Bitwise and Hyperliquid Challenge SEC Proposed Crypto Regulations
Firms demand clearer guidance on token classification and secondary market trading rules.
1Regulatory Proposal Comment Period
Bitwise Asset Management and the Hyperliquid Policy Center submitted formal comment letters to the SEC regarding the proposed Regulation Crypto Assets. This submission occurred as the public comment period neared its conclusion on Tuesday. The firms are actively seeking revisions to rules governing token classifications, airdrops, and secondary-market trading protocols.
2Bitwise Asset Management Demands
Bitwise requested that the SEC clarify how investment managers determine if crypto assets fall under securities laws. The firm specifically argued for a standard based on publicly available information. Furthermore, they seek explicit guidance on relying upon an issuer’s Form TR filing to certify that an investment contract has ceased existence.
3Hyperliquid Policy Center Concerns
The Hyperliquid Policy Center argued that the proposed safe harbor arrives too late in a project's lifecycle. They requested broader protections for airdrops that incentivize network participation. Additionally, the group demanded specific regulatory guidance regarding token buybacks, noting that current proposals fail to provide necessary clarity for decentralized trading venues and protocols.
4Secondary Market Trading Uncertainty
Hyperliquid highlighted significant concerns regarding whether unregistered intermediaries can facilitate token trading. The firm urged the SEC to address secondary-market transactions directly rather than leaving exchanges in a state of regulatory ambiguity. They emphasized the need for clear rules regarding whether tokens can trade freely through existing onchain protocols without legal repercussions.
5Opposition to Proposed Rules
Former SEC enforcement official John Reed Stark and Duke University scholar Lee Reiners submitted a separate letter on October 16. They urged the commission to withdraw the proposal entirely. They argued that the current framework exceeds the agency's statutory authority and would ultimately weaken essential investor protections within the digital asset market.
6Howey Test and Legal Risks
Stark and Reiners contend that existing securities laws and the Supreme Court’s Howey test already provide a sufficient framework for regulating crypto offerings. They warned that the proposed safe harbor allows issuers to remove tokens from oversight through self-certification. They also cautioned that adopting these rules would likely invite immediate legal challenges.
7SEC Review and Decision Process
The SEC is currently reviewing all submissions following the closure of the public comment period. The commission must decide whether to revise, adopt, or withdraw the proposed rules. No specific timetable for a final decision has been announced, and any final rule will require a formal commission vote before it takes effect.
8Industry Impact and Future Outlook
The tension between industry participants and regulatory critics highlights the ongoing struggle to define crypto oversight. While firms seek operational clarity for airdrops and trading, legal experts warn of potential judicial overreach. The final outcome will determine the future of fundraising exemptions and the broader regulatory landscape for digital assets in America.