SEC Staff Says Rule 506(c) Tokenized Offerings May Use On-Chain Accredited Investor Attestations

On July 21, 2026, the SEC Division of Corporation Finance confirmed that investors in certain Rule 506(c) tokenized offerings may satisfy accredited-investor verification requirements through programmatic digital attestations modeled on the framework outlined in the March 12, 2025 Latham & Watkins no-action letter and corresponding incoming letter. The guidance clarifies the permissible verification medium but leaves unchanged the minimum investment threshold, actual-knowledge condition, recordkeeping obligations, and facts-and-circumstances standard.

Key Takeaways

• In Question 260.40 of the Securities Act Rules Corporation Finance Interpretations (July 21, 2026), the staff of the SEC's Division of Corporation Finance confirmed that investors in a Rule 506(c) offering of a tokenized security may deliver the representations required under the Latham & Watkins no-action letter (March 12, 2025) programmatically: through the tokenized security itself, via a digital attestation.
• Under the high-minimum investment framework established by the Latham & Watkins letter, an issuer takes “reasonable steps to verify” accredited investor status where it (1) obtains written representations that the purchaser is an accredited investor and that its minimum investment amount is not third-party financed for the specific purpose of making the investment, (2) requires minimum investments of at least $200,000 for natural persons and at least $1,000,000 for legal entities, and (3) has no actual knowledge to the contrary. The incoming letter applies this to three defined categories of investor, each with its own Rule 501(a) bases — and, for entities accredited solely through their equity owners, additional per-owner conditions. CFI 260.40 addresses only element (1), and only its medium.
• CFI 260.40 confirms an existing permission rather than granting a new one. Footnote 3 of the incoming letter already allowed the representation to be delivered by “any other written means as the issuer shall reasonably determine under the circumstances of the offering.” The staff has now said a digital attestation qualifies.
• The staff conditioned its answer on recordkeeping: “it will be important for the issuer to ensure that it retains sufficient records of the process used via the token standard protocol to verify accredited investor status.” The token standard is the verification instrument; the records of how it operated are the compliance file.
• The staff also repeated its standing reminder that reasonable verification “is an objective determination by the issuer (or those acting on its behalf), in the context of the particular facts and circumstances,” citing Securities Act Release No. 9415 (July 10, 2013) and CFIs 256.35 and 256.36. A smart contract does not convert a facts-and-circumstances standard into a checkbox.
• CFI 260.40 does not lower the Latham & Watkins minimums, does not bless self-certification generally, and does not address Regulation A, Regulation Crowdfunding, or secondary transfers of tokenized 506(c) securities. It answers one narrow question (the medium of the representation) and answers it yes.
• For issuers of tokenized fund interests, real estate interests, revenue-participation instruments, and digital-native securities, the practical effect is that the entire high-minimum subscription flow can now run natively in the token protocol, retiring the parallel paper process those offerings have carried until now.

The Interpretation

On July 21, 2026, the Division of Corporation Finance published Question 260.40 of its Securities Act Rules Corporation Finance Interpretations. The question is short, and so is the answer.

The fact pattern: an issuer intends to conduct a Rule 506(c) offering of a tokenized security using “the reasonable steps to verify accredited investor status” described in the Division's letter to Latham & Watkins LLP (March 12, 2025): minimum investments of at least $200,000 for natural persons and $1,000,000 for legal entities, coupled with purchaser representations as to accredited status and the absence of third-party financing of that minimum, and no actual knowledge to the contrary.

Rather than collecting those representations off-chain, the issuer intends for investors to provide them programmatically through the tokenized security via a digital attestation. Does the staff view this as a satisfactory method of providing representations to the issuer for purposes of the position taken in the Latham & Watkins letter?

The staff's answer: Yes.

Two qualifications travel with that answer, and both will do real work in practice.

First, recordkeeping. The staff emphasizes that issuers must “ensure that [they] retain[] sufficient records of the process used via the token standard protocol to verify accredited investor status.” This echoes the core requirement from the original Rule 506(c) adopting release, Securities Act Release No. 9415 (July 10, 2013), which called on issuers and their verification service providers to document the steps taken to confirm each purchaser’s accredited status.

Second, the objectivity reminder. Issuers “are also reminded that whether an issuer has taken reasonable steps to verify that a purchaser is an accredited investor is an objective determination by the issuer (or those acting on its behalf), in the context of the particular facts and circumstances,” citing Release No. 9415 and Securities Act Rules CFIs 256.35 and 256.36.

That is the entire interpretation. To see why an answer this short matters, you need the before and after.

The Before

Rule 506(c) and the verification burden

When the SEC adopted Rule 506(c) in 2013 under the JOBS Act, it struck a trade: general solicitation in exchange for verification. An issuer may advertise a private placement to the world, but every purchaser must be an accredited investor, and the issuer must take “reasonable steps to verify” that status. Rule 506(c)(2)(ii) supplies a non-exclusive list of verification methods (tax returns, bank and brokerage statements, third-party confirmation letters), and Release No. 9415 made clear that outside the enumerated methods, reasonableness is an objective, principles-based, facts-and-circumstances determination.

The market's verdict on that trade was decisive. For more than a decade, issuers overwhelmingly stayed in Rule 506(b), where self-certification suffices and general solicitation is off the table, rather than ask investors to hand over their financial records. Verification friction, not solicitation appetite, defined the boundary of 506(c).

March 12, 2025: The Latham & Watkins letter and CFIs 256.35 and 256.36

The Latham & Watkins no-action letter changed the economics. On March 6, 2025, four Latham partners wrote to the Division's Office of Small Business Policy seeking interpretive guidance on the use of a minimum investment amount as a verification factor. Six days later, Jeb Byrne, Chief of the Office of Small Business Policy, responded for the Division: the staff agreed that a high minimum investment amount is a relevant factor in verifying accredited investor status and, based on the representations in the incoming letter, concurred that an issuer proceeding as described could reasonably conclude it had taken reasonable steps.

The framework has three elements. The issuer must:

1. obtain written representations from the purchaser that (a) the purchaser is an accredited investor and (b) the purchaser's minimum investment amount is not financed in whole or in part by any third party for the specific purpose of making the particular investment in the issuer;
2. require minimum investment amounts of at least $200,000 for natural persons and at least $1,000,000 for legal entities; and
3. have no actual knowledge of any facts indicating that any purchaser is not an accredited investor, or that any purchaser's minimum investment amount was financed in whole or in part by a third party for that specific purpose.

Because the staff's concurrence rests expressly on the representations in the incoming letter, that letter's detail is load-bearing, and the staff's response compresses several points worth drawing out.

Three categories, not one threshold

The incoming letter applies the framework to three defined categories of accredited investor:

• Natural persons accredited under Rule 501(a)(5) (net worth) or Rule 501(a)(6) (income), agreeing to a $200,000 minimum investment.
• Entities accredited by assets under Rule 501(a)(3), (7), (9), or (12), agreeing to a $1,000,000 minimum investment.
• Entities accredited solely through their equity owners under Rule 501(a)(8), where every equity owner is itself accredited under Rule 501(a)(3), (5), (6), (7), (9), or (12). This category carries two conditions the others do not:
• each equity owner must have a minimum investment obligation to the purchaser of at least $200,000 (natural persons) or $1,000,000 (legal entities); and
• the purchaser must agree to invest at least $1,000,000 (or $200,000 per equity owner, if all of the purchaser's equity owners are fewer than five natural persons).

The staff's response collapses the second and third categories into a single string: Rule 501(a)(3), (7), (8), (9) or (12) for legal entities. Work from the incoming letter's allocation instead. Rule 501(a)(8) is the look-through category, and it does not travel without the equity-owner conditions.

Note also what the enumerated categories omit. The framework does not reach purchasers accredited on other bases; e.g., natural persons qualifying by professional certification or as knowledgeable employees of a private fund, directors and executive officers of the issuer, family clients, or institutions such as banks, broker-dealers, and registered investment companies. That is a scoping limit rather than a trap: an issuer may verify those purchasers by a different method in the same offering, as CFI 260.39 confirmed in January 2026.

The Medium of the representation was already flexible

Footnote 3 of the incoming letter is the provision CFI 260.40 turns on. It provides that the purchaser's written representation could be contained in a standalone document, in a subscription agreement for the offering, in an affirmative written electronic communication from the purchaser, or by any other written means the issuer reasonably determines under the circumstances of the offering.

The letter, in other words, never prescribed paper. It prescribed substance and left the medium to the issuer's reasonable determination.

"Financed" is narrower than it sounds

Footnote 4 of the incoming letter identifies three funding sources that do not defeat the non-financing representation:

(1) financing programs, including a secured credit facility, that has other purposes than solely making the particular investment in the issuer;

(2) binding commitments or financing to the purchaser that predate the commencement of the offering under Rule 506(c); and/or

(3) financing transactions conducted by the purchaser in which the purchaser, as an issuer, has satisfied the conditions applicable to an issuer under this letter.

Footnote 5 adds two mechanics that matter in fund practice. Minimum investment amounts include amounts committed under a binding commitment to invest in one or more installments, as and when called. And the non-financing condition applies solely to the funds applied or committed to the minimum investment amount, not to any greater amount invested or committed by the purchaser or by an equity owner of the purchaser.

CFIs 256.35 and 256.36

The same day as the no-action letter, the staff issued CFIs 256.35 and 256.36, confirming that the Rule 506(c)(2)(ii) methods are non-exclusive and non-mandatory and that a high minimum investment amount can support a reasonable-steps conclusion under the principles-based method. For high-minimum offerings, the letter and interpretations together converted 506(c) verification from a document-collection exercise into a representations-plus-minimums framework, and general solicitation became commercially usable for funds and issuers whose check sizes cleared the thresholds.

The tokenization overlay

As the high-minimum investment framework matured, the staff was building a parallel body of guidance on tokenized securities. Corp Fin’s January 23, 2026 CFI updates—including Question 260.39, which permits an issuer to use different verification methods for different investors in the same 506(c) offering—addressed the verification side. The January 28, 2026 joint statement of the Divisions of Corporation Finance, Investment Management, and Trading and Markets confirmed the organizing principle: a tokenized security is still a security, and the format of issuance or recordation does not change the application of the federal securities laws. The Commission's March 17, 2026 interpretive release on crypto assets, issued jointly with the CFTC, filled in the broader regulatory perimeter.

That left tokenized 506(c) issuers straddling two worlds. The security lived on-chain: issuance, transfer restrictions, cap-table state, and investor allowlisting were all executed programmatically through the token standard. The Latham representations, meanwhile, sat off-chain in a countersigned PDF.

The reason was caution, not prohibition. Footnote 3 of the incoming letter already permitted “any other written means as the issuer shall reasonably determine,” and a wallet-signed attestation is a plausible fit. But no staff guidance said so, and two questions gave practitioners pause:

• Is a transaction signed by a private key an “affirmative written electronic communication from the purchaser,” or something the drafters did not have in mind?
• Does a representation whose text lives in a contract's parameters rather than in a document the purchaser reads and signs satisfy the letter's expectations?

Faced with an unlit path and an offering to close, most issuers ran the paper process alongside the protocol and moved on.

The open question distilled to this: does a digital attestation executed programmatically through the tokenized security count as one of the “written means” footnote 3 leaves to the issuer's reasonable determination?

The After

CFI 260.40 answers that question yes. The answer is worth reading in three directions:

1. The subscription flow can be fully native to the protocol

An issuer can now run the entire high-minimum verification framework inside the token standard. The contract’s mint parameters enforce the minimum investment. The investor’s wallet executes a digital attestation capturing the accredited-investor and no-third-party-financing representations as a condition of issuance. The issuer's allowlist reflects completed attestations. The off-chain subscription booklet no longer does any verification work the protocol cannot do itself—and for digital-native issuers, this removes the last structural excuse for a bifurcated closing process.

Note the shape of the staff’s move: it did not create a new delivery channel but confirmed that an existing one (footnote 3's “any other written means”) reaches a digital attestation.

2. Recordkeeping is now the compliance center of gravity

The staff did not condition its answer on any particular token standard, attestation format, or credential architecture. It conditioned the answer on records—sufficient records of the process used to verify accredited investor status through the protocol. That qualifier matters: on-chain state is durable but not self-explanatory.

Five years from now, in an examination or enforcement inquiry, the issuer will need to reconstruct not just that an attestation transaction occurred, but what the investor saw, what the attestation said, how the representation text was bound to the signed transaction, and how the protocol enforced the minimum investment condition.

At minimum, issuers should preserve the attestation text as presented to investors at each point in the offering; the smart contract code and version history governing the attestation and minimum-investment logic; transaction-level records linking each wallet's attestation to an identified purchaser; and documentation of the issuer's process for monitoring actual-knowledge red flags. A protocol upgrade that silently changes the attestation flow mid-offering is a recordkeeping problem first and everything else second.

3. The objective standard survives the automation

The staff's closing reminder—that reasonableness is an objective, facts-and-circumstances determination—is not boilerplate. It means the digital attestation inherits every limitation of the written representation it replaces. If the issuer has actual knowledge that a purchaser is not accredited, or that the minimum investment is third-party financed, an on-chain attestation cures nothing. If the surrounding facts make reliance on representations unreasonable—say, indications that wallets are being funded by a common source immediately before minting—the issuer must respond exactly as it would to a red flag in a paper process. Automation changes the medium of compliance; it does not change the standard.

What CFI 260.40 does not do

The interpretation is deliberately narrow, and issuers should not read it beyond its terms:

• It does not modify the Latham & Watkins minimums. A digital attestation supporting a $10,000 token purchase is not within the high-minimum investment framework, and CFI 260.40 gives it no comfort.
• It does not reach representations outside the high-minimum investment framework. Rule 506(d) bad-actor representations, investment intent, Regulation S status, AML and sanctions certifications, transfer-restriction acknowledgments, and tax forms are not addressed. Silence is not prohibition, but there is no staff comfort for moving them on-chain, and no basis for assuming the analysis carries over.
• It does not address verification of transferees in secondary transactions, which remain governed by the applicable exemption and the token's transfer-restriction architecture.
• It does not speak to Regulation A, Regulation Crowdfunding, or registered offerings of tokenized securities.
• It does not designate any token standard, attestation protocol, or credential format as compliant per se. The reasonable-steps determination remains the issuer's, on the facts.

Like the Latham & Watkins letter and the January 2026 joint statement, it reflects the views of the Division staff. It is not a rule, regulation, or statement of the Commission, has no legal force or effect, and different facts or conditions might lead the staff to a different conclusion.

The Larger Signal

Read against the January 2026 joint statement and the March 2026 interpretive release, CFI 260.40 is a small piece of a consistent staff posture: the securities laws are format-neutral, and compliance functions that have always been performed on paper may be performed programmatically, provided the substance is identical and the records are better. The staff is not lowering the bar for tokenized offerings. It is confirming that the bar can be cleared on-chain.

That posture has a practical corollary for counsel. The answer to a tokenization question is more often found in the existing framework, read closely, than in a request for new relief. Footnote 3 of a 2025 no-action letter turned out to contain the permission the market spent a year waiting for. For issuers running compliant tokenized 506(c) programs alongside a paper shadow process, the shadow can now be retired. For issuers who assumed tokenization required regulatory improvisation, the message is the opposite: the existing framework, applied precisely, already accommodates the technology.