The Hyperliquid Policy Center (HPC) has asked the U.S. Securities and Exchange Commission (SEC) to confirm that token buybacks executed under fixed, published rules do not constitute a promise of managerial effort — even where a central party exists. The request appears in a comment letter on the agency's proposed Regulation Crypto Assets, filed on October 19 and signed by HPC chief executive Jake Chervinsky and senior counsel Brad Bourque. Comment letters are the standard channel through which outside parties weigh in on a proposed rule before the Commission drafts its final text.

It is one of five requests in the letter. HPC also seeks a narrower definition of "central party" and changes to the proposal's treatment of airdrops, secondary trading, the safe harbor and state preemption.

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, for its part, already returns value to tokenholders by using trading fees to buy back HYPE.

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. In a blog post, the group frames its submissions as refinements to a framework it broadly endorses.

What SEC staff says about buybacks today

The legal question is whether announcing a buyback counts as a promise of "essential managerial efforts" — the work of a team or issuer that buyers rely on to make a profit. Under the Howey test — the Supreme Court's 1946 standard that 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 addresses buybacks in its crypto FAQ. Since an amendment on September 28, the answer states that a buyback announcement is not such a promise where the crypto system is functional and has no central party. Coindoo has previously reported on how staff separated buybacks from profit promises.

Staff FAQs carry no legal force, however. HPC's letter praises the guidance but argues that projects cannot depend on it until the Commission writes the position into the final rule or the adopting release.

Published rules versus case-case calls

HPC wants the Commission to treat two kinds of buyback differently. The letter defines them as follows:

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 verify 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.

On that basis, 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 beyond the FAQ's wording. HPC presents the position 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 program run by a central party may amount to a promise of managerial effort, depending on the facts — especially 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 program

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 recognize 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 — fee-funded, rule-based and verifiable onchain — 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 program can run without human input for months and still depend on someone with the power to 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 make decisions about such a fund.

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 adopting HPC's distinction would need a position on that point, because a parameter change is itself 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 almost 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 a group merely 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 a 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 was 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. The clearest markers to watch are whether the final rule or the adopting release takes up the programmatic-versus-discretionary distinction, defines "central party," and takes a position on who may change a buyback's. 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.