Bitwise and Hyperliquid urge SEC to revise crypto rules on token trading and airdrops

Industry firms ask SEC for clearer token and airdrop guidelines

Bitwise Asset Management and the Hyperliquid Policy Center have asked the US Securities and Exchange Commission (SEC) to update its proposed crypto rules. The companies submitted comment letters on Monday, asking for specific guidance on how to classify digital tokens, how airdrops (free distributions of tokens to users) should be treated, and how secondary-market trading should work.

These requests are being made just before the SEC closes its public comment period on Tuesday. The agency is currently reviewing feedback on a proposed framework called Regulation Crypto Assets. This framework aims to create specific exemptions for crypto fundraising and establish a limited legal protection, known as a safe harbor, for tokens that are not considered investment contracts.

Key details from the comment letters

• Bitwise stated that investment managers need a clear standard based on publicly available information to determine if a crypto asset is regulated as a security.
• The Hyperliquid Policy Center argued that the proposed safe harbor may apply too late in a project’s development, limiting its usefulness.
• Hyperliquid also requested specific protections for airdrops that reward network participation and clearer rules on token buybacks.

What the Hyperliquid Policy Center says

In its submission, the Hyperliquid Policy Center emphasized that the current proposal does not provide clarity on whether unregistered intermediaries can facilitate token trading. The group urged the SEC to address secondary-market transactions directly rather than leaving traditional exchanges and decentralized trading venues facing uncertainty. They argued that the proposal fails to clearly define when tokens can trade freely through onchain protocols.

Opposition from legal and academic experts

Not all submissions supported the proposed rules. Former SEC enforcement official John Reed Stark and Duke University finance scholar Lee Reiners submitted a comment letter on October 16 urging the commission to withdraw the proposal entirely. They argued that the new rules would exceed the SEC’s statutory authority and weaken existing investor protections. The pair stated that current securities laws and the Supreme Court’s Howey test already provide a sufficient framework for regulating crypto offerings. They warned that adopting the rules in their current form would likely face immediate legal challenges and could be struck down.

What happens next

The SEC will now review all submitted comments before deciding whether to revise, adopt, or withdraw the proposed rules. The commission has not announced a specific timeline for a final decision. Any final rule would require a vote by the commission members before it can take effect.

Sources

• Cointelegraph