Bitwise, Hyperliquid Urge SEC to Revise Proposed Crypto Asset Rule

The U.S. crypto industry has asked the Securities and Exchange Commission to clarify regulatory standards for determining whether a token is a security, as well as the treatment of airdrops and secondary-market trading.

Bitwise Asset Management and the Hyperliquid Policy Center urged the SEC to revise parts of its proposed "Regulation Crypto Assets" in comment letters submitted on Oct. 19, Cointelegraph reported on Oct. 20.

The proposal would exempt certain crypto fundraising activities from securities regulations if they meet specified conditions. It would also provide conditional regulatory relief for tokens tied to investment contracts. The SEC accepted public comments through Oct. 20 and plans to review whether to finalize the rule.

Bitwise argued that asset managers need clear standards to determine whether a specific crypto asset qualifies as a security. It said that assessment should be possible using only publicly available information. The firm also asked the SEC to specify the standard for relying on an issuer's Form TR filing, which confirms the end of an investment contract, and how tokens should be evaluated when no such filing exists.

The Hyperliquid Policy Center said the proposed regulatory relief should apply more broadly. Under the current proposal, projects may not meet the conditions for relief until development is already well advanced. It also called for clearer standards for airdrops distributed as network participation rewards and for token buybacks.

Uncertainty around the secondary market has also emerged as a key issue. Hyperliquid said it is unclear whether unregistered intermediaries can support token trading and how far open trading through on-chain protocols would be permitted. It argued that the rule should explicitly set out the secondary-market framework for exchanges and decentralized trading platforms.

Others said the proposal should be withdrawn altogether. Former SEC enforcement official John Reed Stark and Duke University finance scholar Lee Reiners wrote in a comment letter submitted on Oct. 16 that the proposal may exceed the SEC's legal authority and could weaken investor protection. They said existing securities law and the Howey Test are sufficient to determine whether a crypto asset is a security.

The SEC will decide whether to revise, adopt or withdraw the proposal after reviewing the comments. No timeline for a final decision has been disclosed, and any rule would require a vote by the commission.