Qualifying projects would be permitted to raise as much as $5 million over four years under the startup exemption. A separate exemption would permit fundraising of up to $75 million over a 12-month period.
The policy center argues that the value of these exemptions rests partly on tokens having a functioning market for transfers or sales. Its submission therefore asks the SEC to address activities beyond the initial distribution.
Airdrops and secondary trading need clearer treatment
Hyperliquid wants the final rules to formalize the SEC’s existing interpretation that receiving tokens without paying generally does not meet the investment-of-money requirement. It asks the regulator to focus on whether recipients exchanged tangible, definable consideration for those assets.
That approach would distinguish administrative tasks, such as connecting a wallet or completing sanctions screening, from work performed in return for tokens. The group argues that making this distinction explicit would give developers and recipients clearer expectations during network development.
For secondary trading, the center asks the SEC to clarify whether assets issued through the proposed exemptions can subsequently trade through decentralized protocols or other intermediaries. The draft addresses certain offering exemptions without setting out a complete framework for trading after issuance.
The submission also seeks clarity for protocols and participants that facilitate trades without intermediary registration. It recognizes that securities requirements governing exchanges, brokers and dealers continue to apply where relevant.
Developer certification and automated buybacks
Hyperliquid challenges a certification condition in the proposed developer safe harbor, arguing that projects should not have to imply their tokens previously involved investment contracts to obtain protection. The draft offers a conditional safe harbor for cryptocurrencies no longer linked to such contracts.
The center wants projects to be able to certify that their tokens never had that connection. It also argues that protection should cover periods when essential managerial work continues, rather than becoming available only once that work ends or permanently stops.
On buybacks, the group asks the SEC to distinguish purchases executed automatically through published blockchain rules from purchases a centralized operator chooses to make. It argues that these arrangements should not automatically receive identical treatment when assessing who directs economic activity.
The recommendations also seek incorporation of staff guidance on token buybacks and consistent terminology around a “central party.” The center cautions against treating validators as a centralized group solely because they have shared incentives.
Keeping federal protections after the safe harbor
Hyperliquid wants federal preemption of certain state securities registration rules to continue after projects meet the safe-harbor conditions. The proposal would override some state requirements for eligible offerings and later transactions.
The group warns that losing those protections afterward could leave developers or holders facing state registration questions. It distinguishes the SEC’s exemptions from broader statutory frameworks such as the CLARITY Act, while acknowledging that state antifraud rules and activities outside the exemptions would still apply.
The SEC’s crypto regulation proposal remains subject to review and revision following consultation. The deadline for public comments is October 20, 2026.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.