Bitwise Asset Management and Hyperliquid Policy Center are urging the U.S. Securities and Exchange Commission (SEC) to amend its proposed crypto regulations, requesting clearer guidelines regarding token classification, airdrops, and secondary market transactions. The related letters of opinion were submitted on Monday.

These requests emerged on Tuesday, as SEC concluded its public consultation period regarding its proposed Regulation Crypto Assets. This proposal will establish exemptions for eligible crypto financings and create a conditional safe harbor for tokens related to investment contracts.

In an opinion letter dated October 19th, Bitwise Asset Management urged SEC to clarify how investment managers should determine whether a certain crypto asset is subject to securities laws, stating that managers need a standard that can be based on “publicly available information.”

The company also hopes that SEC will further clarify: when managers can rely on the Form TR documents to be submitted by the issuer – which will prove that an investment contract no longer exists – and how tokens should be evaluated in the absence of such documents.

In another submission, Hyperliquid Policy Center urged SEC to expand the scope of its proposed safe harbor, arguing that such a measure might come too late in the project’s development process. The organization also called for clearer protections for airdrops that reward network participation and requested guidelines for token buybacks.

Hyperliquid also warned that the proposal 'failed to provide clarity' regarding whether unregistered intermediaries could facilitate token transactions, or whether tokens could be freely traded through on-chain protocols. The organization urged SEC to directly address the issues of the secondary market transactions, rather than leaving exchanges and decentralized trading venues to continue facing regulatory uncertainties.

SEC Proposal Faces Opposition from Legal and Investor Protection Groups

While industry participants are seeking to modify the proposed rules, former SEC enforcement official John Reed Stark and Duke University finance scholar Lee Reiners hold a completely different stance. On October 16th, the two submitted a letter of opinion urging the committee to withdraw the proposal entirely, stating that it exceeds the statutory authority of the institution and will weaken investor protection.

Stark and Reiners indicate that the existing securities laws, as well as the Howey rulings of the U.S. Supreme Court, have already provided a framework for regulating crypto issuances. They believe that financing exemptions will weaken investor protection, while the proposed safe harbors would allow issuers to effectively exempt their tokens from securities regulation by self-certification.

The two also warned that if these rules are passed with their current substantive content, it could immediately trigger legal challenges and may lead to the framework being overturned by the courts.

As the public comment period concluded on Tuesday, SEC will review the opinions submitted by all parties before deciding whether to amend, adopt, or withdraw these proposed rules. The committee has not yet announced a timeline for the final decision, and any final rules will need to be voted on by the committee before they come into effect.

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