SEC Walks Regulatory Tightrope as Bitwise Seeks First Hyperliquid ETF Approval

The U.S. Securities and Exchange Commission (SEC) has become a focal point for crypto asset regulation as Bitwise Investment Advisers submitted an S-1 registration statement for the Bitwise Hyperliquid ETF, marking the first proposal to seek exposure to Hyperliquid’s native token, HYPE The Block, (https://www.theblock.co/post/372472/bitwise-files-prospectus-hyperliquid-etf)^[1]. Hyperliquid, a Layer 1 blockchain platform, positions itself as a decentralized finance (DeFi) infrastructure tailored for perpetual futures trading. The SEC’s delayed action on this and other crypto ETF proposals underscores the agency’s cautious approach to regulating digital assets, with broader implications for market structure and investor access.

Bitwise’s filing outlines an ETF designed to track the performance of HYPE, which has a market capitalization of $11 billion and ranks as the 21st-largest cryptocurrency The Block, (https://www.theblock.co/post/372472/bitwise-files-prospectus-hyperliquid-etf)^[1]. The token’s circulating supply stands at 270.8 million, with recent data showing a 11% decline in value over the past 24 hours, closing at $40.51 The Block, (https://www.theblock.co/post/372472/bitwise-files-prospectus-hyperliquid-etf)^[1]. This volatility highlights the inherent risks of crypto markets, a concern the SEC has repeatedly emphasized in its regulatory communications.

The SEC’s handling of Bitwise’s application mirrors its broader pattern of scrutinizing crypto ETFs. While the agency’s Division of Trading and Markets initially approved the conversion of Bitwise’s existing crypto index fund into an ETF in July 2025, it later imposed a stay under Rule 431, allowing the full commission to review the decision Cointelegraph, (https://cointelegraph.com/news/sec-pauses-bitwise-crypto-etf-after-approval)^[3]. This move aligns with the SEC’s recent delays on other proposals, including Canary’s spot SUI and PENGU funds, as well as staked INJ and SEI offerings The Block, (https://www.theblock.co/post/372472/bitwise-files-prospectus-hyperliquid-etf)^[1]. Analysts speculate the SEC may be prioritizing the development of a standardized framework for crypto ETF listings, potentially delaying approvals until late 2025 or beyond Cointelegraph, (https://cointelegraph.com/news/sec-pauses-bitwise-crypto-etf-after-approval)^[3].

Industry observers have reacted to the regulatory uncertainty. Howard Lindzon, co-founder of StockTwits, remarked on social media that the web 2.0 era’s venture capital model is being replicated in crypto, with investors seeking early-stage opportunities despite the risks of prolonged regulatory limbo The Block, (https://www.theblock.co/post/372472/bitwise-files-prospectus-hyperliquid-etf)^[1]. Meanwhile, firms like Hashdex have expanded their ETFs to include XRP and Solana following recent SEC approvals of broader listing standards, indicating incremental progress in the sector The Block, (https://www.theblock.co/post/372472/bitwise-files-prospectus-hyperliquid-etf)^[1].

The SEC’s actions reflect a balancing act between fostering innovation and safeguarding market integrity. The agency’s recent extension of deadlines for ruling on in-kind redemptions for Bitcoin and Ether spot ETFs, coupled with its exploration of streamlining approval processes for select crypto vehicles, signals a potential shift toward efficiency Cointelegraph, (https://cointelegraph.com/news/sec-pauses-bitwise-crypto-etf-after-approval)^[3]. However, the lack of a unified regulatory framework for multi-token ETFs remains a barrier. Bitwise’s Hyperliquid ETF, which includes tokens like XRP and Cardano—assets previously subject to SEC scrutiny—exemplifies the complexity of navigating overlapping regulatory interpretations The Currency Analytics, (https://thecurrencyanalytics.com/altcoins/sec-delays-bitwise-etf-with-xrp-btc-sol-after-initial-green-light-186827)^[4].

The outcome of these regulatory deliberations will shape the trajectory of crypto ETFs in the U.S. While Bitwise’s application represents a significant step, the SEC’s delays have created a fragmented landscape. Competitors like Grayscale and VanEck face similar hurdles, with their Avalanche and staked token proposals also awaiting approval The Block, (https://www.theblock.co/post/372472/bitwise-files-prospectus-hyperliquid-etf)^[1]. This uncertainty has prompted calls for clarity from industry groups, including The ETF Institute, which advocates for expedited approvals to align with market demand The Currency Analytics, (https://thecurrencyanalytics.com/altcoins/sec-delays-bitwise-etf-with-xrp-btc-sol-after-initial-green-light-186827)^[4].

As the SEC continues its review, the broader crypto market remains in flux. The agency’s decisions could either catalyze institutional adoption by providing a regulated entry point for investors or further entrench the U.S. behind global competitors like the EU, where the Markets in Crypto-Assets (MiCA) regulation has streamlined compliance for cross-border crypto products . For now, the fate of Bitwise’s Hyperliquid ETF—and the broader crypto ETF ecosystem—hinges on the SEC’s ability to reconcile innovation with its mandate to protect investors.