Key Insights: Hyperliquid Policy Center (HPC) has endorsed the US SEC’s proposed Regulation on Crypto Assets while recommending five key amendments. The policy center recommended that the reg
On October 19, 2026, the Hyperliquid Policy Center (HPC) urged the US Securities and Exchange Commission (SEC) to adopt the crypto regulation framework it proposed last month.
HPC proposed five modifications that the policy center believes will be necessary to make the rules workable for developers and token holders.
The comment filed with the US SEC supports the approach taken by the regulator but seeks to clarify several issues that the policy center believes should be addressed before the rules are finalized.
This comes just one day ahead of the October 20 public-comment deadline set by the SEC for this proposed rule.
The proposed rule, released by the US SEC in August 2026, would permit two exemptions for raising funds through investment contracts involving crypto assets.
A startup exemption would allow offers of up to $5 million over four years, while the fundraising exemption would allow up to $75 million in any 12-month period, with disclosure requirements for qualifying issuers. The proposal would retain applicable antifraud and antimanipulation protections.
The text of the proposed rule builds on the SEC’s March 2026 statement interpreting federal securities laws for crypto assets and activities. This includes airdrops, mining, and staking.
Combined, the documents form a set of principles intended to provide guidance while leaving securities law protections in place.
According to HPC’s view, the uncertainty that remains involves the application of those principles throughout the life of a particular token.
For crypto regulation to achieve its stated objective, developers and token holders need to know not only how to launch a product but also how to enable trading of its token and demonstrate that the network has entered a new regime in which its token is no longer an investment contract.
The complication is most apparent in the case of airdrops. Many crypto projects involve distributing tokens to users who have participated in a network, provided liquidity to its protocols, or run its validators.
According to the HPC, the receipt of such a token should not be deemed an investment of funds. Specifically, the policy center asked the SEC to include the concept of “tangible and definable consideration” in its analysis of investment contracts. The policy center also urged the SEC to make a distinction between payment and procedures for the transfer of property.
Issuance of a token is only part of the equation, as the US SEC noted in its economic analysis of the proposed crypto regulation.
The vitality of a secondary market for those tokens is an important consideration. The question of whether unregistered intermediaries and on-chain protocols can facilitate secondary trading of the tokens issued pursuant to the exemptions is not adequately explained, according to HPC.
In fact, in its own economic analysis, the US SEC warned that the benefits of the proposed rule “may be fairly small” without such a market.
Crypto Regulation Update: Hyperliquid Policy Center Submits to US SEC | Source: X
This is an important point in the discussion of crypto regulation. The mere ability to raise funds through an investment contract does not automatically entitle a project to participate in a secondary market for its tokens.
A similar concern applies to the safe harbor language included in the proposed rule. It is designed to protect against the suggestion that a token is an investment contract after a project has finished or permanently suspended its essential managerial efforts.
According to HPC, the requirement that an issuer make a certification that such efforts have been completed may suggest that an investment contract did exist.
This conflicts with the position that the network had at no point been an investment contract. It is why the HPC urged the SEC to consider an alternative certification and to extend protections to projects in their development stages.
The remaining recommendations concern buybacks and federal preemption. The policy center asked the SEC to consider incorporating staff guidance on token repurchases, differentiate between automatic and discretionary buybacks, and adopt a consistent definition of a “central party.”
The latter recommendation applies because the SEC’s proposed rule would allow federal law to override state law. It excludes an exemption for a project that qualifies for the safe harbor and would leave its tokens subject to registration requirements in more than 50 jurisdictions.
The issues raised by the HPC go beyond the US SEC’s proposed rule on investment contracts. In a post on October 5, 2026, the Hyperliquid policy center expressed support for the European Union’s approach to regulating perpetual futures contracts as derivatives under MiFID II.
On October 9, it expressed similar views on a proposed Commodity Futures Trading Commission (CFTC) framework for crypto exchanges offering leveraged products.
According to the HPC, the CFTC’s approach “would provide a robust regulatory regime for crypto derivatives cleared in U.S. markets.”
Other regulators are also taking steps to address the challenges of crypto regulation. On October 9, 2026, The Coin Republic noted that the European Securities and Markets Authority (ESMA) was considering risks associated with tokenized collateral for central counterparties.
ESMA’s official consultation asks for information on liquidity, legal protections, and settlement procedures for such assets; responses are due by January 15, 2027. That said, ESMA itself does not have the authority to approve such collateral.
Finally, tax policy provides an interesting contrast to the regulatory review process. On October 9, 2026, The Coin Republic noted that Greece had taken steps to impose a 10% capital gains tax on crypto assets, with an annual exemption of €500.
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