Hyperliquid Policy Center hopes that the U.S. Securities and Exchange Commission (SEC) will address issues such as free token distribution, decentralized transactions, and protection for developers in its crypto regulatory proposals. The organization has submitted its opinions to SEC, requesting modifications before the public consultation on the proposed framework of Regulation Crypto Assets ends on October 20, 2026.

Key Points

• Hyperliquid hopes that the revised content will cover airdrops, trading, developer protection, buybacks, and state-level registration.
• The organization hopes that unpaid airdrops are usually excluded from the requirement of “investing money”.
• The draft provides financing exemptions for eligible projects, with ceilings of up to $5 million and $75 million respectively.
• Hyperliquid hopes that even after the project meets the safe harbor criteria, the federal level of protection can continue to apply.

SEC Five proposed amendments to encryption regulation

Eligible projects can raise up to $5 million in financing over four years under the exemption for startups. Another separate exemption allows for a maximum of $75 million in financing within 12 months.

The policy center believes that the value of these exemptions partly depends on whether the tokens have an effective market available for transfer or sale. Therefore, their submitted opinion requires that SEC address activities other than the initial distribution.

Airdrops and secondary transactions require a more explicit approach to handling.

Hyperliquid hopes that the final rules will officially confirm SEC's current interpretation, which is that receiving tokens without paying consideration generally does not meet the requirement of 'investing money'. The organization asks regulatory authorities to focus on whether the recipient has exchanged these assets for tangible and clearly definable consideration.

This approach will distinguish between administrative tasks, such as connecting wallets or completing sanctions screenings, and the work required to obtain tokens. The organization believes that clarifying this distinction will provide clearer expectations for developers and recipients during the network development phase.

For secondary transactions, the center requires SEC to clarify whether assets that are exempt from issuance through the proposed exemption can subsequently be traded via decentralized protocols or other intermediaries. The draft only addresses partial exemptions from issuance and does not establish a complete framework for transactions after issuance.

This submission also hopes to clarify how protocols and participants that facilitate transactions without undergoing intermediary registration should apply the rules. It acknowledges that, in relevant circumstances, the securities requirements applicable to exchanges, brokers, and traders still apply.

Developer Certification and Automated Repurchase

Hyperliquid questions one of the certification requirements in the proposed developer safe harbor, arguing that projects should not have to imply that their tokens were previously involved in investment contracts in order to receive protection. The draft provides a conditional safe harbor for cryptocurrencies that are no longer linked to such contracts.

The center hopes that the project will be able to prove that its tokens have never been associated with such contracts. It also believes that protection should cover the period during which key management tasks are still ongoing, rather than only being applicable after these tasks are completed or permanently ceased.

In terms of repurchase, the organization requires SEC to distinguish between two types of purchases: one type is automatically executed through public blockchain rules, and the other type is decided by centralized operators at their discretion. It believes that when assessing who is directing economic activities, these arrangements should not be automatically given the same treatment.

Maintain federal-level protection after the safe harbor.

Hyperliquid hopes that after the project meets the safe harbor criteria, the federal pre-emption of certain state securities registration rules can continue. This proposal will waive some state-level requirements for eligible issuances and subsequent transactions.

The organization warns that if these protections become invalid later on, developers or holders may still face state-level registration issues. It distinguishes the exemption SEC from broader legal frameworks such as CLARITY Act, while acknowledging that state-level anti-fraud regulations and activities outside the scope of the exemption will still apply.

The encryption regulatory proposal for SEC will still undergo review and revision after seeking public opinions. The deadline for public comments is October 20, 2026.

This article was generated with the assistance of artificial intelligence and has been reviewed by an editorial team.