Bitwise and Hyperliquid Push SEC Rule Changes on Token Trading and Airdrops

Two crypto industry groups have asked the US Securities and Exchange Commission (SEC) to make its proposed crypto regulatory framework more workable, arguing that key provisions on token classification, airdrops, and secondary-market trading still leave too many practical questions unanswered.

Bitwise Asset Management and the Hyperliquid Policy Center submitted comment letters ahead of the SEC’s public-comment deadline for its proposed Regulation Crypto Assets, which would introduce exemptions for qualifying crypto fundraising and a conditional safe harbor for certain tokens linked to investment contracts. The SEC is set to review the submissions before deciding whether to revise, adopt, or withdraw the proposal.

Key takeaways

• Bitwise urged the SEC to provide a clearer, manager-friendly standard for determining when a crypto asset is subject to securities laws, using publicly available information.
• The Hyperliquid Policy Center asked the SEC to expand the proposed safe harbor—warning that overly time-sensitive rules could fail projects before they mature.
• Hyperliquid said the proposal does not adequately address how unregistered intermediaries and onchain protocols could be treated under the rules.
• Separate from industry input, former SEC enforcement official John Reed Stark and Duke finance scholar Lee Reiners argued the SEC should withdraw the proposal entirely, citing statutory authority and investor-protection concerns.

Bitwise pushes for clearer “investment manager” decision rules

In an Oct. 19 comment letter to the SEC, Bitwise Asset Management said the agency needs to clarify how investment managers should evaluate whether a particular crypto asset falls under the securities laws. The firm argued that managers require a standard they can apply consistently, ideally one based on “publicly available information.”

Bitwise also asked for additional guidance on reliance on an issuer’s proposed Form TR filing—an approach the SEC’s framework contemplates as a way to certify that an investment contract relationship has ended. Bitwise pressed for clarity on when such reliance would be appropriate and, crucially, how managers should conduct token assessments when that filing is not available.

For investors and fund operators, these distinctions matter because compliance workflows depend on predictable judgment calls. Without a usable test, managers may be forced to over-rely on conservative interpretations or to treat uncertainty as a de facto barrier to participation—outcomes that can shape which projects can realistically attract regulated capital.

Bitwise’s submission was filed with the SEC as an official public comment Oct. 19 letter.

Hyperliquid Policy Center wants safer timing, plus clearer token mechanics

The Hyperliquid Policy Center’s separate submission argued that the SEC’s proposed safe harbor could arrive too late for some projects. In its view, if the framework’s protective pathway is structured around a process that only becomes available after certain conditions are met, the safe harbor may not be practical for ongoing development.

The group called for stronger, clearer protections for airdrops that reward network participation, highlighting a common real-world use case where tokens are distributed to users for contributing to a blockchain ecosystem.

Hyperliquid also asked for explicit guidance on token buybacks. In practice, token repurchase programs can affect how a token’s economic incentives are understood, and the letter’s push suggests the current proposal does not map those transactions clearly to the SEC’s contemplated securities analysis.

Secondary-market trading and intermediaries remain unclear

Hyperliquid’s letter raised another category of concern: the SEC proposal reportedly does not provide sufficient clarity on whether unregistered intermediaries can facilitate token trading, and whether tokens can trade freely through onchain protocols.

The policy group urged the SEC to tackle secondary-market transactions directly rather than leaving exchanges and decentralized trading venues to interpret regulatory risk on their own. That point goes to the heart of how most token markets operate in the United States: even if a token’s initial distribution is structured to fit a regulatory path, trading liquidity often depends on intermediaries and automated onchain venues that may not fit neatly into traditional gatekeeping models.

In the Hyperliquid letter submitted separately to the SEC, the group argued that without clearer rules for secondary trading and intermediaries, regulatory uncertainty could persist in ways that ultimately affect market access and investor execution quality.

Not all commenters agree with the direction—some want withdrawal

While Bitwise and Hyperliquid argued for revisions, a different pair of commentators said the SEC should withdraw the proposal altogether.

In an Oct. 16 comment letter, former SEC enforcement official John Reed Stark and Duke University finance scholar Lee Reiners urged the commission to remove the proposal in their Oct. 16 submission, contending that the SEC exceeded its statutory authority and that the plan would weaken investor protections.

Stark and Reiners argued that existing securities laws and the Supreme Court’s Howey test already provide a framework for regulating crypto offerings. They further claimed that the proposed fundraising exemptions could reduce investor safeguards, while the safe harbor might allow issuers to remove tokens from securities oversight through self-certification.

They also warned that adopting the rules in their current form could trigger an immediate legal challenge, potentially resulting in the framework being struck down. Their argument underscores a broader tension in crypto regulation: agencies and industry groups are trying to create more certainty through tailored rules, but critics view those same rules as potentially overstepping authority and weakening established investor-protection mechanisms.

What happens next as the SEC weighs revisions

The SEC’s public comment period closes Tuesday, after which the agency will review the submissions before deciding whether to revise, adopt, or withdraw the proposal. The SEC has not announced a timetable for its final decision, and any final rule would require a commission vote before taking effect.

For market participants, the near-term watch items are straightforward: whether the SEC incorporates Bitwise’s request for a manager-operable standard and reliance framework; whether it broadens Hyperliquid’s safe harbor approach to better cover token mechanics such as airdrops, buybacks, and secondary trading; and whether critics’ concerns about statutory authority and investor protection shape the agency’s willingness to finalize the proposal without changes.