SEC Releases Much Awaited Proposal: Regulation Crypto Assets

On August 18, 2026, the SEC proposed Regulation Crypto Assets, a new rule intended to create a tailored securities offering regime for certain investment contracts involving crypto assets. The proposal builds on the SEC’s March 2026 interpretive release (“Token Taxonomy Release”) regarding the application of federal securities laws to crypto assets and would create a crypto-specific securities offering framework that includes new exempt offering regimes, disclosure and reporting requirements, and a conditional safe harbor addressing when certain crypto assets would no longer be deemed subject to an investment contract.

Key Features of Regulation Crypto Assets

The proposal would establish a new regulatory framework for certain investment contracts involving crypto assets and includes two exemptions from the Securities Act registration requirements:

• Startup Exemption: A one-time exemption that would permit offerings of up to $5 million over a four-year period, under which issuers would be required to provide principles-based disclosures^[1] and make public filings at the beginning and end of the exemption period.
• Fundraising Exemption: An exemption that would permit offerings of up to $75 million during any 12-month period, including a Tier 1 offering limit of up to $20 million and a Tier 2 offering limit of up to $75 million, subject to disclosure requirements, financial statement requirements, and ongoing reporting obligations.

The SEC stated that these exemptions are intended to reduce regulatory barriers to capital formation within crypto asset markets while preserving the investor protections of the federal securities laws. Consistent with the approach outlined in the Token Taxonomy Release, the proposal also seeks to provide greater certainty regarding when a crypto asset is no longer subject to an investment contract.

Conditional Safe Harbor

The proposal also includes a conditional safe harbor related to the definition of “investment contract” under the Securities Act and the Exchange Act.

Under the proposed framework:

• An issuer must have completed or permanently ceased all essential managerial efforts promised under the investment contract and must not intend to undertake new essential managerial efforts relating to the underlying crypto asset, thereby permitting the crypto asset to transition out of investment contract status.
• The issuer must publicly certify compliance with the safe harbor conditions and provide supporting analysis.
• If the conditions are satisfied, the crypto asset would be deemed not to be subject to an investment contract for purposes of the federal securities law definitions of “security.”

The proposal would also preempt certain state securities law registration and qualification requirements for securities offered pursuant to an exemption under Regulation Crypto Assets and for certain secondary market transactions.

Comments on the proposal should be submitted to the SEC on or before October 20, 2026.

Legal Tokens

Regulation Crypto Assets has finally escaped the SEC’s on-again, off-again meeting calendar and been released into the world. Now the wait begins to see what shape the final rule takes and how long it takes to get there.

The proposal contains some genuinely new features, particularly the dedicated offering exemptions. More importantly, it reflects the SEC’s effort to build a formal regulatory framework around concepts it first outlined in the Token Taxonomy Release.

The proposed exemptions may enable crypto projects to get to first base in the United States without the ever-present fear of enforcement, which is a step in the right direction. The safe harbor will likely garner much of the attention. By creating a formal pathway for determining when an investment contract has run its course, the SEC is attempting to answer a question that has sat at the center of the crypto securities debate for years. That answer is unlikely to be the last word, however, as the ultimate contours of the analysis will continue to be shaped by Howey and the courts that interpret it. But, for an industry that has often been left to infer regulatory policy from speeches, settlements and enforcement actions, having the SEC finally put its cards on the table is itself a meaningful development. Regulation Crypto Assets represents the SEC’s most significant effort to date to provide a workable framework for crypto capital formation in the United States.

Whether Regulation Crypto Assets becomes a streamlined highway or merely a better-marked obstacle course remains to be seen, but at least the SEC has finally handed everyone a map.

For further information about legal developments in the blockchain space, please contact a member of Seward & Kissel’s Digital Assets Practice.