The U.S. Securities and Exchange Commission has proposed a new framework that would give crypto projects two tailored routes to raise capital without completing a full securities registration, while setting conditions for certain tokens to move beyond treatment as part of an investment-contract arrangement.
The proposal, titled “Regulation Crypto Assets” and assigned docket number S7-2026-27, was released on Aug. 18 and is open for public comment for 60 days following publication in the Federal Register. It remains a proposal with no legal force unless the SEC approves a final rule after reviewing comments.
The package addresses a problem that has shaped the U.S. token market for years: a network may begin with a token sale that depends heavily on an issuer’s work, then develop into a system where the original team no longer provides the managerial efforts purchasers were relying on. The SEC said existing rules do not cleanly address that transition, particularly under the Howey test, the 1946 Supreme Court standard used to determine whether an arrangement qualifies as an investment contract.
Two exemptions would set different fundraising limits
The proposed startup exemption would allow eligible early-stage crypto issuers to raise up to $5 million cumulatively over a period of as much as four years. Projects using the exemption would provide principles-based narrative disclosures rather than the more extensive registration documents required in a conventional public offering.
Companies using the startup route would not have to provide audited financial statements. That could reduce compliance costs for small development teams, though the $5 million lifetime cap would limit its use for projects seeking substantial capital to build infrastructure, establish liquidity programs, or finance international expansion.
A separate fundraising exemption would permit crypto issuers to raise up to $75 million during any 12-month period. The SEC modeled much of that pathway on Regulation A+, an existing securities exemption that permits limited public offerings under a lighter process than a full registration.
The fundraising exemption would use a two-tier format and impose more demanding requirements than the startup route. Issuers would need to provide narrative disclosures, audited financial statements, and continuing reports. The structure would give larger projects an avenue to raise funds from a wider group of purchasers while requiring disclosures that can be updated as the network develops.
Both exemptions would remain subject to federal anti-fraud and anti-manipulation laws. The SEC would retain enforcement authority over misleading statements, market manipulation, and other conduct that violates federal securities laws, even where an issuer has not completed full Section 5 registration under the Securities Act of 1933.
Safe harbor focuses on promised managerial work
The proposal’s most consequential feature may be its conditional safe harbor for crypto-asset investment contracts. It describes circumstances in which a crypto asset can cease to be treated as part of an investment-contract arrangement after the issuer completes, or permanently stops, the essential managerial efforts it had promised to purchasers.
That language centers the analysis on the issuer’s ongoing role rather than treating a token’s label or technical design as determinative. A token sold to fund the construction of a network could initially be connected to an investment contract if buyers depend on the founding team to deliver core features. Under the proposed safe harbor, that connection could end if the promised work has been completed or abandoned permanently.
The approach would give issuers a clearer incentive to identify their obligations at the outset and disclose when those obligations have been fulfilled. It could also make public claims about road maps, protocol upgrades, governance arrangements, and development milestones more legally consequential, since those commitments may help establish whether purchasers continued to rely on a sponsor’s managerial efforts.
The SEC’s proposal uses the term “covered investment contract” for eligible arrangements. The definition is limited to agreements involving a crypto asset that is not itself a security and that does not include other assets. That boundary appears designed to prevent a broad exemption from extending to conventional securities packaged alongside a token.
Disclosures would address token-specific information
The agency said traditional disclosure systems, including Regulation S-K and Form 1-A, do not always capture information market participants seek in token offerings. Regulation Crypto Assets would therefore require disclosures that speak more directly to crypto markets, including token economics, network governance, and source-code security.
Those subjects can determine how much control a founding team retains, whether token supply can expand, how voting power is distributed, and whether technical flaws could disrupt a network. A narrative description of revenue and corporate operations, while central in an ordinary securities offering, may provide an incomplete picture of risks tied to a crypto protocol.
The proposal also redefines “qualified purchaser” for purposes of its exemptions. Securities issued under the new provisions, as well as related secondary-market transactions, would receive federal preemption from state securities-law registration and qualification review requirements. That would replace a potentially fragmented state-by-state review process with a federal framework for covered offerings.
Federal preemption could be especially relevant for token distributions designed to reach purchasers across the United States. State anti-fraud authority would remain relevant, but issuers would not need to navigate separate registration and qualification regimes for transactions covered by the SEC exemption.
Rulemaking arrives as Congress remains stalled
The SEC linked its work to the Trump administration’s January 2025 executive order, “Strengthening American leadership in digital financial technology,” which established the President’s Digital Asset Markets Working Group. The agency also pointed to its Crypto Task Force, led by SEC Commissioner Hester Peirce, which received more than 300 public comment letters.
In July 2025, the working group recommended that the SEC use its rulemaking and exemptive authority to create tailored registration exemptions, a time-limited safe harbor, and an exemption approach for airdrops. The new proposal follows that blueprint closely, though it will face a formal comment process and possible revision before any final version is adopted.
The SEC and Commodity Futures Trading Commission also issued interpretive guidance on March 17, 2026, sorting crypto assets into five categories: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. Regulation Crypto Assets would add an offering and disclosure framework to that classification effort.
The timing places the agency’s action alongside uncertainty in Congress over the CLARITY Act. A Senate procedural vote is scheduled for Sept. 15 after a motion to end debate was filed on Aug. 8. Cloture requires 60 votes, meaning Senate Republicans would need support from roughly 10 Democratic senators based on current seat counts.
Polymarket pricing for a contract on whether the CLARITY Act would be signed into law in 2026 fell from about 82% in February to roughly 18% to 21% by mid-August. That market reflects trader expectations rather than a measure of legislative probability, but the decline underscores how quickly confidence in a near-term congressional settlement has faded.
If Congress does not establish a statutory framework soon, the SEC’s proposal could become the primary near-term venue for determining how token issuers raise capital and explain their obligations to purchasers. Its eventual shape will depend on public submissions, the SEC’s response to substantive comments, and the agency’s internal priorities. Commissioner Peirce is scheduled to leave the SEC in November 2026, adding a potential timing constraint to a rulemaking process that can take months or more than a year to complete.
For deeper context on evolving U.S. crypto rules, explore the possible future of crypto regulation in the US today.
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