Key Takeaways
- • The SEC closes its public comment period on Oct. 20, 2026 for its crypto asset rule proposal, which received about 140 comments over 60 days after being proposed in August.
- • The Hyperliquid Policy Center calls for five key changes covering airdrop classification, compliance standards, safe harbor design, secondary market treatment, and federal-state supervisory authority.
- • The proposal would let startups raise up to $75 million annually through a simplified process, but industry groups argue the requirements could increase litigation risk.
- • Hyperliquid urges an option to declare a token was not a security from the outset and wants airdrops without investment or financial risk distinguished from securities.
- • Industry reaction is broadly positive, though some legal experts warn administrative rules offer less legal stability than congressional legislation.
Summary
The U.S. Securities and Exchange Commission is set to close its public comment submissions on October 20 for a proposed framework governing certain investment contracts involving crypto assets, according to Cointelegraph, which reported on October 19 (local time). The SEC proposed the framework in August and received about 140 comments over a 60-day period. The proposal sets standards for token issuance and disclosure obligations and provides regulatory exceptions for projects that meet specified requirements. It is being viewed as an effort by the SEC to build a regulatory framework through administrative rules while comprehensive digital asset market legislation at the congressional level remains delayed.
In its comments, the Hyperliquid Policy Center broadly supports the regulatory direction but argues the current draft does not sufficiently reduce legal uncertainty for startups. The group asks for clear standards so that free tokens distributed as rewards for on-chain activity are not treated as investment contracts, arguing that airdrops in which users invest no funds and take on no financial risk should be distinguished in determining whether something is a security. It also argues that completing know-your-customer procedures or connecting a wallet to receive tokens should not be treated as consideration.
On safe harbor design, the SEC draft would allow startups to raise up to $75 million annually through a simplified process and provide protections for tokens that meet certain requirements. The Hyperliquid Policy Center contends that the current requirements could increase litigation risk by pressuring projects to acknowledge past reliance on token management teams, and it calls for an option to declare that a token was not a security from the outset. The group also says the proposal insufficiently addresses secondary markets, including decentralised exchanges, and argues that regulating only the issuance stage would be less effective. It urges that exemptions from state-level supervisory liability, which lapse when the safe harbor ends, be maintained over the longer term.
Market participants have responded largely positively. The MiCA Crypto Alliance proposed clarifying crypto-specific disclosure concepts and data structures, and SkyBridge Capital founder Anthony Scaramucci backed the direction of regulatory refinement. Some legal experts, however, have raised concerns that administrative rules may provide less legal stability than legislation passed by Congress. The outcome will depend on how the SEC revises its treatment of airdrops, the safe harbor entry requirements, and the scope of on-chain trading and state-level supervision, and the extent to which industry demands are accommodated is expected to shape the operating environment for U.S. Web3 startups.
In its comments, the Hyperliquid Policy Center broadly supports the regulatory direction but argues the current draft does not sufficiently reduce legal uncertainty for startups. The group asks for clear standards so that free tokens distributed as rewards for on-chain activity are not treated as investment contracts, arguing that airdrops in which users invest no funds and take on no financial risk should be distinguished in determining whether something is a security. It also argues that completing know-your-customer procedures or connecting a wallet to receive tokens should not be treated as consideration.
On safe harbor design, the SEC draft would allow startups to raise up to $75 million annually through a simplified process and provide protections for tokens that meet certain requirements. The Hyperliquid Policy Center contends that the current requirements could increase litigation risk by pressuring projects to acknowledge past reliance on token management teams, and it calls for an option to declare that a token was not a security from the outset. The group also says the proposal insufficiently addresses secondary markets, including decentralised exchanges, and argues that regulating only the issuance stage would be less effective. It urges that exemptions from state-level supervisory liability, which lapse when the safe harbor ends, be maintained over the longer term.
Market participants have responded largely positively. The MiCA Crypto Alliance proposed clarifying crypto-specific disclosure concepts and data structures, and SkyBridge Capital founder Anthony Scaramucci backed the direction of regulatory refinement. Some legal experts, however, have raised concerns that administrative rules may provide less legal stability than legislation passed by Congress. The outcome will depend on how the SEC revises its treatment of airdrops, the safe harbor entry requirements, and the scope of on-chain trading and state-level supervision, and the extent to which industry demands are accommodated is expected to shape the operating environment for U.S. Web3 startups.
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