Key Highlights:
- The Hyperliquid Policy Center (HPC) has urged the SEC to establish that free token airdrops are not securities transactions.
- Recommendations include expanding safe harbor provisions, providing secondary market clarity, and establishing permanent federal preemption over state registration laws.
- The advocacy comes ahead of the October 20 deadline for the SEC to conclude its public comment period on a proposed crypto framework.
Hyperliquid Policy Center Calls on the SEC to Refine Token Distribution and Trading Rules
The Hyperliquid Policy Center (HPC) has formally submitted a set of regulatory recommendations to the U.S. Securities and Exchange Commission (SEC), calling for comprehensive clarity on token airdrops, secondary market operations, and developer protections. HPC recommended that the SEC formally establish that token airdrops do not constitute securities transactions when recipients provide no tangible consideration in exchange. According to the advocacy group, standard administrative prerequisites—such as connecting a crypto wallet or completing sanctions screening—should not be classified as monetary or tangible payment for digital assets.
In its submission, the policy group emphasized the urgent need for defined regulations covering secondary market trading. Specifically, HPC called for explicit guidance on whether decentralized protocols and other market intermediaries are legally permitted to facilitate transactions for tokens distributed under proposed exemptions. As regulatory scrutiny over decentralized finance (DeFi) platforms persists, the center highlighted that intermediaries require clear boundaries to operate compliant exchange infrastructure.
Proposals for Safe Harbors, Buybacks, and Federal Preemption
To support ongoing technical innovation, the Hyperliquid Policy Center urged the SEC to expand its proposed safe harbor framework to cover projects that are still actively undergoing development. Crucially, the group argued that teams building these networks should not be forced to concede or acknowledge that their tokens previously constituted investment contracts in order to access safe harbor protections.
The recommendations also tackled structural market mechanisms, specifically calling on regulators to draw a clear line between different types of token buyback activities. HPC urged regulatory officials to distinguish automated token buybacks governed by predefined, algorithmic rules from discretionary purchases controlled directly by developers or centralized entities. Differentiating programmatic protocol operations from centralized, managed interventions represents a foundational step in crafting equitable market integrity rules.
Addressing state-level compliance hurdles, the group called for permanent federal preemption over certain state registration requirements. HPC cautioned that under the current regulatory trajectory, mature digital asset networks risk facing an uncoordinated patchwork of state regulations as soon as they satisfy the criteria to graduate into or qualify for the federal safe harbor.
Why This Matters
The timing of these policy proposals is pivotal, as the SEC moves toward finalizing its broader cryptocurrency regulatory framework before its public comment period closes on October 20. For years, the absence of codified definitions surrounding airdrops and decentralized exchange liquidity has created regulatory friction in the United States.
HPC argued that delivering transparent, formal legal certainty could directly alter the competitive trajectory of the domestic digital asset economy. Without regulatory clarity, developers face strong incentives to either geoblock American users or relocate their operations overseas to jurisdictions offering established compliance roadmaps.
Frequently Asked Questions
What is the Hyperliquid Policy Center’s stance on token airdrops?
The Hyperliquid Policy Center maintains that airdropped tokens should not be classified as securities transactions when users provide no tangible consideration. The group argues that non-monetary, routine actions—such as connecting a Web3 wallet or undergoing basic sanctions screening—must not be deemed financial payment for digital assets.
What does HPC propose regarding decentralized secondary market trading?
HPC is asking the SEC to issue unambiguous rules confirming whether decentralized protocols and trading intermediaries are authorized to facilitate transactions involving tokens that have been distributed under proposed regulatory exemptions.
Why is federal preemption over state laws a primary issue in the filing?
The group warned that without permanent federal preemption over certain state registration requirements, mature crypto networks that successfully qualify for the SEC’s safe harbor could still be subjected to burdensome, conflicting state-level regulatory mandates.
