HPC Backs SEC Proposal and Requests Five Refinements
HPC has submitted a comment letter supporting the Securities and Exchange Commission’s proposal while asking the SEC to make five targeted refinements. The recommendations address airdrops, secondary token trading, the proposed safe harbor, token buybacks and federal preemption.
Although HPC supports the proposal, the organization says several details could materially affect crypto projects, developers and users. Its requested changes focus on preserving distinctions between token distributions that involve no payment, automated network activity, on-chain trading, developing projects and federal regulatory protections.
SEC Airdrop Rules: Investment of Money and Payment
HPC’s first recommendation concerns airdrops. The organization wants the SEC to state clearly in the final rule that recipients who receive tokens without giving anything in return have not made an investment of money.
According to HPC, people may receive tokens for using a network, running validators or providing liquidity. The group argues that those activities should not automatically cause an airdrop to be treated as an investment contract. It also wants the SEC to confirm that routine actions such as connecting a wallet or completing sanctions checks do not constitute payment for tokens.
Secondary Trading for Tokens Under the Proposed Exemptions
The second recommendation would require greater clarity on secondary trading. HPC wants the SEC to explain how tokens distributed under the proposed exemptions may be traded after distribution.
The letter also asks whether on-chain protocols and other intermediaries can facilitate those trades without registering with the agency. That issue is central to the proposal because the availability of trading venues and intermediaries can affect how recipients exchange distributed tokens without triggering additional regulatory obligations.
Safe Harbor Certification for Developing Crypto Projects
HPC’s third request concerns the proposal’s safe harbor and its certification requirements. The organization says the current process could place some developers in a difficult position when determining whether they qualify.
Some developers may be unable to certify that they have completed their essential managerial work without creating the impression that their tokens were previously subject to securities laws. HPC wants projects to be able to use the safe harbor without making that kind of admission. It also asks for the protections to cover projects whose networks are still under development.
Token Buybacks and a Consistent Definition of an Issuer
The fourth recommendation addresses token buybacks. HPC wants the SEC to apply a consistent definition of an issuer throughout the rule and incorporate existing staff guidance on buybacks into the final framework.
The organization also wants the SEC to distinguish between automatic buybacks governed by published rules and buybacks determined on a case-by-case basis. That distinction would establish which buyback arrangements operate under standardized conditions and which require individual consideration under the proposed exemptions.
Federal Preemption After Safe Harbor Qualification
HPC’s fifth recommendation is federal preemption. The group wants federal protections to remain in place after a project qualifies for the proposal’s safe harbor, rather than ending at that point.
Under the current proposal, HPC says those protections would terminate once a project qualified for the safe harbor. The organization warns that this could leave tokens subject to registration requirements across more than 50 jurisdictions, creating a fragmented compliance environment for qualifying projects.
Why This Matters
HPC’s comment letter highlights five practical uncertainties that could shape how the SEC’s proposal applies to crypto projects. The treatment of airdrops depends partly on whether network participation, validator operation, liquidity provision, wallet connections and compliance checks are treated as payment or investment-related activity. The proposed secondary-trading guidance could also determine which protocols and intermediaries may facilitate transactions involving tokens distributed under the exemptions.
The safe harbor and preemption requests are equally significant. Developers seeking certification may need to demonstrate essential managerial work while avoiding statements that imply their tokens were previously subject to securities laws. Continued federal protection after qualification could also determine whether a project faces a patchwork of potential registration obligations in more than 50 jurisdictions. HPC’s letter does not challenge the proposal outright; it asks the SEC to resolve those implementation issues before adopting the final rule.
Frequently Asked Questions
What changes did HPC request regarding crypto airdrops?
HPC wants the SEC to clarify that receiving tokens without giving anything in return is not an investment of money. It also asks the agency to confirm that using a network, running validators, providing liquidity, connecting a wallet or completing sanctions checks does not automatically turn an airdrop into an investment contract or constitute payment.
How does HPC want the SEC to handle secondary token trading?
The organization wants the SEC to explain how tokens distributed under the proposed exemptions can be traded and whether on-chain protocols and other intermediaries may facilitate those trades without registering with the agency.
Why is HPC seeking broader safe harbor and federal protections?
HPC wants developing projects to qualify for safe harbor without implying that their tokens were previously subject to securities laws. It also wants federal protections to continue after qualification so that tokens do not potentially become subject to registration requirements across more than 50 jurisdictions.
