Bitwise, Hyperliquid seek SEC rule changes for token trading, airdrops

We have spent years watching the crypto industry play a defensive game against the SEC. Most of the time, the strategy involves waiting for a lawsuit, hiring expensive lawyers, and arguing that a decades-old investment contract test doesn't apply to digital code. It is reactive, exhausting, and frankly, not working for the average builder.

Recently, we saw a shift in that dynamic. Bitwise and Hyperliquid decided to stop just venting on social media and instead stepped into the formal public comment arena. As the SEC wraps up a period for public input, these two firms have filed specific requests for rule changes. They aren't just asking for the SEC to go away; they are asking for the agency to actually define how secondary-market trading and airdrops should work under the law.

The Secondary Market Dilemma

For a founder, the biggest headache isn't necessarily the initial sale of a token. Most builders understand that if you raise money from VCs to build a platform, that looks like a security. The real mess starts when that token hits a decentralized exchange or a platform like Hyperliquid. Once the token is out in the wild, the link between the original team's efforts and the token's price becomes blurry.

Bitwise is pushing for the SEC to acknowledge this distinction. Their argument is centered on the idea that just because a token was once part of an investment contract doesn't mean it is a security forever. If a commodity like orange juice is sold as part of a fraudulent investment scheme, the juice itself doesn't magically become a security. The industry is asking for that same logic to be applied to digital assets.

If builders can't get clarity on secondary trading, the entire ecosystem remains in a state of arrested development. You can't build a functional utility token if every time someone buys it on an exchange, the SEC views it as a regulated stock transaction.

The Airdrop Problem

Airdrops have become the standard way to decentralize a protocol and reward early users. But under the current regulatory cloud, airdrops are a legal minefield. The SEC has hinted in various filings that giving away tokens for "free" might still constitute an investment contract because the user provides "value" in the form of marketing or network effects.

Hyperliquid is pushing back on this. Their stance is that distributing tokens to a community to bootstrap a network shouldn't be treated with the same level of scrutiny as an IPO. For a founder, an airdrop is a tool for decentralization. If the SEC classifies every airdrop as a security offering, it effectively kills the ability for a project to become a community-owned protocol. You end up with a centralized entity forever, which defeats the purpose of building on a blockchain in the first place.

Moving Beyond the Howey Test

The core of the issue is that the SEC is trying to use a 1946 Supreme Court case to regulate 2024 technology. The Howey Test requires an investment of money, a common enterprise, and an expectation of profit from the efforts of others. Bitwise and Hyperliquid are essentially arguing that many modern crypto activities fail at least two of these prongs.

When you buy a token on a secondary market, there is no "investment of money" into the company that created the token. The money goes to the seller, who is just another user. When you receive an airdrop, there is no investment of money at all. By forcing the SEC to address these specific mechanics, these firms are trying to carve out a space where builders can operate without a legal target on their backs.

What This Means for Builders

If you are building in this space right now, you are likely operating in a gray area. You are probably wondering if your reward system, your liquidity pools, or your governance tokens are going to trigger an enforcement action. The efforts by Bitwise and Hyperliquid represent a move toward a "safe harbor" environment.

We need rules that distinguish between a speculative asset and a functional one. If the SEC adopts even a fraction of these suggestions, it would mean that founders could focus more on code and less on compliance. It would provide a roadmap for how to launch a token without needing a $10 million legal budget.

However, we shouldn't be naive. The SEC has a long history of ignoring public comments that don't align with their existing enforcement-first agenda. But by putting these arguments on the formal record, the industry is setting the stage for future legislative changes or court rulings. It creates a paper trail of "reasonable alternatives" that the agency has so far refused to consider.

The Skeptic's View

As much as I want to see these rule changes pass, we have to look at the reality of the situation. The SEC is an institution that values control. Acknowledging that secondary-market tokens aren't securities would mean giving up a massive amount of jurisdictional power. They aren't going to do that because a few firms asked nicely.

The value here isn't necessarily in the SEC changing its mind tomorrow. The value is in the consolidation of the industry's voice. For a long time, crypto was a fractured mess of different interests. Now, we are seeing the big institutional players (Bitwise) and the high-performance DeFi platforms (Hyperliquid) align on a single message: give us the rules so we can actually follow them.

The industry is finally realizing that complaining on Twitter isn't a legal strategy. We are moving from the 'move fast and break things' era to the 'write rules so we can build things' era.

For founders, the takeaway is simple: keep building, but watch these filings closely. The definitions that emerge from these battles will determine the architecture of the next decade of the internet. If the SEC refuses to provide clarity, the pressure on Congress to step in will only increase. We are reaching a breaking point where the current lack of clarity is no longer sustainable for the U.S. economy.

In the meantime, the best thing a founder can do is build products that have clear utility beyond just price speculation. The harder it is to argue that your token is just a vehicle for profit, the stronger your position will be, regardless of how these rule changes shake out. Focus on the users, focus on the tech, and let the lawyers fight over the definitions.

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