Hyperliquid Policy Center Pushes SEC on Token Buybacks
Hyperliquid Policy Center has asked the SEC to confirm that a token buyback running on fixed, published rules is not a promise of managerial effort. It wants that to hold even when a company, foundation or other central party still controls the network.
Key Takeaways
- HPC wants buybacks that run on fixed, published rules cleared as no promise of managerial effort on functional networks, even where a central party exists.
- It accepts that discretionary buybacks run by a central party may still count as such a promise, especially when marketed as yield.
- Its definition does not say whether a buyback stays programmatic if someone can change its parameters.
- The letter also seeks a narrower “central party” definition and changes on airdrops, secondary trading, the safe harbor and state preemption.
The request is one of five in a comment letter on the proposed Regulation Crypto Assets, filed on October 19 and signed by HPC chief executive Jake Chervinsky and senior counsel Brad Bourque. HPC launched in February with 1 million HYPE from the Hyper Foundation, which supports the Hyperliquid ecosystem, and describes itself as an independent research and advocacy group. Hyperliquid buys back HYPE with its trading fees.
The SEC proposed the rule in August. It would allow token offerings of up to $5 million over four years under a startup exemption, and up to $75 million in any 12-month period under a fundraising exemption. It would also add a safe harbor confirming when a token is no longer tied to an investment contract, and preempt state registration for those offerings and certain resales. HPC supports the proposal and wants changes before it is adopted.
What SEC staff says about buybacks today
The legal question is whether announcing a buyback counts as a promise of “essential managerial efforts.” These are the work of a team or issuer that buyers rely on to make a profit. Under the Howey test, which courts use to decide whether an arrangement is an investment contract, that reliance is one of the markers of a securities transaction.
The SEC’s Division of Corporation Finance covers buybacks in its crypto FAQ. Since an amendment on September 28, the answer says a buyback announcement is not such a promise where the crypto system is functional and has no central party. Coindoo has reported on how staff separated buybacks from profit promises.
Staff FAQs carry no legal force. HPC’s letter praises the guidance but argues that projects cannot depend on it until the Commission writes it into the final rule or the adopting release.
Published rules versus case-by-case calls
HPC wants the Commission to treat two kinds of buyback differently. The letter defines them this way:
Programmatic
Runs on fixed, publicly disclosed parameters: a set share of protocol fees, a defined schedule, a formula, or continuous open-market buying that anyone can check onchain. No one chooses the timing, the size or whose tokens are bought.
Discretionary
Run by a central party that decides when to buy, how much and from whom. Purchases can come from insiders or a treasury.
In HPC’s view, the second type involves information asymmetries and the kind of discretion securities law exists to police. The first does not.
From that, the letter asks the SEC to confirm that announcing, maintaining or executing a programmatic buyback or burn on a functional system is not a promise of essential managerial efforts, “regardless of the existence of a central party.” That goes past the FAQ’s wording. HPC presents it as a reading of the existing text, arguing that the “no central party” condition was aimed at discretionary buybacks.
The letter also asks the SEC to confirm the opposite case. A discretionary repurchase programme run by a central party may be a promise of managerial effort, depending on the facts. That is especially likely where the issuer markets the buyback as yield for holders or the system is not yet functional. The requested treatment covers only non-security tokens on functional systems.
Hyperliquid already runs this kind of programme
Hyperliquid’s Assistance Fund receives most of the exchange’s trading fees and uses them to buy HYPE on the open market. According to CoinShares research, the fund places orders below the market price and sends the purchased tokens to an address no one can access. Validators voted in December 2025 to recognise those tokens as burned.
The letter does not mention Hyperliquid’s buyback and does not ask for treatment of any single project. The definition it proposes, however, is fee-funded, rule-based and verifiable onchain, which describes the model Hyperliquid already uses.
The question the definition leaves open
HPC’s definition covers how a buyback executes. It does not cover who may change it. A programme can run without human input for months and still depend on someone who can raise or cut the fee share, pause purchases or send the money elsewhere. Hyperliquid’s December 2025 vote shows that holders of governance power do take decisions about such a fund.
| Element | What HPC’s definition fixes | What it does not address |
|---|---|---|
| Funding | A published share of fees or a formula | Who can change the share |
| Timing | A schedule or continuous buying | Who can pause or restart it |
| Use of funds | Open-market purchases, no chosen sellers | Who can redirect the money |
The letter does not say whether a buyback stays programmatic if a team, a foundation or a governance vote can rewrite its parameters. Any final text that adopts HPC’s distinction would need a position on that, because a parameter change is a decision about timing and size made by someone.
Who counts as a central party
The same recommendation asks the SEC to settle what “central party” means. The term governs the FAQ’s buyback answer and the wider test of whether a network is functional, yet the FAQ does not define it. The SEC’s March interpretation defines it in a footnote as a person, entity or group with operational, economic or voting control, without explaining what makes a group.
HPC argues that a loose reading could cover any network with a governance token, since some combination of unrelated holders always controls a majority of votes. It asks the SEC to define a group as two or more persons acting in concert or under common control, in line with Section 13(d) of the Exchange Act. Holders, validators, delegators, developers, foundations and liquidity providers should not count as one because of combined holdings or shared incentives.
That definition would not decide the programmatic case, which HPC wants cleared whether or not a central party exists. It would decide which networks fall under the FAQ’s current answer, and who is responsible for a discretionary buyback.
The other four requests
- Airdrops: Write into the rule that tokens earned by using a network, running a validator or supplying liquidity involve no investment of money where the recipient gave no tangible and definable consideration. Confirm that connecting a wallet, signing a claim or passing sanctions screening is not payment, and apply the same analysis to past airdrops.
- Secondary trading: State that resales of these tokens are not securities transactions, and use the SEC’s Section 36 exemptive authority so intermediaries and qualifying onchain protocols can facilitate trades without registering as exchanges, brokers or dealers. HPC cites the SEC’s own economic analysis, which says the proposal’s benefits may be small if no liquid secondary market develops.
- Safe harbor: Let a project certify that its token was never subject to an investment contract, and state that filing is not an admission. Allow the supporting analysis to stay out of the public filing, since HPC argues it would give opponents a guide for litigation. Extend protection to projects still building, under a defined development period with milestones.
- State preemption: As proposed, preemption would end once a project satisfies the safe harbor. HPC says that could expose holders and trading venues to registration rules in more than 50 jurisdictions and give projects a reason to delay finishing their work. It proposes an optional annual certification that keeps the federal protection in place.
What happens next
The letter is filed under SEC file number S7-2026-27. The Commission will consider public comments before it votes on a final rule, and HPC says it will keep engaging with the agency and its staff. None of the requests has legal effect unless the SEC includes it in the final rule or the adopting release.
This article is provided for informational purposes only and does not constitute legal or investment advice. It describes a proposed rule and requested changes that the SEC has not adopted.
Kosta has reported on cryptocurrency markets and blockchain infrastructure since 2020, bringing over six years of hands-on experience in the crypto industry built through daily tracking of markets, trends, and emerging blockchain developments. Specializing in Bitcoin on-chain analysis, institutional ETF flows, and digital asset price action, his work at Coindoo has been cited by other news agencies and consistently covers market developments with a focus on data-driven reporting across Bitcoin, Ethereum, Solana, and XRP. Over the years, Kosta has contributed to multiple crypto media outlets in different regions, authoring over 6,000 articles across the sector. His reporting spans cryptocurrency markets and the broader fintech industry, tracking not only price action but also the technological and regulatory forces shaping the ecosystem. To support his analysis, Kosta actively leverages on-chain data and metrics from leading platforms such as Santiment, Glassnode, and CryptoQuant, enabling deeper, evidence-based market insights. He believes in the power of transparency and the data that underpins the blockchain ecosystem. His academic background in Marketing Management from Denmark further complements his analytical approach, adding a strong understanding of communication strategy and content positioning to his work.
