Bitwise and Hyperliquid Urge SEC to Clarify Crypto Rules Amid Industry Pushback

The SEC is currently wrapping up its public comment period on Tuesday for its Regulation Crypto Assets proposal. This regulation aims to introduce exemptions for qualifying cryptocurrency fundraising and conditional safe harbor protections for tokens linked to investment contracts.

In its comment letter dated October 19, Bitwise Asset Management requested that the SEC provide clearer standards for investment managers to determine when a crypto asset falls under securities law. They emphasized the need for criteria that can be applied based on publicly accessible information.

Bitwise also sought more definitive rules outlining when investment managers can rely on an issuer’s filing of Form TR—a document confirming that an investment contract has ended—and guidance on how to evaluate tokens if no such form has been submitted.

Separately, the Hyperliquid Policy Center urged the SEC to broaden the scope of the proposed safe harbor, warning that the protections could come too late in a project’s lifecycle. They advocated for clearer rules around airdrops that incentivize network participation and for guidance related to token buybacks.

Hyperliquid further cautioned that the proposal lacks clarity regarding whether unregistered intermediaries can facilitate token trading, or if tokens can freely trade via on-chain protocols. They pressed the SEC to regulate secondary market transactions explicitly, instead of leaving exchanges and decentralized platforms in legal uncertainty.

While many in the industry have requested adjustments to the proposed rules, former SEC enforcement official John Reed Stark and Duke University finance expert Lee Reiners have taken an opposing stance. In an October 16 comment letter, they urged the SEC to withdraw the proposal entirely, arguing it exceeds the agency’s authority and would weaken investor protections.

Stark and Reiners stated that existing securities laws, alongside the Supreme Court’s Howey test, already provide an adequate framework for crypto regulation. They contended that the fundraising exemptions would reduce investor safeguards and that the proposed safe harbor could allow issuers to evade oversight through self-certification.

They also warned that adopting the rules in their current form would likely trigger immediate legal challenges that might invalidate the entire regulatory framework.

Following the close of the public comment period on Tuesday, the SEC will review all submitted feedback before deciding to amend, approve, or withdraw the proposed regulations. The agency has not set a timeline for a final decision, and any new rule would require a commission vote before implementation.

The responses reflect a critical crossroads in crypto regulation, highlighting the need for clear, balanced rules to foster innovation while safeguarding investors. How the SEC addresses these concerns will shape the industry’s regulatory landscape moving forward.

The significance lies in the fact that the SEC’s approach will influence the clarity and stability of cryptocurrency regulation in the U.S., directly affecting market development, investor protection, and legal certainty for participants.