Hyperliquid Policy Center ( HPC ) has submitted formal comments to the U.S. Securities and Exchange Commission ( SEC ) regarding the draft new "Regulations on the Supervision of Cryptocurrency Assets". The institution supports the overall initiative of the regulators, but indicates that in its current form, the document contains systematic legal pitfalls.
For this proposed draft to be truly feasible, the crypto industry demands five fundamental modifications.
In August of this year, SEC first proposed this compromise: startups will be able to raise up to $75 million per year under a simplified mechanism, and at the same time, they will also gain "safe harbor" status to protect mature tokens from prosecution by regulatory authorities.
Prior to this, the institution had been using the "Howey Test" from 1946 to evaluate the crypto market. This test was originally designed for the trading of Florida citrus plantation shares. Due to this legal deadlock, US Web3 startups have been forced to relocate overseas or block US users for many years.
SEC The issues startups face: five major pitfalls
Lawyers from Hyperliquid pointed out that this new compromise proposal from SEC is still detached from reality. The main objections from this policy center can be summarized into five categories:
- The legal status of airdrops
- Compliance Concepts
- Safe Harbor Clause
- Secondary Market Integration
- Federal Exemption Period
The institution believes that regulatory rules must clearly state that the distribution of free tokens based on on-chain activities does not constitute an investment contract, as users do not invest any funds and therefore do not bear financial risks. Furthermore, completing identity verification (KYC) or connecting a wallet to receive airdrops cannot be legally interpreted as a 'payment' of assets.
The remaining modifications are related to the long-term survival of the project. At present, if the project wants to enter a safe harbor, it must acknowledge that its tokens relied on the management team during the development phase, which will automatically expose the startup to litigation risks from the past few years.
HPC requires that companies be allowed to declare that their tokens have never been considered securities. Furthermore, the proposed rules do not address the status of decentralized protocols at all; and if a project does not have the right to legally trade tokens on a blockchain platform from day one, then the entire set of regulatory rules loses its economic significance.
Finally, although the current draft exempts approved projects from the supervision of state regulatory agencies, this exemption will lapse after they exit the safe harbor. The industry is calling for this protection to be made indefinite in order to alleviate the burden on companies that face regulation from over 50 different jurisdictions at the same time.
The article claims that Hyperliquid's move is an attempt to defend itself in advance for the market. This platform is a leader in the field of on-chain perpetual contracts, but due to strict U.S. laws, it has been forced to completely block U.S. residents. Currently, SEC or the Commodity Futures Trading Commission (CFTC) of the United States has not filed any formal lawsuits against this platform, nor has it issued any fines.
However, the project still faces pressure from traditional exchanges ( CME ) and the U.S. Congress. In September, during an investigation into possible insider trading prior to the release of tariff announcements, the U.S. House of Representatives Oversight Committee requested that Hyperliquid co-founder Jeff Yan provide internal data.
