Regulating The Promise, Not The Token: What Regulation Crypto Assets Would Change

Key Takeaways

• The proposed Regulation Crypto Assets framework would build on existing investment contract principles under federal securities law and the Securities and Exchange Commission’s March 2026 interpretive release(the “2026 Interpretation”), a joint release in which the Commodity Futures Trading Commission provided related guidance under the Commodity Exchange Act.
• Regulation Crypto Assets would apply to a covered investment contract as the security; it would not make the subject non-security crypto asset itself a security. Tokenized securities and arrangements in which multiple assets are subject to the same investment contract would fall outside the framework.
• Proposed Rule 200 (Startup Exemption) would provide a one-time offering exemption of up to $5 million over a period of up to four years. Unlike the proposed fundraising exemption, it would not require SEC qualification of an offering statement.
• Proposed Rules 300 through 307 (Fundraising Exemption) would provide a two-tier fundraising exemption: up to $20 million in Tier 1 and $75 million in Tier 2 during any 12-month period. The issuer would have to file an offering statement on proposed Form 1-CRYPTO and could not sell until the SEC qualified it. Financial statement and ongoing reporting obligations would apply.
• Representations or promises conveyed before or contemporaneously with an offer or sale would bear on the investment contract analysis for that transaction. Later communications would not retroactively alter the analysis of a completed sale, but could bear on subsequent offers or sales and could preclude reliance on proposed Rule 400 (Investment Contract Safe Harbor) if they make new representations or promises of essential managerial efforts. Issuer communications would also need to be consistent with proposed Rule 103 disclosures.
• Proposed Rule 500 (Definition of “Qualified Purchaser”) would provide only conditional state registration and qualification preemption; it would not authorize trading or create an Exchange Act exemption for intermediaries.

On August 18, 2026, the Securities and Exchange Commission (SEC) proposed Regulation Crypto Assets, a regulatory framework for covered investment contracts involving crypto assets. The proposal would create two new offering exemptions, principles-based disclosure requirements, a conditional safe harbor for determining when a covered investment contract has ceased to exist, and conditional preemption of state registration and qualification requirements for specified offerings and secondary transactions.

The premise running through the proposal is the distinction between a crypto asset and the investment contract under which it may be offered. That distinction drives each operative provision of the proposal: the issuer's representations about or promises of essential managerial efforts are a key factor in determining whether a transaction satisfies the investment contract test, what must be disclosed under proposed Rule 103 (Disclosure Requirements), and whether the contract may cease to exist under proposed Rule 400 (Investment Contract Safe Harbor). Proposed Rule 500 (Definition of “Qualified Purchaser”) would separately address preemption of state registration and qualification requirements, including certain requirements applicable to resales, but only if its conditions, including issuer compliance, are met.

The proposal would not make every crypto asset a security or exempt every transaction involving one. What it would do is sharpen two lines: between the crypto asset and the investment contract under which it is offered, and between the transactions that would fall within the proposed framework and those that would remain subject to existing law.

The Proposal Would Separate the Crypto Asset from the Investment Contract

The starting point for determining whether federal securities law applies to a crypto asset transaction as an investment contract would remain the test set forth in SEC v. W.J. Howey Co., 328 U.S. 293 (1946) (the Howey test). The relevant question asked by the Howey test is whether the contract, transaction, or scheme involves an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the essential managerial efforts of others. If Howey is not satisfied, there is no investment contract to exempt, and Regulation Crypto Assets would not apply.

An issuer’s representations or promises to develop an associated network or application, create functionality, attract participation, or establish governance are relevant to whether purchasers reasonably expect profits to be derived from the issuer’s essential managerial efforts. Those statements do not, by themselves, establish an investment contract; all elements of the Howey test, including an investment of money in a common enterprise, must be present. A purchaser’s belief that a crypto asset may appreciate  is not enough by itself.

The proposal would not define “investment contract.” Instead, it directs market participants to the 2026 Interpretation: a non-security crypto asset may be subject to an investment contract without becoming a security itself if the applicable transaction satisfies the Howey test. In that case, the investment contract, rather than the crypto asset, is the security, and the transaction would require registration under the Securities Act of 1933 (Securities Act) or an available exemption from those registration requirements.

When the Howey test is satisfied, proposed Rule 100 would add three conditions for the arrangement to qualify as a “covered investment contract”:

• The crypto asset is subject to the investment contract.
• The crypto asset is not itself a security.
• No other asset, whether a security or non-security, is subject to the same investment contract.

The proposed framework would therefore be narrower than the universe of crypto asset transactions. A tokenized share or debt instrument would remain a security in its own right and would not be an eligible subject crypto asset. The framework would not apply when another asset is subject to the same investment contract. A transaction outside the framework would still require analysis under the Securities Act, including applicable registration, exemption, and antifraud requirements, as well as any independently applicable requirements under the Securities Exchange Act of 1934 (Exchange Act) and state law.

Issuer Communications Would Shape Both Disclosure and the Howey Test Analysis

Proposed Rule 103 would make the issuer’s representations or promises of essential managerial efforts central to the proposed disclosure framework. Each proposed offering exemption would require principles-based disclosure about the covered investment contract and offering; the subject crypto asset; management, related persons, and conflicts of interest; the associated network or application and development plan; security and source code; economics and allocations; governance; the ecosystem; and material risks. In particular, the issuer would have to disclose its representations or promises of essential managerial efforts, its progress toward fulfilling them, purchaser obligations, conditions, and other material terms. The Proposing Release states that these disclosure topics were informed in part by the Division of Corporation Finance’s April 10, 2025 staff statement, Offerings and Registrations of Securities in the Crypto Asset Markets.

Proposed Rule 103(a) would require that disclosure provided under Regulation Crypto Assets be tailored to the issuer, the subject crypto asset, and the associated network or application; presented in clear, concise, and understandable language; and consistent, as to material matters, with the issuer’s public statements in established communication channels and its promotional materials, including websites, official social media accounts, and whitepapers. That consistency requirement would not convert every public statement into a contractual term.

The same communications also bear on the Howey analysis when they convey representations or promises of essential managerial efforts. A representation or promise made by or on behalf of the issuer and conveyed to purchasers before or contemporaneously with an offer or sale bears on purchasers’ reasonable expectations of profits and therefore on the investment contract analysis for that transaction. Its weight may vary, and no single communication is necessarily outcome-determinative.

The relevant disclosure and communication record may include statements in issuer-controlled channels, direct communications, regulatory filings, and documents clearly attributable to the issuer. A third party’s representation or promise ordinarily would not be attributed to the issuer unless it was authorized by the issuer and conveyed to purchasers, or circumstances such as collusion made purchaser reliance reasonable. These attribution and timing principles are set out in the 2026 Interpretation.

Timing determines which transaction a communication would affect. A post-sale statement would not retroactively turn an earlier sale into an offer or sale of an investment contract. If conveyed to purchasers before or contemporaneously with a later offer or sale, however, it would bear on the analysis of that later transaction. A later communication that makes a new representation or promise to undertake essential managerial efforts also would prevent the issuer from satisfying Rule 400(a)’s condition that it not make, or intend to make, any such new representations or promises. By contrast, reporting that the issuer has completed a previously disclosed milestone would not necessarily create a new commitment.

For an issuer relying on proposed Rule 200, maintaining the disclosure record would be an ongoing obligation. The Rule 103 information would have to remain publicly accessible and free of charge at the website identified in proposed Form NOR. That obligation would run until the earlier of the fourth anniversary of the Form NOR filing or the filing of proposed Form TR under Rule 200(e). The issuer would review the posted information at each calendar year-end and, if it had materially changed, amend it within 30 calendar days. Form NOR could be amended at any time and would have to be amended as soon as practicable after the issuer discovered a material mistake or material change. Neither the end of the Rule 200 period nor the related Form TR filing would, by itself, establish that the investment contract had ceased to exist under Rule 400.

The proposal would not expressly require issuers to preserve prior website versions or identify each amendment. That omission is significant because the historical communications record could be needed both to establish what purchasers saw in connection with a particular transaction and to support a later determination that all promised essential managerial efforts had been completed or permanently ceased. Issuers should therefore identify the persons authorized to speak on their behalf, reconcile material public communications with Rule 103 disclosure, preserve dated versions of material communications and website content, and document the completion, modification, or permanent cessation of relevant commitments. Those controls would support the issuer’s factual record, even though the proposal would not expressly require all of them.

Two Exemptions, Different Compliance Burdens

Proposed Rule 200 (Startup Exemption) and proposed Rules 300 through 307 (Fundraising Exemption) would be subject to proposed Rule 104, which would incorporate Regulation A's Rule 262 bad actor disqualification standard, 17 C.F.R. § 230.262, including its exceptions and waiver process. Events occurring before any final rule adopted from proposed Rule 104 became effective would not disqualify an offering, but the issuer would have to disclose them in writing; failure to make that disclosure would not preclude reliance if the issuer establishes that it did not know and, after an appropriate factual inquiry, could not have known of the event.

Startup Exemption: Four Years, $5 Million, and a Public Website Record

The Rule 200 startup exemption would not be limited to newly formed or early-stage companies. An eligible issuer, which could be an entity, an individual, or a group of individuals or entities, could rely on a limited, one-time exemption for up to $5 million over a period of up to four years, provided Rule 200's conditions were satisfied. The issuer could use that period while attempting to complete the essential managerial efforts it represented or promised. If the issuer were a group, each member would need to satisfy the applicable conditions and certifications.

• Offering Period. The exemption would be available after the issuer filed Form NOR and until the earlier of four years after that filing or the filing of Form TR under Rule 200(e).
• Cap.The aggregate amount of covered transactions, including transactions by affiliates, could not exceed $5 million.
• One-time use.The issuer and its affiliates generally could not use Rule 200 again for the same or a substantially similar crypto asset.
• Disclosure and filing.Before the first covered transaction, the issuer would file Form NOR, certify its intent to fulfill the promised essential managerial efforts within four years, and make the information required by Rule 103 publicly accessible and free of charge. Non-cash consideration would count toward the cap under Rule 200’s valuation methodology.

Rule 100 would define a covered transaction broadly to include offers, sales, and other distributions in reliance on Rule 200, including certain distributions tied to use of or activities involving the associated network or application. The exemption would not be available until the issuer had filed Form NOR and satisfied the website disclosure condition. Earlier communications therefore would need to be analyzed under existing Securities Act requirements.

Once the conditions were satisfied, Rule 200 would permit general solicitation and would not require financial statements, accredited-investor eligibility, or purchaser-level investment limits. Securities issued under the exemption would not be restricted securities or subject to a rule-based holding period, but contractual restrictions and other applicable law could still limit transfers.

Rule 200 would not categorically exempt airdrops. The 2026 Interpretation states that an airdrop of a non-security crypto asset to recipients who provide no money, goods, services, or other consideration in exchange generally is not an offer or sale of an investment contract under that interpretation. The Rule 100 definition of a covered transaction nevertheless expressly includes airdrops and other distributions that involve a covered investment contract; an airdrop conditioned on a purchase, service, or specified task could therefore fall within Rule 200 if its conditions were satisfied. The label “airdrop” or “free” is not dispositive, and non-cash consideration, potentially including certain airdrops, would count toward the $5 million cap.

Fundraising Exemption: Qualification, Reporting, and Secondary-Market Conditions

Rules 300 through 307 would create a two-tier public offering exemption for covered investment contracts. Tier 1 would permit up to $20 million and Tier 2 up to $75 million in any 12-month period. The issuer would file proposed Form 1-CRYPTO, the proposed offering statement form, and sales could begin only after the SEC qualified the offering statement. Proposed Rule 102 would provide for periodic inflation adjustments, no less frequently than once every five years. Both exemptions would be non-exclusive, so an issuer could also consider other available exemptions if applicable.

Proposed Rule 304 would permit oral or written, non-binding solicitations of interest before qualification, including before a public filing or non-public submission. Those communications would remain subject to the federal antifraud provisions, and the issuer could not solicit or accept money, other consideration, or any commitment before qualification. Written materials and broadcast scripts generally would have to be filed as exhibits.

An issuer could submit a draft offering statement for non-public staff review, but the initial submission and non-public amendments would have to be publicly filed at least 15 calendar days before qualification. No sale could occur before qualification. After qualification, written offers generally would have to be accompanied or preceded by the most recent offering circular, subject to the proposed delivery rules.

Specified continuous or delayed offerings would be permitted under Rule 300(c)(3) that otherwise meet the fundraising exemption’s requirements, including certain offerings by selling securityholders and offerings expected to be made within two years of qualification; those offerings generally could continue for no more than three years. At the market offerings would not be permitted.

The fundraising exemption would be unavailable to, among others, development stage blank check companies; investment companies and business development companies; certain issuers subject to orders under Section 12(j) of the Exchange Act; issuers delinquent in required reports; and issuers subject to disqualification under Rule 104.

Proposed Rule 305 would require an annual report on proposed Form 1-KC within 120 calendar days after fiscal year-end, a semiannual report on proposed Form 1-SC within 90 calendar days after the covered period, and, generally, a current report on proposed Form 1-UC within four business days after specified events, plus special financial reports in specified circumstances.

Rule 305 would also provide two ways for an issuer to stop reporting. An issuer with a class held of record by fewer than 300 persons could suspend reporting if it had filed the required reports and met the rule’s other conditions. Any issuer could terminate reporting once the covered investment contract ceased to exist and it filed Form TR.

Rule 300 would also limit selling securityholder participation: affiliates could offer no more than $6 million in Tier 1 or $22.5 million in Tier 2, and sales by all selling securityholders together could not exceed 30% of the aggregate offering price in the issuer’s first offering and in offerings qualified within the following year.

Under the proposed fundraising exemption, if the purchaser were not an accredited investor as defined in Rule 501 of Regulation D, the aggregate purchase price could not exceed 10 percent of the greater of the purchaser’s annual income or net worth (or, for non-natural persons, the greater of revenue or net assets for the most recently completed fiscal year). Unlike Regulation A, this limitation would apply to both Tier 1 and Tier 2 offerings, and there would be no exception for securities listed on a national securities exchange. Issuers could rely on a purchaser’s representation when determining compliance.

The proposed fundraising exemption would require financial statements prepared in accordance with U.S. GAAP. For Tier 1 offerings, there would be no mandatory audit requirement, although issuers that obtained an audit for other purposes would need to file it. For Tier 2 offerings, financial statements would have to be audited in accordance with either U.S. GAAS or the standards of the PCAOB by an independent auditor.

Proposed Rule 306 would permit the SEC to suspend the exemption temporarily for specified noncompliance, material misstatements or omissions, violations under Section 17 of the Securities Act, disqualification proceedings, obstruction, and related grounds, subject to notice and hearing procedures. Proposed Rule 307 would permit withdrawal of an offering statement only if no covered investment contracts had been sold and no suspension proceeding was pending, and would permit abandonment of an unqualified filing after nine months without qualification absent a qualifying amendment.

The proposed fundraising exemption (contained in Rules 300 through 307) was modeled on, but also departs in certain important respects from, the two-tier offering exemptions currently provided under Regulation A. The following comparison highlights the principal differences in compliance burden.

When an Investment Contract Would Cease to Exist

Rule 400 would provide a non-exclusive safe harbor under which a covered investment contract would be deemed to have ceased to exist and the subject crypto asset would be deemed not to constitute, represent, or be subject to that investment contract, solely for purposes of the term “investment contract” in the Securities Act and Exchange Act definitions of “security.” An issuer could seek the safe harbor whether or not it had used either proposed offering exemption.

The Rule 400 safe harbor would require two substantive conditions and a filing on Form TR:

• Managerial efforts. The issuer had completed or otherwise permanently ceased all essential managerial efforts that it represented or promised it would undertake under the covered investment contract.
• No new commitments. The issuer was not making, and did not intend to make, any new representations or promises to undertake essential managerial efforts with respect to the crypto asset.
• Form TR.The issuer filed Form TR through the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR), identified the covered investment contract and the subject crypto asset, certified that Rule 400(a) was satisfied, and provided a supporting analysis.

Form TR would put the issuer's certification and analysis on the public record, but neither the SEC nor its staff would be required to review or approve the filing. Filing alone would not establish reliance on the safe harbor, and the SEC could still challenge whether the Rule 400 conditions were satisfied.

The Rule 400 safe harbor would operate only after its substantive and filing conditions were satisfied; it would not cure an earlier violation or constitute SEC approval. Its scope would be limited to the term “investment contract” in the Securities Act and Exchange Act definitions of “security.” It would not decide whether the crypto asset or another related instrument is a different type of security or implicates the Investment Company Act or Investment Advisers Act.

The four-year period under Rule 200 would not be a maturity date for the investment contract. A Form TR filed under Rule 200(e) would end the Rule 200 offering period and related notice and website obligations, but the investment contract would cease under Rule 400 only if the Rule 400 conditions were independently satisfied. If those conditions were not satisfied, Form TR would instead disclose the contract's current status and the efforts that remained incomplete or had not permanently ceased.

Under the 2026 Interpretation, a covered investment contract ceases to exist — and the subject non-security crypto asset separates from the federal securities laws — under either of two circumstances: (1) the issuer has fulfilled the representations or promises to engage in essential managerial efforts made in connection with the offering, or (2) purchasers no longer reasonably expect the issuer to fulfill or continue those efforts (e.g., by publicly abandoning the project). The inquiry would remain tied to the issuer's own description of those efforts, not to a general market conception of decentralization or functionality.

The Proposing Release states that, once an issuer has satisfied its representations or promises to engage in essential managerial efforts and the associated network or application is functional, services to secure, maintain, improve, or enhance such a network or application or its functionality, or to facilitate network effects, would not constitute essential managerial efforts. Representations or promises to provide or continue those services after the network or application is functional therefore would not, by themselves, prevent the investment contract from ceasing to exist. Proposed Rule 400 would place those principles into a non-exclusive safe harbor, but only when the issuer satisfies the substantive conditions and files the required Form TR.

Because the safe harbor would be non-exclusive, an issuer could still contend under the governing facts and the Howey test that the subject crypto asset is no longer subject to an investment contract without relying on Rule 400. Conversely, filing Form TR would not prevent another party from taking a contrary position. A later offer or sale involving new managerial promises would require a fresh analysis under the Howey test and could create a new investment contract only if all of the test’s elements were satisfied.

Secondary Trading and State Preemption Would Be Conditional

The proposed exemptions would provide that covered investment contracts issued under them are not restricted securities and are not subject to rule-based resale restrictions. That would remove an exemption-based federal holding period, but it would not make every resale lawful, eliminate contractual restrictions, preempt state law in every transaction, or authorize trading on a particular market.

Rule 500 would use the “qualified purchaser” mechanism in Section 18(b)(3) of the Securities Act to provide conditional preemption of state registration and qualification requirements. The proposed definition would cover purchasers in offerings under Regulation Crypto Assets and purchasers in specified secondary transactions involving the same covered investment contract.

For a secondary transaction, the seller could not be the issuer, an underwriter, or a dealer. The issuer also would need to have satisfied an exemption under proposed Regulation Crypto Assets for the same covered investment contract and remain subject to, and current with respect to, the applicable disclosure, filing, and periodic reporting obligations. Whether a resale receives preemption under proposed Rule 500 could therefore depend on issuer conduct outside the holder's control.

Under the Rule 200 startup exemption, the issuer would need to keep the disclosure required by Rule 103 publicly accessible, amend Form NOR when required, and update the website for material changes. If the Rule 200 period ended while the covered investment contract remained outstanding and the Rule 400 conditions were not satisfied, the Rule 200 basis for secondary-market preemption would generally end.

Under the proposed fundraising exemption, the issuer would remain responsible for reporting under Rule 305. For purposes of Rule 500, however, the proposal would exclude Form 1-UC current reports from the “periodic reporting obligations” used to test preemption. A required Form 1-UC would still have to be filed, but its omission would not, by itself, defeat preemption under Rule 500.

Rule 500 also would not require tracing each fungible unit to the exemption used for its original sale. If the issuer had satisfied an exemption under Regulation Crypto Assets for the same covered investment contract and remained current with respect to the applicable disclosure, filing, and periodic reporting obligations, qualifying secondary transactions could receive preemption even when some units were initially sold under another federal exemption, such as Regulation D.

Rule 500 would address only specified state registration and qualification requirements. States would retain notice filing and fee authority, antifraud jurisdiction, authority over unlawful broker-dealer conduct, and power to suspend offers or sales for failure to make a permitted filing or pay a permitted fee. The rule would not itself exempt a broker, dealer, exchange, trading platform, or other intermediary from applicable federal or state requirements. Requirements that independently apply because of the transaction, the intermediary's role, or another exemption being used, including Regulation A, Regulation D, or Regulation Crowdfunding, would remain in effect.

Practical Consequences for Issuers and Platforms

The proposal follows the 2026 Interpretation in treating the existence and duration of an investment contract as dependent on the facts of each transaction, including the issuer’s representations or promises and purchasers’ reasonable expectations. It would not alter the Howey test, declare that a particular crypto asset is, or is not, a security in every context, apply to a crypto asset that is itself a security, or make Rule 400 the exclusive way to show that a covered investment contract has ceased to exist. Nor would Rule 400 cure past violations or turn Form TR into SEC approval.

For issuers, the choice of exemption would determine the disclosure, financial-statement and reporting burden, duration of the offering, and the conditions for potential preemption under Rule 500. The recurring compliance task would be to document what the issuer promised, what it completed or permanently ceased, and whether it remained in compliance with the disclosure, filing, and reporting obligations of the selected exemption.

Platforms and other intermediaries would still need to analyze their own activities under the Exchange Act and other applicable law. Rule 500 could reduce state registration and qualification issues for qualifying transactions, but it would not prescribe an intermediary diligence program. As a practical matter, a platform would need reliable issuer information to evaluate the covered investment contract, the seller and transaction, and the issuer's current disclosure and reporting status.

In practice, that would mean an analysis at each relevant stage: determine whether an investment contract exists, identify and disclose the issuer’s material promises, track performance or permanent cessation of those efforts, and assess whether the conditions of proposed Rule 500 were satisfied for a later resale. The proposal would create tools for that analysis; it would not replace the facts-and-circumstances inquiry. The recurring question for issuers and platforms would remain what the issuer promised and whether those promises have been performed or permanently ceased.

Status and Comment Deadline

As of August 27, 2026, Regulation Crypto Assets remains a proposal, not a final rule. The release was published in the Federal Register on August 21, 2026, and comments are due October 20, 2026. Market participants therefore cannot rely on the proposed exemptions, the Rule 400 safe harbor, or Rule 500 preemption, and any final rules could differ from the proposal in scope, conditions, or timing. Existing registration requirements, exemptions, antifraud provisions, and independently applicable intermediary rules continue to apply until any final rules take effect.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.