Bitwise Asks SEC to Define When Crypto Assets Separate From Investment Contracts

Bitwise Asset Management, Inc. has asked the SEC to set an observable standard for when a crypto asset separates from an investment contract, giving managers a way to assess its status using public information.

Bitwise made the request in an Oct. 19 comment on the SEC’s proposed Regulation Crypto Assets. It also wants the agency to explain when an investment manager or another party that is not the issuer may rely on an issuer’s proposed Form TR filing, and how to assess an asset when no filing exists.

Under the proposal, Form TR would let an issuer certify that an investment contract has ended. Bitwise’s request focuses on how others can make that assessment from information they can obtain publicly.

The proposal also includes a safe harbor for determining when a token is no longer tied to an investment contract.

The Hyperliquid Policy Center has sought changes to the same proposal, including an earlier point at which its safe harbor would apply. Its request on airdrops concerns non-security crypto assets distributed outside capital-raising transactions to recipients who qualify through their own network activity. The center also wants clarity on whether unregistered intermediaries and qualifying onchain protocols may facilitate later token trades.

Former SEC enforcement official John Reed Stark and Duke University finance scholar Lee Reiners asked the commission to withdraw the proposal in an Oct. 16 comment. They argued that existing securities laws and the Supreme Court’s Howey test already provide a framework for crypto offerings. They also contended that the fundraising exemptions and issuer self-certification process would weaken investor protections.

Stark and Reiners warned that adopting a rule substantially like the proposal could bring an immediate legal challenge.

The comment period ended Oct. 20. The SEC has set no timetable for a decision on the proposal; adopting a final rule would require a commission vote.