SEC Regulation Crypto Assets: Hyperliquid Policy Center Wants Automated Buybacks Treated Apart

The Hyperliquid Policy Center filed a comment letter with the SEC on October 19, one day before the comment deadline on the agency's proposed Regulation Crypto Assets. Per The Crypto Times, the group backs the proposal but wants five provisions clarified before it is finalized. One of them goes straight at the mechanism that sits under HYPE every day: the buyback.

For traders, the letter is less about legal theory and more about which flows the rules would treat as normal market activity. Airdrops, on-chain secondary trading and automated buybacks are all things that show up in an order book.

What SEC Regulation Crypto Assets Proposes

The SEC proposed Regulation Crypto Assets in August 2026 under docket S7-2026-27, following a March 2026 interpretation of how securities laws apply to certain crypto assets, according to The Crypto Times. The draft includes a startup exemption for token offerings of up to $5 million over four years and a fundraising exemption for up to $75 million in any 12 month period.

It also creates a safe harbor for tokens that are no longer tied to an investment contract, plus exemptions from some state registration requirements. FinanceFeeds notes the rule has not been adopted and no implementation date has been announced, and that the HPC recommendations are proposals from an advocacy group, not exemptions anyone can rely on today.

The Buyback Request: Automated vs Discretionary

The fourth request is the one with the most direct market link. HPC asks the SEC to distinguish automated repurchases carried out under published protocols from discretionary buybacks by identifiable entities, and to use one consistent definition of collective centralized control, per FinanceFeeds. The Crypto Times adds that HPC wants recent SEC staff guidance folded in and argues that validators and ordinary network users should not automatically be treated as one controlling group.

Hyperliquid is the obvious case study. The Assistance Fund buys HYPE on the open market with trading fee revenue and the purchased tokens are treated as burned. 24/7 Wall St. describes the purchases as daily and puts the fee share at about 97% to 99%. CoinGape reported on October 13 that the fund held more than 48 million HYPE bought for about $1.36 billion, worth about $3.95 billion at the time, and that the AQAv2 framework routed nearly $14.58 million in USDC yield into the fund in early October.

Why the label matters: a buyback that follows a published rule is a flow anyone can model. A discretionary buyback by an identifiable party looks more like an issuer supporting its own price, which is exactly the kind of activity securities law cares about. If the final rule blurs the two, a mechanical bid could be pulled into a category it was designed to avoid.

Why a Rule-Based Bid Changes HYPE Orderflow

A fee-funded buyback is not a constant. 24/7 Wall St. points out that buyback volume depends on trading activity: when trading slows, especially on price dips, the fund buys fewer tokens. That makes the bid partly pro-cyclical. It is largest when the platform is busy, not necessarily when price needs support.

The October 13 session shows the limit. CoinGape had HYPE near $81.20, down nearly 5% in 24 hours, with $931.6 million of 24 hour trading volume and the buyback still running. A steady passive bid absorbs some sell pressure, but it does not decide direction when aggressive sellers are larger.

For orderflow reading, the practical point is that the buyback is a known, mostly price-insensitive buyer. On days where HYPE CVD turns positive with little change in perp open interest, part of that buy delta can be structural rather than speculative. A rule that confirms the automated status keeps that flow predictable. A rule that forces changes to how it runs would change the baseline every HYPE trader is reading against.

Airdrops, Secondary Trading and State Preemption

The other four requests shape token supply and where it can trade. On airdrops, HPC wants the SEC to confirm that free distributions do not meet the investment-of-money test and that wallet connection or sanctions screening should not count as payment, per FinanceFeeds. U.Today reports that HPC argues the draft does not address decentralized exchanges and that tokens should be legally tradable on-chain from day one.

On the safe harbor, HPC says developers should not have to implicitly admit their token was once an investment contract, and that the safe harbor should also cover networks still in essential development. On state rules, it wants federal preemption to stay in place after a project meets the safe harbor conditions, citing exposure to registration requirements in more than 50 jurisdictions, per The Crypto Times.

This is not HPC's first filing. The same report says the group met the SEC Crypto Task Force on July 14 and, in August, asked the SEC and the CFTC to adopt shared rules for classifying perpetual contracts. The buyback and secondary trading points extend that push from the perp side of Hyperliquid to the token side.

What to Watch on HYPE While the Rule Is Pending

The comment period closes on October 20, so the next step sits with the SEC and there is no date for a final rule. Until then, the buyback runs as it does today, and the market impact of this letter is about expectations, not mechanics.

On Buildix, the HYPE pair view puts CVD, open interest and order book imbalance side by side, which is where a change in the structural bid would show first: buy delta that stops tracking platform volume, or open interest rising while spot delta fades. If the final text treats published, automated buybacks as ordinary protocol behavior, the HYPE bid stays a model input. If it does not, that bid becomes a regulatory variable, and every trader leaning on it will need a different baseline.