Hyperliquid Policy Center Urges SEC to Refine Crypto Rules

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The letter landed one day before the comment window closes on October 20. It is signed by CEO Jake Chervinsky and Senior Counsel Brad Bourque. According to the filing, the group supports prompt adoption because the rules bring long-missing clarity. Still, it argues that the draft text leaves gaps.

What the Hyperliquid Policy Center Asked the SEC

The comment letter responds to Release Nos. 33-11434 and 34-106150, filed under docket S7-2026-27. The SEC first proposed the rules on August 18, 2026. Then the Federal Register published them on August 21, which started a 60-day clock.

The group frames its requests as usability fixes, not opposition. As the letter puts it, several features of the proposal “will not deliver the certainty the Commission intends.” So the group lists five refinements. Each one targets a practical problem that builders face today.

For transparency, the Hyperliquid Policy Center is a 501(c)(4) advocacy group funded by 1 million HYPE tokens from the Hyper Foundation. It launched in February 2026 and works on onchain market policy. Chervinsky previously led policy at the Blockchain Association.

Clearer Rules for Crypto Airdrops

First, the group wants the SEC to write its airdrop analysis directly into the final rule. The Hyperliquid SEC comment letter argues that the test should turn on whether a recipient gave real, definable consideration. In other words, did the user pay money, goods, or services for the token?

An airdrop distributes tokens without a purchase, often to reward early activity. Where recipients provide no consideration in exchange, the letter argues, no “investment of money” exists under the Howey test. As a result, such a distribution does not create an investment contract.

The group also wants clear treatment of routine steps. Connecting a wallet or passing a sanctions check should not count as payment. Moreover, the timing of an announcement should not determine the outcome. Writing these protections into the final rule would give projects and users greater certainty.

Secondary Trading and Intermediary Status

Second, the Hyperliquid SEC comment letter pushes the agency to clarify how these tokens trade after issuance. Under the current draft, secondary sales remain securities transactions until the asset separates from its investment contract. Consequently, exchanges, brokers and onchain protocols face uncertainty when facilitating trading.

This matters because free trading supports network effects, a point the SEC’s own economic analysis recognizes. Therefore, the group asks the agency to clarify the Exchange Act definitions of “exchange,” “broker,” “dealer” and “clearing agency.”

In addition, the letter seeks exemptions for facilitators of these secondary trades, including qualifying onchain protocols, while issuers comply with the offering exemption. It also asks the SEC to confirm that secondary transactions in the non-security token itself do not constitute securities transactions. These changes would support immediate trading without requiring facilitators to register under the securities intermediary framework.

A Safe Harbor Projects Can Actually Use

Third, the Hyperliquid SEC comment letter targets proposed Rule 400, the investment contract safe harbor. As drafted, it requires projects to certify through Form TR that essential managerial efforts have ceased. However, some teams view that filing as an admission that an investment contract previously existed and that they acted as its issuer.

The safe harbor also becomes available only after development ends, leaving projects without its protection while they build, when legal uncertainty remains greatest. Therefore, the group wants an alternative certification allowing projects to state that the asset never formed part of an investment contract.

The letter adds three further requests. First, the SEC should clarify that filing does not admit prior status or provide evidence of a past violation. Next, teams should have the option to submit supporting analysis confidentially. Finally, the safe harbor should protect projects during a defined development period, with appropriate milestones and disclosures.

Buybacks and the Central Party Question

Fourth, the Hyperliquid SEC comment letter asks the agency to incorporate recent staff guidance on token buybacks into the final rule or adopting release. It also seeks a clear distinction between programmatic and discretionary buybacks. A protocol-level buyback follows predefined rules in code, while a discretionary buyback depends on decisions by a team or other party.

In addition, the letter addresses the proposal’s “central party” concept, which concerns control and separation from an investment contract. The group wants the SEC to align this concept with existing beneficial-ownership “group” principles. This would help prevent the agency from treating dispersed, unaffiliated validators, users and liquidity providers as one controlling group simply because they share economic incentives.

Keeping Federal Preemption in Place

Fifth, the group wants federal preemption to last. Under proposed Rule 500, state-law preemption ends once a project satisfies the safe harbor. At that point, the token faces possible registration across more than 50 state jurisdictions.

That design creates a strange incentive. A team might delay finishing its managerial efforts just to keep state protection. Instead, the letter proposes that issuers elect continued “covered security” status through Form TR. States would still keep their antifraud authority, so investor protection stays intact.

A Friendlier SEC Posture

The filing reflects a wider shift at the agency. Before 2025, the SEC mostly regulated crypto through enforcement, applying Howey case by case. That approach drove many projects offshore.

Under Chairman Paul Atkins, the tone changed. In a statement on the proposal, Atkins said the agency was “charting a new course with a package of exemptions that would facilitate capital formation.” Commissioner Hester Peirce added that the rules offer “new fundraising pathways tailored for the unique characteristics of crypto assets.”

Not everyone is sold, though. Some academic and consumer-focused commenters on the docket still raise investor-protection concerns about broad exemptions. Other industry voices welcome the rules while asking for more on liquidity and decentralization, much like the Hyperliquid Policy Center.

What Happens Next

The comment window closes on October 20, so the SEC will soon begin reviewing the full docket. After that, the agency could issue a revised proposal or move straight to a final rule. No timeline is set, and adoption is far from certain.

For now, the five refinements give builders a clear checklist to watch. Readers can track the docket on the SEC public comments page and read the group’s own summary on the Hyperliquid Policy Center blog. OurCryptoTalk will follow the SEC’s next move.