by Ijeoma Okoli
Photo courtesy of the author.
Securities and Exchange Commission (“SEC”) Chairman Paul Atkins continues to lead the SEC towards reengaging with its capital formation facilitation remit alongside those of protecting investors and ensuring fair and orderly markets. On August 18, 2026, the SEC introduced Regulation Crypto Assets proposals, providing a clear new framework for crypto market issuers to raise capital to develop their projects, building on an earlier SEC release issued in March 2026 providing clarity on the SEC’s classification of crypto assets and their treatment under US Securities laws[1], going beyond speeches and SEC staff statements on which the industry cannot rely to propose rules on which the industry may rely.
In a video announcing proposed Regulation Crypto Assets, innovation friendly rules on crypto asset capital raising, Chairman Atkins said that the SEC sought to answer a question that has puzzled innovators since the dawn of the blockchain: “How can I raise capital to develop a crypto asset while I am still working to develop the network where it will be used.”[2]
The SEC release accompanying proposed Regulation Crypto Assets explicitly states its intention in the first paragraph: “to facilitate capital formation and accommodate innovation within the crypto asset markets, while at the same time, ensuring that investors are adequately protected and provided with the information they need to make informed investment decisions.”[3] This is a welcome departure from the immediate past regulation by enforcement era of the SEC. This paper provides a summary of and commentary on the Regulation Crypto Assets proposals.
The types of crypto assets covered by Regulation Crypto Assets for which issuers may take advantage of the two types of exemptions (the startup exemption and the fundraising exemption) and the safe harbor contained in the regulation are those crypto assets that do not themselves fall into any of the enumerated types of securities contained in the definition of security in Section 2(a)(1) of the Securities Act of 1933, as amended (the “Securities Act”) and Section 3(a)(10) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Regulation Crypto Assets would cover the offering of these crypto assets pursuant to a contract, transaction or scheme that would satisfy the test for an investment contract introduced in the 1946 US Supreme Court case, SEC v. Howey (an investment of money in common enterprise with the expectation of profits through the entrepreneurial or managerial efforts of others), a test that has bedeviled the crypto assets sector at least since the SEC’s July 2017 DAO Report[4] that put the sector on notice that their so-called Initial Coin Offerings (or “ICOs”) were in fact investment contracts and therefore securities offerings subject to the strictures of Securities Act and the Securities Exchange Act. In proposed Regulation Crypto Assets, the SEC introduced a new defined term, “covered investment contracts”, to describe these types of offerings. Once a covered investment contract satisfies the conditions for an exemption, either the startup exemption or the fundraising exemption, both primary sales and secondary market sales are covered. The exemptions are non-exclusive, which means that issuers can also take advantage of other exemptions from registration requirements that may be available to them. However, the SEC warns that for any issuances that take place concurrently or in close proximity to each other, issuers must consider the integration doctrine. The integration doctrine seeks to prevent an issuer from improperly avoiding registration by artificially dividing a single offering into multiple seemingly exempt offerings to try to circumvent Securities Act registration requirements that would be applicable to the combined offering.
Certain general provisions apply to both the startup exemption and the fundraising exemption. Among them are principles-based disclosure requirements that would require an issuer seeking to utilize the aforementioned exemptions to provide information that would be material to investors in the relevant offering. In making this proposal, the SEC acknowledged that the validity of a common compliant from that crypto assets sector that the existing registration framework required the disclosure of matters that were not relevant, applicable or material to the offerings of covered investment contracts on the one hand and did not seek disclosure on matters that are relevant to investors of covered investment contracts on the other hand. The new disclosure requirements in proposed Rule 103 seek to rectify this disconnect and tailor the disclosure regime to those matters that would be relevant to investors in covered investment contracts.
Rule 103 would require an issuer to provide the following information in “clear, concise and understandable language”:
(1) a description of the material terms of the covered investment contract, including the issuer’s commitments to engage in essential managerial efforts, conditions to the covered investment contract and any other material terms;
(2) a description of the material terms of the offering, including the number of units of the covered investment contract being offered, the price per unit, the use of proceeds and the website address at which any whitepapers or other offering material are accessible free of charge;
(3) the name and material aspects of the crypto asset that is subject to the covered investment contract;
(4) material information on the issuer’s management and any related persons, information on any material conflicts of interest or related party transactions involving the issuer as well as disclosure in relation to any transfer or resale restrictions applicable to related persons;
(5) information on the material aspects of the crypto network/application associated with the crypto asset that is the subject of the covered investment contract, along with information on the issuer’s plan of development for the crypto network or application;
(6) information on the material aspects of the security of the subject crypto asset and the associated crypto network or application, and if publicly available, the website at which the code underlying the associated crypto network or application is accessible;
(7) a description of the material aspects of the subject crypto asset’s economics and allocation, including price, supply, lockups, holdings by related parties, mechanisms for generating (minting) and destroying (burning) the subject crypto asset and methods to verify the transaction history of the subject crypto asset;
(8) a description of the material aspects of the governance mechanisms of the subject crypto asset and the associated crypto network or application – this would help investors understand the circumstances under which changes may be made to the subject crypto asset and associated crypto network or application as well as who has the power to make the changes;
(9) a description of the material aspects of the network of participants that support and interact with the subject crypto asset and its associated network or application; and
(10) a description of the material factors that make an investment in the covered investment contract offering speculative or risky, including risk factors specifically related to the issuer, the crypto asset and the associated crypto network or application.[5]
Proposed Rule 104 contains a disqualification condition, cross referencing the disqualification provisions in Rule 262 of Regulation A, meaning that neither the startup exemption nor fundraising exemption is available if the issuer or certain other relevant related persons (including executive officers, directors and predecessors of the issuer) is a bad actor, someone who has been convicted of, or is subject to court or administrative sanctions for, securities fraud or other violations of certain laws.[6]
The startup exemption provides a mechanism to raise capital in the least restrictive manner but limits the amount that can be raised and the duration for which the exemption is available. The SEC recognized that ICO issuers typically make representations or promises regarding their efforts to develop or market a project in connection with the offer or sale of relevant crypto assets, which makes them investment contracts, but that at some point in time the subject crypto assets may separate from the issuers’ representations and promises to engage in essential managerial efforts in connection with the projects, at which point the relevant investment contract may cease to exist.[7] This concept was first publicly articulated by William Hinman, former Director of the SEC’s Division of Corporate Finance in a speech at a Yahoo Finance conference in 2018. Hinman raised the possibility that decentralization of a crypto network, “where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts” may make subsequent sales of the related crypto assets not investment contracts and therefore not securities offerings.[8] The SEC has now formalized this line of thinking into an actual rule that the industry can rely on, subject to certain conditions.
The startup exemption is available to issuers in the US and around the world but is subject to a maximum aggregate offering size of $5 million and a four-year limit on its availability. According to the SEC, the aim of this exemption is to (i) provide issuers with temporary relief from the registration requirements of the Securities Act which would allow them time to work on fulfilling the essential managerial efforts in connection with the subject crypto asset and crypto network or application that they represented they would engage in to investors and (ii) at the same time ensure that investors are sufficiently informed and protected, including by the fact that issuers that rely on the startup exemption will be subject to the antifraud and antimanipulation provisions of the federal securities laws.
In order to take advantage of the startup exemption, an issuer must file a notice of reliance with the SEC and make the Rule 103 disclosures discussed above in “General Provisions” publicly available and free of charge at a website disclosed in the notice of reliance. The notice of reliance will contain additional basic information about the issuer, the subject crypto asset and a certification that the information provided is true, complete and correct, and that the issuer intends to fulfil the relevant essential managerial efforts represented or promised to investors. The notice of reliance would make investors, the SEC and the general public aware that the issuer intends to rely on the startup exemption. The issuer will be required to periodically update the required information provided for any material changes or to correct a material mistake of fact or error. On or before the four-year anniversary of the filing of the notice of reliance, the issuer will be required to file with the SEC a transition report[9] which will indicate to investors, the SEC and the general public that the issuer has ceased relying on the startup exemption. The startup exemption is a one-time exemption meaning that an issuer can only use it once in connection with a subject crypto asset or another crypto asset substantially similar to the subject crypto asset.
The second exemption is the two-tier fundraising exemption, with an available offering cap of $75 million in any 12-month period and, unlike the startup exemption it has no time limit, however it has an explicit requirement that any entities seeking to raise capital in the US in connection with crypto projects and rely on the exemption from registration must be organized in the US.[10] The majority of the entity’s executive officers or directors must also be US citizens or residents; more than 50% of the entity’s assets must be located in the US and the issuer’s business must be principally administered in the US.[11] These US residency and citizenship requirements would serve a number of purposes, including: (i) facilitating the ability of the SEC and investors to seek recourse in the event of fraud or manipulation, (ii) providing US investors with more easily accessible investment opportunities and better investor protection, (iii) reverse the tide of crypto projects moving overseas as a result of a previous era of US regulatory uncertainty and (iv) encourage US domestic innovation and capital formation.[12] The rule specifies that issuers that rely on the fundraising exemption will be subject to the antifraud and antimanipulation provisions of the federal securities laws. Purchasers of covered investment contracts under the fundraising exemption that are not accredited investors will be restricted to purchases up to 10% of the greater of the purchaser’s annual income or net worth.
In order to take advantage of the fundraising exemption, an issuer must file an offering statement with the SEC containing basic information about the issuer, the Rule 103 disclosures discussed above in “General Provisions”, a discussion of the issuer’s financial condition and two years’ worth[13] of financial statements of the issuer prepared in accordance with US Generally Accepted Accounting Principles. Tier 2 offerings have the additional requirement that financial statements must be audited by an independent auditor in accordance with US Generally Accepted Auditing Standards or standards of the Public Company Accounting Oversight Board (“PCAOB”). For Tier 1 offerings, issuers will be permitted to offer and sell up to $20 million[14] of covered investment contracts in a 12-month period and for Tier 2 offerings, issuers will be permitted to offer and sell up to $75 million[15] of covered investment contracts in a 12-month period. However, no offer (other than communications to determine whether there is interest in the subject offering under the fundraising exemption) or sale may be made prior to the filing of an offering statement with the SEC. After such filing, offers may be made under certain circumstances, but no sales may be made until the offering statement is qualified by the SEC. Amendments would be required annually to update financial statements and on an ad hoc basis to reflect any facts or events arising after the date of qualification by the SEC which represent a fundamental change in the information included in the relevant offering statement. There are also ongoing requirements to file annual, semi-annual and current reports with the SEC. The duty to file reports will be suspended if (i) there are less than 300 holders of the covered investment contracts (or other securities of the issuer’s in same class of securities) once the issuer files a transition report with the SEC as long as the issuer is up to date with its ongoing reporting requirements or (ii) if the issuer satisfies the conditions to take advantage of the safe harbor in Regulation Crypto Assets.
The safe harbor provisions contained in Regulation Crypto Assets provide a bright line to determine when an investment contract no longer exists and hence the contract, transaction or scheme no longer a security.
In order to take advantage of the safe harbor, the issuer would have to have completed or permanently cease all essential managerial efforts that it represented or promised that it would engage in, and the issuer does not make and does not intend to make any new representations or promises to engage in essential managerial efforts in connection with the subject crypto asset.[16] The issuer will also be required to file a transition report with the SEC containing a certification that the issuer has completed or permanently ceased all essential managerial efforts and it will not recommence such efforts. This transition report will serve to inform investors, the SEC and the general public that the investment contract has ceased to exist.
To the extent that offers and sales of crypto assets that are covered investment contracts satisfy conditions for either the startup exemption or the fundraising exemption contained in Regulation Crypto Assets, any state securities law registration and qualification requirements will be preempted. State law preemption will also apply to secondary market sales where the covered investment contracts were initially sold pursuant to a Regulation Crypto Asset exemption, as long as the issuer continues to satisfy its disclosure and ongoing reporting requirements, or another exemption under the federal securities laws. Preemption will avoid the cost, inefficiencies and inconsistencies that may otherwise arise if issuers were forced to seek registration and qualification or an exemption in each of the 50 states of the US.
The publication of proposed Regulation Crypto Assets is a firm indication that the US is open for business. It welcomes those from around the world seeking to raise capital in connection with crypto assets projects in the largest and most liquid capital market in the world, embedded in a supervisory framework backed by over 90 years of history with a well-earned reputation for market integrity and protecting investors while facilitating commerce. It also ushers in a regime which is a departure from the wild west days of ICOs that took place between 2016 and 2018 and towards an orderly era of capital raising for crypto market participants. However, given the ICO boom has long passed, there are lingering questions as to whether there will be many market participants taking advantage of these new rules around crypto related capital raising. The SEC welcomes comments on its proposals and the comment period until October 20, 2026.
[1] Securities and Exchange Commission, Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, 91 FR 13714.
[2] Atkins, Paul, SEC Proposes New Regulation Crypto Assets (August 18. 2026).
[3] Securities and Exchange Commission, Regulation Crypto Assets (proposed rule), Release Nos. 33-11434; 34-106150 (Aug. 18, 2026).
[4] See Securities and Exchange Commission, Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO, Release No. 34-81207 (July 25, 2017).
[5] See proposed 17 CFR 228.103 and Securities and Exchange Commission, Regulation Crypto Assets (proposed rule), SEC Release Nos. 33-11434; 34-106150 (Aug. 18, 2026).
[6] See proposed 17 CFR 228.104 and Securities and Exchange Commission, Regulation Crypto Assets (proposed rule), SEC Release Nos. 33-11434; 34-106150 (Aug. 18, 2026).
[7] See proposed 17 CFR 228.200.
[8] Hinman, William, Digital Asset Transactions: When Howey Met Gary (Plastic) (June 14, 2018).
[9] The transition report will include either a certification from the issuer that it has completed or otherwise permanently ceased all essential managerial efforts that it represented or promised it would engage in connection with the covered investment contract (see proposed 17 CFR 228.200(e) and 17 CFR 228.400(a)) or otherwise a description of the then current status of the covered investment contract, subject crypto asset and associated crypto network or application.
[10] See proposed 17 CFR 228.300(b)(1).
[11] Id.
[12] Securities and Exchange Commission, Regulation Crypto Assets (proposed rule), SEC Release Nos. 33-11434; 34-106150 (Aug. 18, 2026).
[13] If the issuer or any predecessor has been in existence for less than two years, the issuer only needs to provide financial statements for such sorter period.
[14] No more than $6 million of which may comprise offers from sellers who are affiliates of the issuer and capped at 30% of the offering for the issuer’s first offering under the exemption or subsequent offerings under the fundraising exemption that are qualified by the SEC within one year of the qualification date of the issuer’s first offering under the exemption.
[15] No more than $22.5 million of which may comprise offers from sellers who are affiliates of the issuer and capped at 30% of the offering for the issuer’s first offering under the exemption or subsequent offerings under the fundraising exemption that are qualified by the SEC within one year of the qualification date of the issuer’s first offering under the exemption.
[16] See proposed 17 CFR 228.400(a).
[17] The opinions and views expressed in this paper are those of the author’s alone and do not represent the opinions or views of any institution or other entity with which she may be affiliated.
Ijeoma Okoli is a Senior Fellow at the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School.
The views, opinions and positions expressed within all posts are those of the author(s) alone and do not represent those of the Program on Corporate Compliance and Enforcement (PCCE) or of the New York University School of Law. PCCE makes no representations as to the accuracy, completeness and validity or any statements made on this site and will not be liable any errors, omissions or representations. The copyright of this content belongs to the author(s) and any liability with regards to infringement of intellectual property rights remains with the author(s).
by Ijeoma Okoli
Photo courtesy of the author.
Securities and Exchange Commission (“SEC”) Chairman Paul Atkins continues to lead the SEC towards reengaging with its capital formation facilitation remit alongside those of protecting investors and ensuring fair and orderly markets. On August 18, 2026, the SEC introduced Regulation Crypto Assets proposals, providing a clear new framework for crypto market issuers to raise capital to develop their projects, building on an earlier SEC release issued in March 2026 providing clarity on the SEC’s classification of crypto assets and their treatment under US Securities laws[1], going beyond speeches and SEC staff statements on which the industry cannot rely to propose rules on which the industry may rely.
In a video announcing proposed Regulation Crypto Assets, innovation friendly rules on crypto asset capital raising, Chairman Atkins said that the SEC sought to answer a question that has puzzled innovators since the dawn of the blockchain: “How can I raise capital to develop a crypto asset while I am still working to develop the network where it will be used.”[2]
The SEC release accompanying proposed Regulation Crypto Assets explicitly states its intention in the first paragraph: “to facilitate capital formation and accommodate innovation within the crypto asset markets, while at the same time, ensuring that investors are adequately protected and provided with the information they need to make informed investment decisions.”[3] This is a welcome departure from the immediate past regulation by enforcement era of the SEC. This paper provides a summary of and commentary on the Regulation Crypto Assets proposals.
The types of crypto assets covered by Regulation Crypto Assets for which issuers may take advantage of the two types of exemptions (the startup exemption and the fundraising exemption) and the safe harbor contained in the regulation are those crypto assets that do not themselves fall into any of the enumerated types of securities contained in the definition of security in Section 2(a)(1) of the Securities Act of 1933, as amended (the “Securities Act”) and Section 3(a)(10) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Regulation Crypto Assets would cover the offering of these crypto assets pursuant to a contract, transaction or scheme that would satisfy the test for an investment contract introduced in the 1946 US Supreme Court case, SEC v. Howey (an investment of money in common enterprise with the expectation of profits through the entrepreneurial or managerial efforts of others), a test that has bedeviled the crypto assets sector at least since the SEC’s July 2017 DAO Report[4] that put the sector on notice that their so-called Initial Coin Offerings (or “ICOs”) were in fact investment contracts and therefore securities offerings subject to the strictures of Securities Act and the Securities Exchange Act. In proposed Regulation Crypto Assets, the SEC introduced a new defined term, “covered investment contracts”, to describe these types of offerings. Once a covered investment contract satisfies the conditions for an exemption, either the startup exemption or the fundraising exemption, both primary sales and secondary market sales are covered. The exemptions are non-exclusive, which means that issuers can also take advantage of other exemptions from registration requirements that may be available to them. However, the SEC warns that for any issuances that take place concurrently or in close proximity to each other, issuers must consider the integration doctrine. The integration doctrine seeks to prevent an issuer from improperly avoiding registration by artificially dividing a single offering into multiple seemingly exempt offerings to try to circumvent Securities Act registration requirements that would be applicable to the combined offering.
Certain general provisions apply to both the startup exemption and the fundraising exemption. Among them are principles-based disclosure requirements that would require an issuer seeking to utilize the aforementioned exemptions to provide information that would be material to investors in the relevant offering. In making this proposal, the SEC acknowledged that the validity of a common compliant from that crypto assets sector that the existing registration framework required the disclosure of matters that were not relevant, applicable or material to the offerings of covered investment contracts on the one hand and did not seek disclosure on matters that are relevant to investors of covered investment contracts on the other hand. The new disclosure requirements in proposed Rule 103 seek to rectify this disconnect and tailor the disclosure regime to those matters that would be relevant to investors in covered investment contracts.
Rule 103 would require an issuer to provide the following information in “clear, concise and understandable language”:
(1) a description of the material terms of the covered investment contract, including the issuer’s commitments to engage in essential managerial efforts, conditions to the covered investment contract and any other material terms;
(2) a description of the material terms of the offering, including the number of units of the covered investment contract being offered, the price per unit, the use of proceeds and the website address at which any whitepapers or other offering material are accessible free of charge;
(3) the name and material aspects of the crypto asset that is subject to the covered investment contract;
(4) material information on the issuer’s management and any related persons, information on any material conflicts of interest or related party transactions involving the issuer as well as disclosure in relation to any transfer or resale restrictions applicable to related persons;
(5) information on the material aspects of the crypto network/application associated with the crypto asset that is the subject of the covered investment contract, along with information on the issuer’s plan of development for the crypto network or application;
(6) information on the material aspects of the security of the subject crypto asset and the associated crypto network or application, and if publicly available, the website at which the code underlying the associated crypto network or application is accessible;
(7) a description of the material aspects of the subject crypto asset’s economics and allocation, including price, supply, lockups, holdings by related parties, mechanisms for generating (minting) and destroying (burning) the subject crypto asset and methods to verify the transaction history of the subject crypto asset;
(8) a description of the material aspects of the governance mechanisms of the subject crypto asset and the associated crypto network or application – this would help investors understand the circumstances under which changes may be made to the subject crypto asset and associated crypto network or application as well as who has the power to make the changes;
(9) a description of the material aspects of the network of participants that support and interact with the subject crypto asset and its associated network or application; and
(10) a description of the material factors that make an investment in the covered investment contract offering speculative or risky, including risk factors specifically related to the issuer, the crypto asset and the associated crypto network or application.[5]
Proposed Rule 104 contains a disqualification condition, cross referencing the disqualification provisions in Rule 262 of Regulation A, meaning that neither the startup exemption nor fundraising exemption is available if the issuer or certain other relevant related persons (including executive officers, directors and predecessors of the issuer) is a bad actor, someone who has been convicted of, or is subject to court or administrative sanctions for, securities fraud or other violations of certain laws.[6]
The startup exemption provides a mechanism to raise capital in the least restrictive manner but limits the amount that can be raised and the duration for which the exemption is available. The SEC recognized that ICO issuers typically make representations or promises regarding their efforts to develop or market a project in connection with the offer or sale of relevant crypto assets, which makes them investment contracts, but that at some point in time the subject crypto assets may separate from the issuers’ representations and promises to engage in essential managerial efforts in connection with the projects, at which point the relevant investment contract may cease to exist.[7] This concept was first publicly articulated by William Hinman, former Director of the SEC’s Division of Corporate Finance in a speech at a Yahoo Finance conference in 2018. Hinman raised the possibility that decentralization of a crypto network, “where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts” may make subsequent sales of the related crypto assets not investment contracts and therefore not securities offerings.[8] The SEC has now formalized this line of thinking into an actual rule that the industry can rely on, subject to certain conditions.
The startup exemption is available to issuers in the US and around the world but is subject to a maximum aggregate offering size of $5 million and a four-year limit on its availability. According to the SEC, the aim of this exemption is to (i) provide issuers with temporary relief from the registration requirements of the Securities Act which would allow them time to work on fulfilling the essential managerial efforts in connection with the subject crypto asset and crypto network or application that they represented they would engage in to investors and (ii) at the same time ensure that investors are sufficiently informed and protected, including by the fact that issuers that rely on the startup exemption will be subject to the antifraud and antimanipulation provisions of the federal securities laws.
In order to take advantage of the startup exemption, an issuer must file a notice of reliance with the SEC and make the Rule 103 disclosures discussed above in “General Provisions” publicly available and free of charge at a website disclosed in the notice of reliance. The notice of reliance will contain additional basic information about the issuer, the subject crypto asset and a certification that the information provided is true, complete and correct, and that the issuer intends to fulfil the relevant essential managerial efforts represented or promised to investors. The notice of reliance would make investors, the SEC and the general public aware that the issuer intends to rely on the startup exemption. The issuer will be required to periodically update the required information provided for any material changes or to correct a material mistake of fact or error. On or before the four-year anniversary of the filing of the notice of reliance, the issuer will be required to file with the SEC a transition report[9] which will indicate to investors, the SEC and the general public that the issuer has ceased relying on the startup exemption. The startup exemption is a one-time exemption meaning that an issuer can only use it once in connection with a subject crypto asset or another crypto asset substantially similar to the subject crypto asset.
The second exemption is the two-tier fundraising exemption, with an available offering cap of $75 million in any 12-month period and, unlike the startup exemption it has no time limit, however it has an explicit requirement that any entities seeking to raise capital in the US in connection with crypto projects and rely on the exemption from registration must be organized in the US.[10] The majority of the entity’s executive officers or directors must also be US citizens or residents; more than 50% of the entity’s assets must be located in the US and the issuer’s business must be principally administered in the US.[11] These US residency and citizenship requirements would serve a number of purposes, including: (i) facilitating the ability of the SEC and investors to seek recourse in the event of fraud or manipulation, (ii) providing US investors with more easily accessible investment opportunities and better investor protection, (iii) reverse the tide of crypto projects moving overseas as a result of a previous era of US regulatory uncertainty and (iv) encourage US domestic innovation and capital formation.[12] The rule specifies that issuers that rely on the fundraising exemption will be subject to the antifraud and antimanipulation provisions of the federal securities laws. Purchasers of covered investment contracts under the fundraising exemption that are not accredited investors will be restricted to purchases up to 10% of the greater of the purchaser’s annual income or net worth.
In order to take advantage of the fundraising exemption, an issuer must file an offering statement with the SEC containing basic information about the issuer, the Rule 103 disclosures discussed above in “General Provisions”, a discussion of the issuer’s financial condition and two years’ worth[13] of financial statements of the issuer prepared in accordance with US Generally Accepted Accounting Principles. Tier 2 offerings have the additional requirement that financial statements must be audited by an independent auditor in accordance with US Generally Accepted Auditing Standards or standards of the Public Company Accounting Oversight Board (“PCAOB”). For Tier 1 offerings, issuers will be permitted to offer and sell up to $20 million[14] of covered investment contracts in a 12-month period and for Tier 2 offerings, issuers will be permitted to offer and sell up to $75 million[15] of covered investment contracts in a 12-month period. However, no offer (other than communications to determine whether there is interest in the subject offering under the fundraising exemption) or sale may be made prior to the filing of an offering statement with the SEC. After such filing, offers may be made under certain circumstances, but no sales may be made until the offering statement is qualified by the SEC. Amendments would be required annually to update financial statements and on an ad hoc basis to reflect any facts or events arising after the date of qualification by the SEC which represent a fundamental change in the information included in the relevant offering statement. There are also ongoing requirements to file annual, semi-annual and current reports with the SEC. The duty to file reports will be suspended if (i) there are less than 300 holders of the covered investment contracts (or other securities of the issuer’s in same class of securities) once the issuer files a transition report with the SEC as long as the issuer is up to date with its ongoing reporting requirements or (ii) if the issuer satisfies the conditions to take advantage of the safe harbor in Regulation Crypto Assets.
The safe harbor provisions contained in Regulation Crypto Assets provide a bright line to determine when an investment contract no longer exists and hence the contract, transaction or scheme no longer a security.
In order to take advantage of the safe harbor, the issuer would have to have completed or permanently cease all essential managerial efforts that it represented or promised that it would engage in, and the issuer does not make and does not intend to make any new representations or promises to engage in essential managerial efforts in connection with the subject crypto asset.[16] The issuer will also be required to file a transition report with the SEC containing a certification that the issuer has completed or permanently ceased all essential managerial efforts and it will not recommence such efforts. This transition report will serve to inform investors, the SEC and the general public that the investment contract has ceased to exist.
To the extent that offers and sales of crypto assets that are covered investment contracts satisfy conditions for either the startup exemption or the fundraising exemption contained in Regulation Crypto Assets, any state securities law registration and qualification requirements will be preempted. State law preemption will also apply to secondary market sales where the covered investment contracts were initially sold pursuant to a Regulation Crypto Asset exemption, as long as the issuer continues to satisfy its disclosure and ongoing reporting requirements, or another exemption under the federal securities laws. Preemption will avoid the cost, inefficiencies and inconsistencies that may otherwise arise if issuers were forced to seek registration and qualification or an exemption in each of the 50 states of the US.
The publication of proposed Regulation Crypto Assets is a firm indication that the US is open for business. It welcomes those from around the world seeking to raise capital in connection with crypto assets projects in the largest and most liquid capital market in the world, embedded in a supervisory framework backed by over 90 years of history with a well-earned reputation for market integrity and protecting investors while facilitating commerce. It also ushers in a regime which is a departure from the wild west days of ICOs that took place between 2016 and 2018 and towards an orderly era of capital raising for crypto market participants. However, given the ICO boom has long passed, there are lingering questions as to whether there will be many market participants taking advantage of these new rules around crypto related capital raising. The SEC welcomes comments on its proposals and the comment period until October 20, 2026.
[1] Securities and Exchange Commission, Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, 91 FR 13714.
[2] Atkins, Paul, SEC Proposes New Regulation Crypto Assets (August 18. 2026).
[3] Securities and Exchange Commission, Regulation Crypto Assets (proposed rule), Release Nos. 33-11434; 34-106150 (Aug. 18, 2026).
[4] See Securities and Exchange Commission, Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO, Release No. 34-81207 (July 25, 2017).
[5] See proposed 17 CFR 228.103 and Securities and Exchange Commission, Regulation Crypto Assets (proposed rule), SEC Release Nos. 33-11434; 34-106150 (Aug. 18, 2026).
[6] See proposed 17 CFR 228.104 and Securities and Exchange Commission, Regulation Crypto Assets (proposed rule), SEC Release Nos. 33-11434; 34-106150 (Aug. 18, 2026).
[7] See proposed 17 CFR 228.200.
[8] Hinman, William, Digital Asset Transactions: When Howey Met Gary (Plastic) (June 14, 2018).
[9] The transition report will include either a certification from the issuer that it has completed or otherwise permanently ceased all essential managerial efforts that it represented or promised it would engage in connection with the covered investment contract (see proposed 17 CFR 228.200(e) and 17 CFR 228.400(a)) or otherwise a description of the then current status of the covered investment contract, subject crypto asset and associated crypto network or application.
[10] See proposed 17 CFR 228.300(b)(1).
[11] Id.
[12] Securities and Exchange Commission, Regulation Crypto Assets (proposed rule), SEC Release Nos. 33-11434; 34-106150 (Aug. 18, 2026).
[13] If the issuer or any predecessor has been in existence for less than two years, the issuer only needs to provide financial statements for such sorter period.
[14] No more than $6 million of which may comprise offers from sellers who are affiliates of the issuer and capped at 30% of the offering for the issuer’s first offering under the exemption or subsequent offerings under the fundraising exemption that are qualified by the SEC within one year of the qualification date of the issuer’s first offering under the exemption.
[15] No more than $22.5 million of which may comprise offers from sellers who are affiliates of the issuer and capped at 30% of the offering for the issuer’s first offering under the exemption or subsequent offerings under the fundraising exemption that are qualified by the SEC within one year of the qualification date of the issuer’s first offering under the exemption.
[16] See proposed 17 CFR 228.400(a).
[17] The opinions and views expressed in this paper are those of the author’s alone and do not represent the opinions or views of any institution or other entity with which she may be affiliated.
Ijeoma Okoli is a Senior Fellow at the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School.
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