Hyperliquid’s policy arm asks the SEC for five changes to Regulation Crypto Assets

The Hyperliquid Policy Center (HPC), a Washington group that lobbies for US access to on-chain markets such as Hyperliquid, filed a comment letter on 19 October asking the SEC to adopt its proposed Regulation Crypto Assets with five changes. The letter arrived one day before the public comment period on the proposal closes, on Tuesday 20 October. Its requests cover airdrops, secondary trading, the proposed safe harbor, token buybacks and how long federal law should override state registration rules.

The group backs the rulebook as a whole. “We generally support the Proposal and urge its prompt adoption,” the letter says, before listing features that, as drafted, “will not deliver the certainty the Commission intends”. It is signed by HPC chief executive Jake Chervinsky and senior counsel Brad Bourque.

The SEC has adopted none of these changes. A comment letter is a request from an interested party, and the Commission can take it up, rework it or ignore it.

Regulation Crypto Assets is the SEC’s first offering regime written for tokens. Until now Coindaro had only summarised it inside a wider piece on US crypto rules.

What the SEC proposes in Regulation Crypto Assets

The Commission issued the proposal on 18 August 2026 under file number S7-2026-27 (Release Nos. 33-11434 and 34-106150). It appeared in the Federal Register on 21 August, at 91 FR 54510, which opened a 60-day comment window ending on 20 October. The release fills 146 pages of the Federal Register. It is classed as an economically significant regulatory action under Executive Order 12866, so the White House budget office reviewed it before publication.

The scope is narrower than the name suggests. The rules apply to “covered investment contracts” built around crypto assets that are not themselves securities. Tokenized shares and bonds are out, and so is any contract that also involves another asset. Issuers using either exemption stay subject to federal antifraud and antimanipulation rules.

Four numbered rules carry the regime, each aimed at a different problem token projects have raised with the SEC for years.

Rule 200: a one-time $5 million startup exemption

Rule 200 allows offerings “of up to $5 million during a four-year period”, in the words of the SEC’s proposal page. The release defines the transactions it covers broadly: capital raises, but also distributions handed out in recognition of past work or as an incentive. A project files a notice of reliance on a new Form NOR to start the clock. It must then file a transition report on Form TR no later than four years after that notice, and it cannot start a second four-year run. The release adds no financial statement requirement for this exemption.

Airdrops get a specific treatment. Those that fit the SEC’s March 2026 interpretation need no exemption at all, the release says. An airdrop that falls outside it can be made under the startup exemption, inside the $5 million limit.

Rule 300: two fundraising tiers of $20 million and $75 million

Rule 300 is “modeled on Regulation A with the same offering limits”, according to the proposing release. Under Tier 1, an issuer could sell up to $20 million of covered investment contracts in a 12-month period, including no more than $6 million sold by affiliated holders, with no audit of its financial statements required. Tier 2 raises the ceiling to $75 million a year, with up to $22.5 million from affiliated holders, and requires financial statements audited by an independent auditor.

Two more limits apply. In an issuer’s first offering under Rule 300, and in any offering qualified within a year of that first one, sales by existing holders may not exceed 30% of the offering. And under both tiers, a buyer who is not an accredited investor may put in no more than 10% of the greater of their annual income or net worth.

Rule 400: a safe harbor that ends a token’s investment contract

Rule 400 is the part the industry has waited for. It creates a “conditional safe harbor from the term ‘investment contract’ in the definition of ‘security'”, according to the SEC. To use it, an issuer must have “completed or otherwise permanently ceased all essential managerial efforts” it promised buyers, make no new promises of that kind, and file a certification on Form TR. Once those conditions are met, the token is deemed not to be subject to an investment contract under the Securities Act and the Exchange Act.

Rule 500: federal law over state registration

Rule 500 defines a “qualified purchaser” under Section 18(b)(3) of the Securities Act. In practice that switches off state registration and qualification for offerings made under the two exemptions, and for certain resales of those tokens, as long as the issuer keeps its filings current. States keep their power to pursue fraud.

For its paperwork estimates, the SEC assumes 130 offerings a year under the regulation, 99 under the startup exemption and 31 under the fundraising exemption, plus 475 issuers a year relying on the safe harbor. The release presents these as working assumptions, saying it is not possible to predict precisely how many offerings there will be.

All of this builds on the interpretation the SEC published in March 2026 (Release No. 33-11412, printed in the Federal Register on 23 March). That document said an airdrop of a non-security token to people who give no money, goods, services or other consideration in return does not involve an “investment of money”, one of the elements of an investment contract. Before the August proposal, a team that wanted to sell a token legally in the United States had to register the offering or use general exemptions such as Regulation D, Regulation A or Regulation Crowdfunding, none of them written for tokens.

Why “investment contract” is the term that matters

US securities law decides whether a token sale is a securities offering by asking whether it is an investment contract. The test comes from a 1946 Supreme Court case about Florida citrus groves, SEC v. W.J. Howey: money invested in a common enterprise, with an expectation of profit from the efforts of others. A team that sells tokens while promising to build the network usually meets it. Rule 400 answers the question the industry kept asking afterwards: what happens once the team has built what it promised?

Airdrops sit at the other end of the test. If recipients pay nothing, there is no “investment of money” and no investment contract forms. That is why the March interpretation mattered to projects that hand tokens to their users, and why HPC wants its reasoning in the rule itself. Our glossary entry on airdrops explains how these distributions usually work.

The five changes Hyperliquid’s policy center asks for

HPC calls itself “an independent research and advocacy organization” in the letter. Its requests, summarised on its blog and argued in detail in the letter, are specific. None asks the SEC to start over.

Airdrops: put the March interpretation in the rule text

HPC wants the airdrop analysis written into the final rule, not just repeated in the release that accompanies it. The test it proposes is whether a recipient gave “tangible and definable consideration”, a phrase taken from the Supreme Court’s 1979 Daniel decision; the letter calls this the “sine qua non” of an investment of money. Someone who earns tokens by using a network, running a validator, supplying liquidity or voting in governance has not funded the issuer, HPC argues.

The March interpretation only covered airdrops that were not announced in advance. HPC wants the rule to cover announced airdrops too, when three conditions hold: the tokens go out on or after the date the system works, eligibility rests on the recipient’s own use of or contribution to the system, and the distribution is not a capital raise. In that case, it says, the timing of the announcement should not matter.

The letter also lists delivery steps that should never count as payment: connecting a wallet, signing a claim transaction, paying a network fee, accepting terms of use, attesting to eligibility, and sanctions, anti-money-laundering or geographic screening. Treating them as consideration “could have the perverse effect of penalizing issuers” for careful compliance, HPC writes. It asks the SEC to confirm that the same reasoning applies when older airdrops, made before the rule, are reviewed.

Secondary trading: say whether tokens can change hands

The proposal treats resales of a token still tied to an investment contract as securities transactions until the token separates from the issuer’s promises. HPC says this leaves open whether unregistered persons can facilitate trades, whether the tokens can trade freely on on-chain protocols, and how registered brokers should handle them. It quotes the SEC’s own economic analysis, which says the benefits of the regime “may be fairly small” if no liquid secondary market develops.

Its fix goes further than a clarification. HPC asks the SEC to use its exemptive power under Section 36 of the Exchange Act to exempt people who facilitate secondary trades in these tokens, or trades on qualifying on-chain protocols, from the definitions of exchange, broker, dealer and clearing agency, for as long as the issuer complies with its exemption. It also wants the rule text to say that secondary trades in non-security crypto assets are not securities transactions at all.

Safe harbor: no admission, and room for projects still building

As drafted, a team using Rule 400 certifies that the investment contract around its token has ended, which implies there was one. HPC says a project whose lawyers concluded no investment contract ever existed “cannot reasonably” certify the contrary, especially when the filing could be used against it in private lawsuits or state proceedings. It wants filers to be able to certify instead that a token was never subject to an investment contract, and the rule to say that a Form TR filing is not evidence of a past securities offering.

HPC also asks that the supporting analysis behind a Form TR certification stay out of the public filing, or go to SEC staff confidentially, because a public version would work as “a de facto litigation roadmap”. And it wants the safe harbor open to projects whose essential managerial efforts are still under way, with a defined development period, disclosures and milestones, rather than only to those that have finished.

Buybacks: one “central party” test, and protocol rules apart

Many token projects buy back their own tokens with protocol revenue. The SEC’s Division of Corporation Finance said in its crypto FAQs, updated on 28 September 2026, that where a functional system has no central party, announcing a buyback is not a promise of essential managerial efforts. HPC wants that guidance moved into the rule or the adopting release, because staff FAQs lack legal force.

It also wants one definition of “central party” across the March interpretation, the proposal and the FAQs. A “group” should mean people acting in concert or under common control, as in the beneficial-ownership rules, so that dispersed validators, delegators, developers, liquidity providers and users do not form a controlling group just because their incentives line up. Buybacks that run on fixed, published parameters and can be checked on-chain should never count as a promise of managerial effort, the letter says. A discretionary buyback by a central party could, depending on the facts.

The topic is close to home for HYPE holders, since Hyperliquid’s Assistance Fund receives almost all protocol fees and uses them to buy HYPE on the market. The letter itself does not mention that programme.

Preemption that outlasts the safe harbor

The last request concerns state law. Under the proposal, preemption of state rules for resales lasts only while the issuer stays current with its filings, and ends once the investment contract ceases to exist, including through the safe harbor. HPC says that would expose holders, deployers and trading venues to registration regimes “across more than fifty jurisdictions” at the very moment the token is meant to have left securities law, which rewards delay.

Its proposal: an issuer that has met the safe harbor could choose on Form TR to keep “covered security” status by filing a short annual certification instead of full periodic reports. That statement could be filed by an unaffiliated person, or through on-chain governance where no sponsoring company remains. State regulators would keep their antifraud powers.

Who else has written to the SEC

The public comment file shows letters with a delay. When Coindaro checked it on 19 October around 16:45 UTC, its first page, out of five, listed filings from 6 to 16 October, and HPC’s letter was not yet among them. HPC published it on its own site and addressed it to the file.

Among the letters posted on the SEC’s site by 16 October are submissions from the law firm Davis Polk and Wardwell (15 October), Ava Labs through its general counsel Lee Schneider (12 October), Anthony Scaramucci of SkyBridge (8 October), Hedera Hashgraph (7 October), Rialto Markets and Parameter Crypto (both 7 October), the Global Legal Entity Identifier Foundation (16 October) and a co-founder of BarnBridge DAO (16 October). Large industry names such as a16z, Coinbase or the Blockchain Association do not appear on that first page; later pages and last-day filings may still include them.

Hedera’s letter overlaps with HPC on the safe harbor. It asks the SEC to write the asset categories of the March interpretation, digital commodities in particular, into Rule 400, to define “essential managerial efforts” more clearly, and to protect issuers that relied in good faith on earlier SEC guidance.

The sharpest criticism so far comes from five law professors: John Coates, a former SEC general counsel, John Coffee Jr., James Cox, Merritt Fox and Joel Seligman. Their letter of 7 October attaches Shadow SEC Statement No. 15, which calls the proposal “deeply flawed”. The statement asks whether a separate crypto regime is needed at all, since crypto offerings already use Regulation D, Regulation A and Regulation Crowdfunding, notes that resales need not be registered, and objects that the bad-actor rules would not cover misconduct from before the rule. It says the regulation should at least be proposed again.

Blockworks has taken another line. Unchained reported on 19 October, from a briefing Blockworks shared before filing, that the company wants token projects to disclose token loans, market-maker and exchange agreements, tokens paid to advisers or influencers, key wallet addresses and how supply is calculated, with a new “Qualified Onchain Disclosure Agent” role. Unchained had not seen the letter itself, and noted that Blockworks offers filing tools to token issuers.

HYPE and the second airdrop question

Cryptoast linked the letter to a long-running question among HYPE holders: will there be a second airdrop? Its own article says the letter “ne mentionne aucun deuxième airdrop HYPE” (mentions no second HYPE airdrop), and nothing has been announced. The reasoning is Cryptoast’s: the first distribution in November 2024 handed out about 31% of HYPE supply, nearly 38.9% is reserved for future emissions and community rewards, and a looser federal airdrop rule could make new distributions easier, including to US users. That is a reading, not a plan, and no Hyperliquid entity has confirmed one.

For context only, HYPE traded near $78.6 at 16:22 UTC on 19 October, about 2% higher over 24 hours and 6.8% lower over seven days. Its record, according to CoinGecko, is $97.96, set on 23 September. Nothing in the data links the day’s move to the letter.

The policy center has been working the SEC for months. On 14 July 2026, staff of the SEC’s Crypto Task Force met representatives of HPC, XYZ Ltd and the law firm Sullivan and Cromwell to discuss crypto regulation, according to the SEC’s memo of that meeting. The request attached to the memo, which also named Hyperliquid Labs, asked for a meeting to give an overview of the Hyperliquid protocol. In its blog post on the letter, HPC says many projects launched abroad or excluded Americans from token distributions because they could not tell how US law applied to them.

Why the SEC is writing these rules alone

Congress was supposed to settle much of this. The CLARITY Act, the market-structure bill, cleared the Senate Banking Committee 15-9 on 14 May 2026, then failed a procedural vote on the Senate floor on 15 September, 49-50, with 60 votes needed. The bill is not formally dead, but no new floor date has been set. We covered that stall in our explainer on how the SEC and CFTC are writing US crypto rules without CLARITY.

Since then the regulators have moved on their own. CFTC chair Michael Selig said on 20 August that he had told his staff to explore rules codifying a crypto market structure under the agency’s existing powers. On 17 September the CFTC sent a pre-rule action, “Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets”, to the White House regulatory office, and a binding CFTC rule is not expected to take effect before late 2027. The SEC has a second crypto rulemaking open, on custody for investment advisers and funds, which we covered on 1 October.

The difference matters. A statute would be harder to undo, while a rule adopted by the Commission can be rewritten by a later Commission and challenged in court.

What it changes for token holders and issuers

For a US team planning a token, the proposal would add a route between full registration and launching offshore: a capped, filed exemption with a time limit, then an exit from investment-contract status once the promised work is done. Holders would get disclosure filings to read, and non-accredited buyers would face a cap of 10% of their income or net worth in Rule 300 offerings. If HPC gets its way, the rules on airdrops and resales would also be written down rather than left to staff guidance.

Readers in Europe sit under a different system. In the EU, MiCA handles most token offers through a white paper notified to the national authority, the AMF in France or Consob in Italy, rather than through exemptions with audited accounts. A US exemption has no direct effect on EU rules. Our guide to MiCA sets out how the European regime works.

After 20 October: staff review, then a final rule or a new draft

Once the window closes, SEC staff will read and summarise the letters before the Commission decides whether to adopt the rules as proposed, change them, or propose them again. No date has been announced. Letters filed by the deadline will keep appearing on the SEC’s site for some days, so the full list of commenters is not known yet.

On airdrops, the open point is whether the reasoning moves from an interpretation into rule text, as HPC asks. On the safe harbor, it is whether projects still building can use it, and whether federal preemption survives once a token leaves securities law. The CFTC’s own crypto market rules, at the White House since 17 September, are the other half of the US rulebook still to come.