Bitwise and Hyperliquid Push SEC Rule Changes for Token Trading, Airdrops

The US Securities and Exchange Commission is facing mounting pressure from crypto industry groups to clarify key parts of its proposed “Regulation Crypto Assets” framework, as public comments on the rulemaking process are set to close. In separate comment letters submitted Monday, Bitwise Asset Management and the Hyperliquid Policy Center urged the SEC to revise the proposal to reduce ambiguity around token classification, token-related corporate actions such as airdrops, and how secondary-market trading should be treated.

The SEC’s proposal would establish exemptions for qualifying crypto fundraising and introduce a conditional safe harbor intended to address when tokens associated with investment contracts may fall outside certain securities-law requirements. The public comment period is set to end Tuesday, according to the SEC notice referenced by Cointelegraph earlier this week.

Key takeaways

• Bitwise asked the SEC for a practical standard investment managers can use to determine whether a crypto asset is a security, relying on “publicly available information.”
• Bitwise also sought clearer guidance on how to use an issuer’s proposed Form TR and how managers should evaluate tokens when no such filing exists.
• The Hyperliquid Policy Center urged the SEC to broaden the proposal’s safe harbor so it can protect token incentives earlier in a project’s lifecycle, including participation-based airdrops.
• Hyperliquid warned the draft rule leaves unresolved whether unregistered intermediaries can facilitate token trading and whether onchain protocols permit tokens to trade without regulatory uncertainty.
• Meanwhile, a separate Oct. 16 letter from former SEC enforcement official John Reed Stark and Duke finance scholar Lee Reiners argued the SEC should withdraw the proposal, citing statutory authority and investor-protection concerns.

Industry groups seek clearer token classification and manager standards

Bitwise Asset Management’s Oct. 19 comment letter centered on what it says is the biggest operational gap in the proposal: guidance for investment managers on when a crypto asset should be treated as subject to securities laws. Bitwise argued that managers need an approach they can apply consistently, using information that is accessible outside the issuer’s internal processes.

In its filing, Bitwise urged the SEC to clarify how investment managers should determine whether a particular token falls within the securities framework. The firm specifically asked for a standard that can be implemented using “publicly available information,” an emphasis that matters because asset managers typically operate under time-sensitive portfolio and compliance constraints.

Bitwise also pointed to the proposal’s reliance on an issuer’s “proposed Form TR” certification. The SEC’s structure contemplates a situation where an issuer can certify that an “investment contract” has ceased to exist. Bitwise asked for clearer rules on when managers can rely on that filing, as well as what they should do in cases where no Form TR exists.

For investors, the practical stakes are straightforward: clearer classification and reliance rules can affect eligibility for portfolios, disclosures, and the risk calculus around whether a token’s regulatory status changes over time—or remains uncertain due to process gaps.

Safe harbor timing, airdrops, and token buybacks come under scrutiny

In a separate submission, the Hyperliquid Policy Center argued that the SEC’s proposed safe harbor may arrive too late to be effective for many projects. The group’s central concern was that token incentives and network-participation mechanisms often occur early and throughout a project’s development, so safeguards that can only be relied on later could fail to match real-world token lifecycles.

Hyperliquid asked the SEC for expanded protection for airdrops that reward network participation. It also requested guidance on token buybacks, raising the broader question of how routine issuer and ecosystem activities should interact with the SEC’s securities-law analysis.

Perhaps most importantly, Hyperliquid warned that the proposal “fails to provide clarity” on whether unregistered intermediaries can facilitate token trading and whether tokens can trade freely through onchain protocols. In its view, leaving those issues unresolved would push regulatory uncertainty onto both centralized exchanges and decentralized trading venues.

Rather than treating the secondary-market question as something that can be addressed indirectly, Hyperliquid urged the SEC to address secondary-market transactions directly within the rulemaking.

Not everyone wants change—the SEC faces calls to withdraw

Not all comment letters argued for revisions. In an Oct. 16 letter cited in the SEC’s public comment docket, former SEC enforcement official John Reed Stark and Duke University finance scholar Lee Reiners urged the commission to withdraw the proposal entirely. Their argument took a fundamentally different direction from the industry requests for clarification.

Stark and Reiners contended that the SEC’s proposal exceeds the agency’s statutory authority and could weaken investor protections. They argued that existing securities-law tools—along with the Supreme Court’s Howey test—already provide a framework for regulating crypto offerings.

They further criticized the proposal’s fundraising exemptions as potentially undermining investor safeguards. They also argued the conditional safe harbor could allow issuers to effectively remove tokens from securities oversight through self-certification, creating a path they believe would be inconsistent with investor-protection objectives.

In addition, the pair warned that implementing the rules in substantially their current form would likely trigger an immediate legal challenge, with a risk that a court could strike down the framework.

What happens next as the comment window closes

With the public comment period closing Tuesday, the SEC will review the submissions before deciding whether to revise, adopt, or withdraw the proposal. The commission has not announced a specific timetable for its final decision, and any final rule would require an SEC vote before it becomes effective.

For readers watching this rulemaking, the key uncertainty is whether the SEC will shift from broad, principle-based drafts toward the more operational clarifications industry groups are seeking—especially around the mechanics of token classification, the use of Form TR, and how the SEC intends to handle secondary-market trading and intermediary activity. Just as importantly, investors should also monitor whether the legal concerns raised by Stark and Reiners influence the SEC’s willingness to proceed—or whether the agency views those objections as addressable through refinements rather than withdrawal.