The proposed SEC crypto rules face competing demands over both their reach and their legal basis. Bitwise Asset Management wants a workable way to classify tokens, while the Hyperliquid Policy Center wants protections that address airdrops and secondary-market trading. Other commenters want the proposal withdrawn entirely. The public comment period closes on October twentieth, with no timetable announced for a final decision.
Key Takeaways
- Bitwise is seeking classification guidance that investment managers can apply using publicly available information.
- Hyperliquid wants the proposal to address network-participation airdrops, token buybacks and trading through intermediaries and onchain protocols.
- Former SEC official John Reed Stark and finance scholar Lee Reiners argue that the proposal exceeds the agency’s authority and weakens investor protections.
Table of Contents
- SEC crypto rules leave distinct questions for managers and markets
- What would managers be able to rely on?
- Hyperliquid seeks protection earlier in development
- Why some commenters want withdrawal instead
- Conclusion
SEC crypto rules leave distinct questions for managers and markets
Regulation Crypto Assets would create exemptions for qualifying crypto fundraising and a conditional safe harbor for tokens associated with investment contracts. The industry submissions ask the SEC to explain how that framework would work beyond an issuer’s fundraising transaction.
For investment managers, the issue is determining whether an asset falls under securities laws. For trading venues and protocols, it is whether and how transactions in those tokens can proceed. The letters therefore seek clarity at different points in a token’s lifecycle, rather than simply broader fundraising exemptions.
| Item | Details |
|---|---|
| Fundraising exemptions | Proposed for qualifying crypto fundraising; critics argue they would weaken investor protections. |
| Conditional safe harbor | Would cover tokens associated with investment contracts; Hyperliquid seeks broader and earlier protection. |
| Form TR | Proposed certification that an investment contract has ceased to exist; Bitwise seeks reliance guidance. |
| Decision status | The proposal remains under consideration, with no final-decision timetable announced. |
What would managers be able to rely on?
Bitwise’s October nineteenth letter focuses on the evidence available to an investment manager making a classification decision. The firm wants a standard based on publicly available information, making the practical question what managers can establish without relying on information unavailable to them.
The proposed Form TR filing is central to that request. It would certify that an investment contract has ceased to exist, but Bitwise wants the SEC to explain when managers could rely on that certification. It also seeks an assessment method for tokens without such a filing. Those are separate situations that the firm wants the rules to address explicitly.
Hyperliquid seeks protection earlier in development
The Hyperliquid Policy Center challenges the timing and coverage of the proposed safe harbor. It argues that protection could arrive too late in a project’s development and asks for clearer treatment of airdrops that reward network participation, alongside guidance on token buybacks.
Its trading concerns extend beyond the issuer. The group wants the SEC to address whether unregistered intermediaries can facilitate token transactions and whether tokens can trade freely through onchain protocols. A safe harbor for a token would not, in its view, answer those questions unless the rules directly address secondary-market activity.
Why some commenters want withdrawal instead
The role of issuer certification is also a point of opposition. In their October sixteenth letter, Stark and Duke University finance scholar Reiners argued that the safe harbor would let issuers effectively remove tokens from securities oversight through self-certification.
They see existing securities laws and the Supreme Court’s Howey test as an adequate regulatory framework, not a gap requiring these exemptions. Their objections combine concerns about reduced investor protections with a challenge to the SEC’s statutory authority. They warned that adopting substantially the current proposal would invite an immediate legal challenge that could result in it being struck down.
The SEC will review the submissions before deciding whether to revise, adopt or withdraw the proposal. Any final rule would require a commission vote before taking effect.
Conclusion
The submissions expose a basic divide: industry commenters want rules that resolve classification and trading questions, while opponents dispute the framework’s legitimacy. None of the requested changes has been adopted.
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Disclaimer
This FinanceVelix article provides general information, not personalized financial, investment, legal, or tax advice. Market prices, interest rates and economic conditions can change; investments carry a risk of loss. Facts reflect the material available when published and may change. Check important information independently and consult a qualified professional when needed. Mentioning an asset, company, or service is not an endorsement.
