Hyperliquid Policy Committee Files Formal Comment Letter with SEC
TREE NEWS reports: In a significant push to resolve long-standing legal ambiguities for decentralized finance, the Hyperliquid Policy Committee (HPC) has submitted a detailed comment letter to the U.S. Securities and Exchange Commission (SEC) regarding the proposed Regulation Crypto Assets. While broadly supporting the SEC’s effort to establish a regulatory framework for digital assets, the HPC outlined five core revisions aimed at clarifying token distribution, secondary market trading, decentralized safe harbors, and the interplay between federal and state securities laws.
Codifying Airdrop and Secondary Market Exemptions
The HPC’s primary concern centers on the mechanical application of the 1946 Howey Test to on-chain native assets. Although the SEC has previously acknowledged that no-consideration airdrops do not constitute an investment of money, this interpretation lacks binding statutory backing. The HPC urges the SEC to formally codify the legal analysis that “airdrop assets without substantial and explicit consideration do not constitute investment contracts” into the final rule text. Furthermore, the committee emphasizes that purely administrative steps—such as connecting a wallet, completing sanctions screening, or signing a non-economic verification message—must not be construed as consideration or capital contribution.
To prevent liquidity deadlocks for token holders, the HPC argues that the new rules must explicitly exempt the legal resale of tokens in the secondary market. This would provide decentralized protocols, DEXs, and unregistered matching intermediaries with a clear compliance path, avoiding the secondary market becoming a repeated target for securities enforcement.
Reforming Safe Harbor and Programmatic Buybacks
The HPC also criticizes the proposed safe harbor regime for its flawed logic, which currently requires teams to implicitly admit that their tokens were associated with investment contracts in their early stages—a form of forced self-incrimination. The committee suggests that compliance should focus on whether a project has achieved sufficient decentralization, rather than binding past legal characterizations. Additionally, the HPC recommends extending safe harbor protection to early-stage projects whose core technology is still under development, providing a clear legal transition period for builders to gradually decentralize governance.
On token economics, the HPC calls for a clear distinction between programmatic token buybacks triggered by smart contracts and discretionary buybacks managed by teams. Code-executed, immutable programmatic burns should not be equated with traditional share repurchase offers. Finally, to prevent projects from falling into a patchwork of state-level securities registrations after meeting federal safe harbor requirements, the SEC should ensure the long-term durability of federal exemptions, creating an institutional defense against fragmented enforcement for truly decentralized Web3 infrastructure.
Implications for the DeFi Industry
If adopted, these recommendations could significantly reduce legal uncertainty for DeFi projects, encouraging innovation and broader participation. The HPC’s letter reflects a growing consensus among industry participants that regulatory clarity is essential for the maturation of decentralized finance. The SEC’s response to these comments will be closely watched as a bellwether for the future of crypto regulation in the United States.
