file number S7-2026-27. The commission has not adopted any of the requested changes, and the proposal remains under review as part of the rulemaking process.
Airdrops and secondary trading remain central concerns
One recommendation asks the SEC to place its existing interpretation of airdrops directly into the final rule. Hyperliquid Policy Center argues that a free token distribution generally should not satisfy the investment-of-money element of an investment contract when recipients do not provide payment or other tangible consideration. It also said routine steps such as connecting a wallet or passing sanctions screening should not, by themselves, convert a free distribution into a securities transaction.
The group also wants the SEC to clarify what happens after tokens are distributed through the proposed exemptions. In its view, the usefulness of the offering framework depends partly on whether token holders can later transfer or sell those assets in functioning markets. The August proposal discusses offerings, resale and some state registration questions, but does not, in Hyperliquid’s view, fully address decentralized protocols and other actors that facilitate secondary trading.
At the same time, the submission does not claim all trading venues should receive blanket relief. It acknowledges that existing securities law requirements for exchanges, brokers and dealers can still apply when an activity falls within those statutory definitions.
Developer certification and buyback language
Another point of dispute is the proposed safe harbor for determining when a token is no longer tied to an investment contract. As drafted, the framework generally requires an issuer to complete, or permanently stop, the essential managerial efforts previously promised to investors. Hyperliquid Policy Center said that approach could be problematic for projects that have consistently argued their tokens were never sold as investment contracts in the first place, because a required certification could be read as implying the opposite.
The group wants projects to be able to certify that no such investment-contract relationship ever existed. It also argues that safe-harbor protection should be available while development work is still ongoing, not only after those efforts are completed or abandoned.
On token repurchases, Hyperliquid asks the SEC to distinguish between automatic buybacks carried out under preset on-chain rules and repurchases directed by a centralized company or foundation. The group said the two models should not necessarily receive the same treatment when regulators assess whether a central party is driving the economic activity around a token.
State law questions and what comes next
The fifth recommendation concerns federal preemption. The SEC’s draft would preempt certain state securities registration requirements for qualifying offerings and some later transactions, while leaving other state laws in place. Hyperliquid Policy Center said those federal protections should continue even after a project satisfies the proposed safe harbor, warning that otherwise developers and token holders could face a fresh round of state-level registration issues.
The SEC’s proposal also would not displace every state rule affecting crypto businesses. State antifraud laws and other requirements outside the covered offerings could still apply. For now, the immediate next step is the close of the comment period on October 20. After reviewing public input, the SEC may revise the proposal, keep it as drafted or adopt a different final framework.
Source: crypto.news