Hyperliquid Policy Center Urges SEC to Refine Crypto Rules…

The Hyperliquid Policy Center (HPC) has urged the US Securities and Exchange Commission to revise its proposed cryptocurrency regulatory framework, submitting five recommendations aimed at clarifying how token distributions and decentralized markets operate under federal securities law. In an October 19, 2026 comment letter, the organization expressed support for Regulation Crypto Assets, which the SEC proposed in August, while identifying provisions it believes could create unnecessary legal uncertainty for blockchain developers and token holders.The proposal includes a startup exemption allowing qualifying token offerings of up to $5 million over four years and a separate fundraising exemption permitting up to $75 million in any 12-month period. It also proposes a safe harbor addressing when crypto assets cease to be associated with investment contracts, alongside exemptions from certain state registration requirements. The public comment period closes October 20. The SEC has not adopted the proposed framework or announced a final implementation date.

Airdrops and Secondary Trading Take Center Stage

HPC's first recommendation concerns the legal treatment of cryptocurrency airdrops, particularly distributions in which recipients provide no payment or other consideration. The organization wants the SEC to incorporate its March 2026 interpretive guidance into the final regulation, explicitly recognizing that qualifying free distributions do not satisfy the investment-of-money requirement associated with investment contracts. It also argues that administrative activities, including connecting a cryptocurrency wallet or completing sanctions screening, should not automatically be classified as consideration. HPC distinguishes these procedures from services performed specifically in exchange for tokens. Its second recommendation addresses secondary-market trading.The organization wants tokens distributed under the proposed exemptions to become freely tradable from the outset, with clearer regulatory treatment for intermediaries and decentralized protocols facilitating those transactions. Without additional clarification, HPC argues, developers and market participants could remain uncertain about whether ordinary trading activity creates securities registration obligations. The distinction matters for decentralized exchanges and blockchain networks seeking to support token liquidity while complying with federal law. However, the recommendations do not establish that every airdrop or secondary-market transaction would fall outside securities regulation.

Safe Harbors, Buybacks and State Rules Remain Disputed

HPC's third recommendation concerns the proposed safe harbor for crypto assets no longer associated with investment contracts. The organization argues that developers should not have to implicitly acknowledge that their tokens previously constituted investment contracts to qualify for protection. It also wants the safe harbor to accommodate networks still undergoing essential development, rather than applying only after managerial efforts have concluded. The fourth recommendation addresses token buybacks and the definition of a controlling party. HPC wants the SEC to distinguish automated repurchases conducted under published protocols from discretionary buybacks directed by identifiable entities.It also seeks consistent terminology for determining whether network participants collectively exercise centralized control. Finally, the organization wants federal preemption of state registration requirements to remain effective after projects satisfy the safe harbor. Under the current proposal, HPC argues, protections could expire at precisely the point when developers complete the relevant conditions, potentially exposing projects to differing state requirements.The submission comes as US regulators continue developing clearer boundaries between securities offerings, decentralized infrastructure and ordinary cryptocurrency trading. For developers, the final rules could influence token fundraising, distribution structures and access to US markets. For investors, the outcome could affect secondary-market liquidity and disclosure obligations. Nevertheless, the SEC must still evaluate public comments before determining whether to revise or adopt the framework. HPC's recommendations remain proposals from an industry advocacy organization, not regulatory exemptions currently available to market participants.