On August 18, the SEC proposed Regulation Crypto Assets, a new regulatory framework for certain offerings involving crypto assets. The proposal would create two new exemptions from Securities Act registration, establish a conditional safe harbor addressing when a crypto asset ceases to be subject to an investment contract, and preempt certain state securities-law registration and qualification requirements. The SEC describes the proposal as intended to provide a tailored offering regime for “covered investment contracts” while facilitating capital formation and protecting investors.
The proposal builds on the SEC’s March 2026 interpretive release addressing the application of the federal securities laws to crypto assets and transactions involving crypto assets. Under the proposed rules, a “covered investment contract” generally would be an investment contract involving a crypto asset that is not itself a security, where no other asset is subject to the investment contract.
Key elements of the proposal include:
· Startup exemption. A one-time, non-exclusive exemption would permit issuers to offer up to $5 million of covered investment contracts during a period of up to four years. Issuers would be required to make public filings at the beginning and end of the period and provide investors with specified principles-based narrative disclosures. Issuers relying on the exemption would remain subject to the antifraud and antimanipulation provisions of the federal securities laws.
· Fundraising exemption. A second exemption, modeled in part on Regulation A, would permit larger offerings through two tiers: up to $20 million during a 12-month period under Tier 1 and up to $75 million under Tier 2. Issuers would be required to publicly file offering materials containing the proposal’s principles-based narrative disclosures, a discussion of financial condition and financial statements, with audited financial statements required for Tier 2 offerings. Issuers also would be subject to ongoing reporting requirements.
· Tailored disclosures. The proposed framework would require disclosures designed specifically for covered investment contracts rather than relying solely on disclosure requirements developed for traditional securities. As summarized by Wachtell Lipton, required disclosures under the startup exemption would address matters including the covered investment contract and offering, management and related persons and conflicts of interest, the subject crypto asset, security, the associated network and development plan, source code, tokenomics, governance and risk factors.
· Investment contract safe harbor. The proposal would establish a conditional safe harbor from the term “investment contract” in the Securities Act and Exchange Act definitions of “security.” An issuer could satisfy the safe harbor after completing or permanently ceasing the essential managerial efforts it represented or promised to undertake, provided it does not make or intend to make new representations or promises to undertake such efforts and publicly files a certification and supporting analysis. If the conditions are met, the covered investment contract would be deemed to have ceased to exist and the underlying crypto asset would be deemed not to be subject to that investment contract.
· State-law preemption. The proposal would define “qualified purchaser” under the Securities Act in a manner that would preempt state securities-law registration and qualification requirements for offers and sales under the new exemptions. The proposed preemption also would extend to certain secondary-market transactions where the issuer remains current with the applicable disclosure, filing and/or reporting requirements.
Wachtell Lipton observes that the proposal would provide a new path for qualifying crypto asset offerings to raise capital in the US and notes that the fundraising exemption would impose additional issuer eligibility, filing, and reporting requirements, including the use of a new Form 1-CRYPTO and audited financial statements for Tier 2 offerings.
The proposal contains an extensive set of requests for public input, including questions concerning the scope and definitions of the new regime, disclosure requirements, offering limits, the safe harbor, state-law preemption, investor protections and the economic effects of the proposal. The SEC expressly invites interested parties to comment on any aspect of the proposed rules and asks commenters to provide reasoning and supporting documentation or data for their recommendations.
Commissioner Hester Peirce, who supported the proposal, emphasized the importance of public feedback and specifically welcomed views on facilitating the ability of crypto assets to play a role similar to equity by enabling token holders to share in the growth and value of the enterprise building a crypto network. She characterized the proposal as one step toward a clear and workable regulatory framework and encouraged interested parties to submit their views during the comment period.
Comments will be due 60 days after the proposing release is published in the Federal Register.
See also the SEC’s release and Fact Sheet and Chair Atkins’ Statement.