Bitwise, Hyperliquid seek clearer SEC crypto rules

Bitwise Asset Management and the Hyperliquid Policy Center urged the U.S. Securities and Exchange Commission to revise its proposed crypto rules, which would create exemptions for some fundraising activities and a conditional safe harbor for tokens linked to investment contracts.

The requests came in comment letters submitted before the SEC’s public comment period ended Tuesday, Oct. 20. The commission will review the submissions before deciding whether to revise, adopt or withdraw the proposal.

In an Oct. 19 letter, Bitwise called for a clear method to determine whether a crypto asset is subject to securities laws. The firm proposed using information available to the public so investment managers can apply the same standard when classifying tokens.

Bitwise also sought guidance on when managers could rely on an issuer’s proposed Form TR filing. The filing would certify that an investment contract connected to a token no longer exists. The firm asked how managers should classify tokens when an issuer has not submitted the filing.

In a separate submission, the Hyperliquid Policy Center urged the SEC to broaden the proposed safe harbor, arguing that the protection could become available too late in a project’s development. The group requested clearer treatment of airdrops that reward users for participating in a network and guidance on token buybacks.

The policy center wrote that the proposal “fails to provide clarity” on whether unregistered intermediaries could facilitate token trading and whether tokens could trade freely through onchain protocols. It asked the SEC to address secondary-market transactions directly so exchanges and decentralized trading venues would not have to interpret the rules independently.

Former SEC enforcement official John Reed Stark and Duke University finance scholar Lee Reiners urged the commission to withdraw the proposal in an Oct. 16 letter. They argued that it exceeds the agency’s statutory authority and could weaken investor protections.

Stark and Reiners wrote that existing securities laws and the Supreme Court’s Howey test already provide a framework for regulating crypto offerings. They argued that the proposed fundraising exemptions could reduce investor safeguards and that the safe harbor could let issuers remove tokens from securities oversight through self-certification.

They also warned that adopting the proposal in substantially its current form could prompt an immediate legal challenge and lead to the rules being struck down.

The SEC has not announced a timetable for a final decision. Any final rule would require a vote by the commission before taking effect.