Author: Shenchao TechFlow
On October 19, 2026, the Hyperliquid Policy Committee officially announced that it has formally submitted a detailed professional opinion letter to the U.S. Securities and Exchange Commission (SEC). While supporting in principle the SEC’s proposed Regulation Crypto Assets, the HPC put forward five key revision recommendations on critical areas including token distribution, secondary market trading, the definition of the decentralized safe harbor, and the alignment of federal and state regulatory authority, urging regulators to eliminate years of legal ambiguity in the decentralized finance ecosystem.
Codify the disclaimer for no-consideration airdrops and free tradability on secondary markets.
For a long time, the core legal dilemma facing U.S. crypto developers has been the mechanical application of the 1946 Supreme Court Howey test to on-chain native assets. Although the SEC previously acknowledged in its interpretations that airdrops without consideration do not constitute an investment of funds, it has lacked rigid statutory backing in actual regulatory enforcement.
HPC urgently urges the SEC to formally codify into the final rule the legal analysis that "token distributions without material and definite consideration do not constitute investment contracts." Regarding common operational thresholds in practice, the committee particularly emphasizes that purely administrative steps undertaken by users during token airdrops—such as connecting a wallet on-chain, completing sanctions list screening, or signing verification messages with no economic cost—must not be construed as consideration or capital contribution. To prevent tokens from becoming trapped in a liquidity deadlock after reaching holders, the new regulatory framework must explicitly and positively exempt the lawful resale of tokens on secondary markets, directly providing compliant pathways for decentralized protocols, decentralized exchanges, and unregistered matching intermediaries to facilitate token流通, thereby avoiding the secondary market’s recurrence as a focal point of securities enforcement due to lack of guidance.
Shedding the burden of presumed guilt and reshaping safe harbors for ongoing research projects
Regarding the much-discussed safe harbor provision in the proposed regulation, HPC points out that the current draft rules contain serious logical flaws, and their stringent entry requirements are excluding many teams genuinely committed to decentralization.
The existing safe harbor provisions require teams applying for certification to essentially admit that their tokens were initially associated with investment contracts. HPC considers this architecture, which indirectly forces entrepreneurs to incriminate themselves, highly unreasonable; compliance pathways should focus on whether the project has currently achieved sufficient decentralization, rather than forcibly tying it to past legal classifications. Meanwhile, the committee strongly recommends extending the safe harbor’s protection to early-stage projects whose core technology is still under development. Before tokens reach maturity and are no longer dependent on the founding team’s critical managerial efforts, builders need a clear and viable legal transition period to gradually transfer network governance rights within a framework of transparent and open disclosure.
Programmatic buyback qualification and federal exemption persistent defense
In the context of ecological economic models and interjurisdictional regulatory conflicts, HPC focused primarily on the token repurchase mechanism and federal preemption over state blue-sky laws.
Amid the explosive growth in cash flows from leading decentralized finance protocols, fee buybacks and burns have become the most core value-capture mechanism in the decentralized ecosystem. HPC urges the SEC to establish a unified definition for the term “core entity” throughout the rulemaking, strictly distinguishing between programmatic token buybacks automatically triggered by smart contracts and discretionary buybacks manually orchestrated by实体 teams. Programmatic burns executed autonomously and immutably by code should not be equated with traditional public company share repurchase offers. At the cross-jurisdictional regulatory coordination level, to prevent projects from falling into the fragmented and stringent state-level securities registration traps after successfully meeting the federal safe harbor exit, the SEC must ensure that federal exemptions possess long-term durability, building a institutional firewall against fragmented enforcement for truly decentralized Web3 infrastructure.