On Aug. 18, 2026, the U.S. Securities and Exchange Commission (the SEC) took a significant step towards creating a tailored regulatory framework for offerings of investment contracts involving crypto assets by announcing a proposed regulation titled “Regulation Crypto Assets.”1 The proposed regulation seeks to provide clarity and encourage participation and investment in transactions previously characterized by regulatory ambiguity.
Background
Crypto assets have not fit neatly into the existing U.S. federal securities regulation framework, and parties seeking to raise funds by selling digital assets have been forced to contend with existing rules written before the proliferation of crypto assets, creating confusion for regulators and market participants and, according to critics, driving investment offshore.
Regulation Crypto Assets follows SEC Chair Atkins’s broader “Project Crypto” initiative to modernize the SEC’s approach to digital assets announced in 2025, the announcement of a joint interpretation by the SEC and the Commodity Futures Trading Commission (the CFTC) on Mar. 17, 2026, and the uncertainty around broader legislation in the form of the Digital Asset Market Clarity Act (the CLARITY Act).2 On Sept. 15, 2026, the CLARITY Act failed to advance in the Senate after a cloture vote on a motion to proceed fell short of the required votes and remains pending in the Senate.
What is Regulation Crypto Assets?
The SEC’s proposed Regulation Crypto Assets aims to provide clear capital-raising pathways for issuers of certain investment contracts involving crypto assets (covered investment contracts) and preserve core investor protections with rules tailored specifically for crypto asset offerings.
The proposal would provide two exemptions from the registration requirements of the Securities Act of 1933 (the Securities Act), a safe harbor for certain instruments from being considered “investment contracts,” as defined in the Securities Act, and express pre-emption from the application of state securities laws.
Startup exemption
The Startup Exemption is a one-time, nonexclusive exemption from SEC registration for offerings raising up to USD5M over four years, adjusted for inflation. It is intended to provide relief to issuers that intend to use proceeds of sales to build technology, and expressly concludes with either the completion of the promises to engage in managerial efforts with respect to the crypto asset, or demonstrating that the investment contract has ceased to exist, while requiring tailored mandatory disclosures to keep investors adequately informed along the way.
Conditions for using this exemption include:
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Filing a notice of reliance on Form NOR with information about the issuer, the name of the crypto asset, and certain certifications, initiating the four-year exemption period.
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Maintaining a public website containing narrative disclosures on 10 topics, including the offering, the subject crypto assets, the investment contract, management, and risk factors, with an obligation to update for material changes at least annually (Rule 103 Disclosures).
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Filing a transition report on Form TR no later than four years after filing Form NOR, explaining that the investment contract has been completed or will not be completed, ending the issuer’s ability to rely on the exemption.
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The issuer and its affiliates’ not having previously relied on the exemption with respect to the same crypto asset, or a substantially similar crypto asset.
In contrast to certain Regulation D private placement exemptions, the Startup Exemption does not restrict general solicitation or participation by nonaccredited investors. In addition, the securities issued under the exemption would be unrestricted securities that are not subject to Rule 144’s holding period and other limitations.
Issuers relying on this exemption would remain subject to the antifraud and antimanipulation provisions of the federal securities laws.
Fundraising exemption
The Fundraising Exemption is a nonexclusive, two-tiered exemption for U.S. domestic issuers modeled in part on Regulation A under the Securities Act, and is intended to facilitate larger capital raises.
Tier 1 would permit unregistered offerings of up to USD20M in any 12-month period, including up to USD6M by affiliated selling securityholders, with the limits adjusted periodically for inflation.
Tier 2 would permit unregistered offerings of up to USD75M in any 12-month period, including up to USD22.5M by affiliated selling securityholders, with the limits adjusted periodically for inflation.
Conditions for using this exemption, for both tiers, include:
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Requirements that the issuer:
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Be a domestic entity organized in the U.S. with a majority of executive officers or directors who are U.S. citizens or residents, more than 50% of its assets located in the U.S., and its business administered principally in the U.S.
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Not be a blank check company, an investment company, or a business development company.
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Has filed with the SEC all reports required to be filed, if any, pursuant to Regulation Crypto Assets or pursuant to Section 13(d) or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act) during the two years before the filing of the offering statement discussed below (or such shorter period as required).
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Not have been subject to an order revoking or suspending its Exchange Act registration for failing to comply with the reporting or other requirements under the Exchange Act (a Section 12(j) order) during the prior five years;
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Filing an offering statement on Form 1-CRYPTO with an offering circular containing Rule 103 Disclosures and a discussion of the issuer’s financial condition, financial statements (which must be audited for Tier 2 offerings), and exhibits, subject to the SEC’s review and qualification.
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Participation is limited to accredited investors, unless a non-accredited investor purchases securities in the amount of no more than 10% of the greater of such purchaser’s annual income or net worth (for natural persons) or 10% of revenue or net assets (for non-natural persons).
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A limit on secondary sales of no more than 30% of the aggregate offering price for the issuer’s first offering pursuant to the exemption, and any subsequent offering qualified within the following year.
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Ongoing reporting requirements following qualification, including annual reports on Form 1-KC, semiannual reports on Form 1-SC, and current reports on Form 1-UC, or as required by section 13 or 15(d) of the Exchange Act.
Continuous or delayed offerings will be permitted under the exemption, but at-the-market offerings will not.
Similar to the Startup Exemption, general solicitation would be permitted, the issued securities would be unrestricted, and issuers would remain subject to the antifraud and antimanipulation provisions of the federal securities laws.
Unlike the Startup Exemption, the Fundraising Exemption does not appear to have a defined limit on the number of times the exemption may be used.
Investment contract safe harbor
The Investment Contract Safe Harbor is a conditional, nonexclusive safe harbor from the term “investment contract” in the definition of “security” under the Securities Act. It builds on the interpretation published by the SEC and the CFTC in March 2026 addressing when a non-security crypto asset can fall within the scope of the federal securities laws if offered and sold subject to an investment contract, as well as when the same crypto asset can fall outside the same laws when it separates from the investment contract.3
The safe harbor is intended to provide greater clarity as to when a covered investment contract has ceased to exist because of a lack of essential managerial efforts and the underlying crypto asset is no longer subject to such investment contract. The safe harbor would be available upon the satisfaction of the following conditions:
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Completing or otherwise permanently ceasing all essential managerial efforts that it represented or promised it would engage in under the covered investment contract, and not making (and not intending to make) any new representations or promises to engage in such efforts with respect to the crypto asset; and
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Making a public filing on Form TR certifying that it has satisfied the conditions of the safe harbor or that it cannot satisfy those conditions, and providing an analysis supporting that certification.
Although the SEC indicated that the safe harbor would control with respect to its administration of the federal securities laws, the SEC did not preclude challenges to whether the issuer actually satisfied its conditions or assertions by third party private litigants that the crypto asset remains subject to an investment contract or is otherwise a security.
The safe harbor would be available to any issuer that satisfies its conditions, including those that have previously utilized the Startup Exemption or the Fundraising Exemption. Importantly, there is no separate deadline for invoking the safe harbor.
State-law preemption
The proposed regulation would preempt state securities law registration and qualification requirements for offers and sales under either the Startup Exemption or Fundraising Exemption, as well as qualifying secondary-market transactions by persons other than the issuer, an underwriter, or a dealer. The secondary-market transactions preemption would continue so long as the issuer remains current on its applicable disclosure, filing, and reporting obligations under Regulation Crypto Assets.
Looking ahead
Although the proposed exemptions are targeted at smaller offerings and address narrower issues than those contemplated by the CLARITY Act (which remains pending), Regulation Crypto Assets would provide meaningful clarity for market participants seeking to raise funds by selling crypto assets while more comprehensive legislation remains pending. In his statement supporting the proposal, Chair Atkins emphasized the importance of a durable legal framework, and that Regulation Crypto Assets should not be viewed as a substitute for legislation.
Footnotes
1. Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Rel. No. 33-11412 (Mar. 23, 2026), https://www.sec.gov/files/rules/interp/2026/33-11412.pdf.
2. H.R.3633 - 119th Congress (2025-2026): Digital Asset Market Clarity Act, H.R.3633, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/house-bill/3633.
3. Regulation Crypto Assets, Rel. No. 33-11434 (Aug. 21, 2026), https://www.sec.gov/files/rules/proposed/2026/33-11434.pdf.
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.
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