SEC’s crypto rulebook enters a three-way tug-of-war as comments close

The US Securities and Exchange Commission (SEC) is scheduled to close public comments Tuesday on its proposed Regulation Crypto Assets, with Bitwise Asset Management and the Hyperliquid Policy Center pressing for revisions in letters submitted Monday while two other commenters are urging withdrawal.

The proposal would create exemptions for qualifying crypto fundraising and a conditional safe harbor for tokens associated with investment contracts. In an Oct. 19 comment letter, Bitwise Asset Management asked the SEC to clarify how investment managers should determine whether a crypto asset is subject to securities laws, arguing they need a standard based on “publicly available information.” The firm also sought rules on when managers can rely on an issuer’s proposed Form TR filing, which would certify that an investment contract has ceased to exist, and on assessing tokens when no such filing is available.

In a separate submission, the Hyperliquid Policy Center argued that the proposed safe harbor could come too late in a project’s development and called for broader protections. It requested clearer safeguards for airdrops that reward network participation, guidance on token buybacks, and direction on whether unregistered intermediaries can facilitate token trading or whether tokens can trade freely through onchain protocols. Hyperliquid said the proposal “fails to provide clarity” on those questions and urged the SEC to address secondary-market transactions directly instead of leaving exchanges and decentralized trading venues facing regulatory uncertainty.

In an Oct. 16 comment letter, former SEC enforcement official John Reed Stark and Duke University finance scholar Lee Reiners urged the commission to withdraw the proposal, arguing that it exceeds the agency’s statutory authority and would weaken investor protections. They said existing securities laws and the Supreme Court’s Howey test already provide a framework for regulating crypto offerings, while the fundraising exemptions would weaken protections and the safe harbor would let issuers effectively remove their tokens from securities oversight through self-certification. Stark and Reiners warned that adopting the rules in substantially their current form would invite an immediate legal challenge and could result in the framework being struck down.

The SEC will review the submissions before deciding whether to revise, adopt or withdraw the proposed rules.