SEC Proposes "Regulation Crypto Assets," Creating a Tailored Offering Framework for Crypto Investment Contracts
On August 18, 2026, the Securities and Exchange Commission (SEC) proposed Regulation Crypto Assets, a new registration-exempt offering framework designed specifically for crypto assets. The proposal would create two exemptions from Securities Act registration; a conditional safe harbor under which a crypto asset would no longer be treated as a security; and preemption of state blue sky registration and qualification requirements. This is the SEC's first purpose-built offering regime for crypto assets, and it comes as the Senate has stalled for now on broader crypto market structure legislation. Comments are due 60 days after publication in the Federal Register.
Background: From Enforcement to a "Fit-for-Purpose" Framework
Since the 2017 DAO Report, the SEC has regulated crypto assets largely by applying the Supreme Court's SEC v. W.J. Howey Co. test through informal guidance and enforcement, asking whether a crypto asset was sold as part of an "investment contract" and thus regulated as a security. Market participants have long argued that this analysis is hard to apply consistently and that case law, disclosure and resale rules written decades before blockchain technology was invented are a poor fit for token distributions.
The SEC's posture shifted with the creation of the Crypto Task Force in 2025 and, on March 17, 2026, the SEC and Commodity Futures Trading Commission (CFTC) issued a joint interpretive release addressing how the federal securities laws apply to certain crypto assets and transactions. That March interpretation confirmed that while some crypto assets are not securities, they may be sold subject to an investment contract that is a security and, critically, that the otherwise non-security underlying crypto asset may later "separate" from its investment contract security when purchasers can no longer reasonably expect the issuer to engage in essential managerial efforts. Regulation Crypto Assets would codify that separation concept and build an offering regime leading up to it.
The Building Block: "Covered Investment Contracts"
The proposed regime centers on the "covered investment contract" definition: an investment contract where a crypto asset is the only asset subject to the contract and that crypto asset is not itself a security; that token is separately defined as the "subject crypto asset." Notably, the startup exemption covers "covered transactions," a term that expressly includes airdrops and network rewards in addition to offers, sales and other distributions. Where the underlying crypto asset is a security, however (such as with tokenized stock securities), the definition, and thus the exemptions, do not apply.
All issuers relying on either exemption (both are described below) would provide principles-based narrative disclosure under proposed Rule 103, with 10 topics, including the material terms of the covered investment contract and the issuer's representations or promises to engage in essential managerial efforts. Rule 103 would also require that the disclosure be consistent with the issuer's public communications (e.g., its website, official social media accounts and whitepapers), rendering communications discipline a compliance issue in addition to a marketing one. Both exemptions would be non-exclusive. They are unavailable to "bad actors" disqualified under Regulation A's Rule 262, registered investment companies and business development companies.
The Startup Exemption
Proposed Rule 200 would exempt offers, sales and other distributions of covered investment contracts up to $5 million over up to four years. The exemption is available only once to an issuer and its affiliates for the same or a substantially similar crypto asset, and the issuer may be an entity, an individual or a group.
To use the exemption, an issuer would file a notice of reliance on new Form NOR with the SEC before any covered transaction occurs, certifying its intent to fulfill the promised essential managerial efforts within four years; keep the Rule 103 disclosures freely available on a specified website; update them within 30 calendar days after each year-end if there have been material changes; and file a transition report on new Form TR no later than the end of the four-year period. The Rule 103 information itself would not be filed on EDGAR, making version control and recordkeeping important if questions later arise about what was publicly available and when.
Unlike Regulation D and Regulation Crowdfunding, the startup exemption would impose no accredited investor condition and no individual investment limit, would permit general solicitation, and would not treat the covered investment contracts as restricted securities subject to Rule 144-style holding periods. The SEC's view is that free tradability supports the network effects that drive token value.
The Fundraising Exemption
Proposed Rules 300 through 307 would create a two-tier offering exemption modeled on Regulation A.
- Tier 1 would permit up to $20 million of covered investment contracts in a 12-month period (including no more than $6 million by affiliated selling securityholders), with no audit requirement.
- Tier 2 would permit up to $75 million in a 12-month period (including no more than $22.5 million by affiliated selling securityholders), with financial statements audited under U.S. GAAS or PCAOB standards.
The fundraising exemption would impose a U.S. nexus test drawn from the "foreign private issuer" definition: the issuer must be organized in the United States, a majority of its executive officers or directors must be U.S. citizens or residents, more than 50% of its assets must be located in the United States and its business must be administered principally in the United States.
Issuers would file an offering statement on new Form 1-CRYPTO, modeled on Form 1-A, with a Part II offering circular tracking the Rule 103 topics, a narrative discussion of financial condition modeled on Regulation Crowdfunding and U.S. GAAP financial statements. Regulation A-style offering conditions would carry over, including a 10% of income or net worth investment limit for non-accredited investors, "testing the waters" communications under Rule 304, and a prohibition on at-the-market offerings. Qualified issuers would then be subject to ongoing reporting on new Forms 1-KC (annual), 1-SC (semiannual) and 1-UC (current).
The Investment Contract Safe Harbor
Proposed Rule 400 would provide a non-exclusive, conditional safe harbor from the term "investment contract" in the definitions of "security" in Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Exchange Act. An issuer satisfies the safe harbor if it (1) has completed or permanently ceased all essential managerial efforts it promised under the covered investment contract, and is not making and does not intend to make new such promises; and (2) files a transition report on Form TR certifying satisfaction of that condition and providing a supporting analysis. The safe harbor is available whether or not the issuer used either exemption.
Three limits deserve attention. The safe harbor rests on the issuer's own certification and analysis rather than any SEC staff determination or bright-line decentralization metric. The SEC would not be barred from later challenging whether the conditions were actually met, in which case it may argue that the investment contract never ceased to exist. And while the safe harbor would control the SEC's administration of the federal securities laws, the release states plainly that it "would not prevent other parties from asserting that a crypto asset is subject to an investment contract (or is otherwise a security)"—leaving private plaintiffs and state regulators outside its protection.
Preemption of State Registration and Qualification
Proposed Rule 500 would define "qualified purchaser" for purposes of Securities Act Section 18(b)(3), making covered investment contracts sold under the regime "covered securities" and thus preempting state registration and qualification requirements. Preemption would extend to secondary market transactions by persons other than an issuer, underwriter or dealer in covered investment contracts initially sold under Regulation Crypto Assets or another federal exemption—but only while the issuer remains current with the applicable disclosure, filing and periodic reporting requirements of a Regulation Crypto Assets exemption. Resale preemption can therefore lapse. States would retain their antifraud authority.
Importantly, the proposal does not address whether platforms trading covered investment contracts must register as exchanges, brokers or dealers. Free transferability and blue sky preemption alone would not create a complete federal pathway for secondary trading.
Practical Implications
- The comment period is a leverage point. The 60-day window is the principal opportunity to shape offering limits, the disclosure topics, the safe harbor conditions, foreign issuer applicability, and the scope of preemption. Commissioner Hester Peirce, who leads the Crypto Task Force, acknowledged that the proposal "will not fit every model" and specifically invited comment on facilitating crypto assets that "serve a role akin to equity."
- Disclosure discipline starts now. Because Rule 103 requires consistency with whitepapers, websites and official social media, and because the description of promised "essential managerial efforts" becomes the benchmark against which the safe harbor is later measured, issuers should treat public statements about roadmaps and milestones as securities disclosure.
- Public companies can mine Rule 103. Issuers with material crypto operations, exposure or treasury strategies may find the Rule 103 topics a useful reference for risk factors, competitive intelligence, and digital asset disclosure even if they never file the new forms.
- The safe harbor is not a private litigation shield. Counsel should not treat a Form TR filing as an ultimate determination of non-security status. Contractual protections, a defensible, contemporaneous supporting analysis, and ongoing compliance remain essential.
Takeaways
Regulation Crypto Assets would be a significant shift from regulation-by-enforcement toward a defined pathway for crypto asset offerings. Its treatment of resales, general solicitation and state preemption is more permissive than any existing small-offering exemption, providing a regulatory advantage to such crypto offerings as compared to offerings of other securities.
But it targets smaller, unregistered offerings, leaves secondary market intermediary questions unresolved, and its centerpiece safe harbor binds only the SEC. Chairman Paul Atkins framed the package as "minimum effective dose, maximum freedom to build, and durable clarity under existing law," while cautioning that "legislation remains indispensable to enacting 'future-proofed' rules of the road that are durable enough to protect the work we are undertaking today from being unwound by a future rogue regulator."
With the Senate likely to take an initial vote on the CLARITY Act soon, issuers and market participants would be wise to treat the proposal as only the current state of play in a rapidly changing regulatory environment for crypto assets.
For more information on Regulation Crypto Assets and its implications for crypto asset offerings, disclosure practices and securities law compliance, please contact Scott Gootee, Eric Mikkelson, Andrew Arbuckle or the Stinson LLP contact with whom you regularly work.
