SEC Proposes Tailored Crypto Asset Offering Framework

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Background

Crypto asset projects often raise capital before a network or application is complete. The SEC historically has applied the Howey test (SEC v. W.J. Howey Co.) to determine whether such transactions are subject to the federal securities laws, and in March 2026 the commission issued an interpretation on how those laws apply to crypto assets. The new proposal builds on that interpretation with offering and disclosure requirements tailored to the crypto asset market.

Under the proposal, a covered investment contract would be a contract, transaction, or scheme that constitutes an investment contract and involves a crypto asset that is not itself a security. That crypto asset must be the only asset subject to the investment contract. Accordingly, the proposed exemptions would not apply to tokenized stocks, bonds, or other crypto assets that are themselves securities. The SEC has said existing offering rules can create friction for crypto asset projects and might not elicit the information most relevant to investors. Regulation Crypto Assets is intended to address those concerns while preserving the anti-fraud and anti-manipulation protections of the federal securities laws.

Details

Crypto-specific disclosure framework

Both the startup exemption and the fundraising exemption would use principles-based narrative disclosures (Rule 103) covering, as applicable:

• The covered investment contract and the material terms of the offering
• The subject crypto asset and the associated network or application, including the development plan
• Management, related persons, and conflicts of interest
• Security arrangements and information about source code availability
• Crypto asset economics, allocation, governance, and the broader ecosystem
• Material risks, including technological, market, liquidity, and redemption risks

Disclosure generally would be required only when a topic is applicable and the information is known or reasonably available, consistent with the rule’s aim of eliciting material information for investors. Issuers therefore would need to make and support materiality judgments.

Startup exemption

The startup exemption is a one-time, nonexclusive exemption from Securities Act registration for covered transactions after the issuer files Form NOR (a notice of reliance) and before the earlier of four years later or its filing of Form TR (a transition report).

Key conditions would include:

• An aggregate offering limit of $5 million, including covered transactions by the issuer and its affiliates and the value of noncash consideration
• One-time use by the issuer and its affiliates for the same or substantially similar crypto asset available to an entity, an individual, or a group, each acknowledging responsibility through the required filings
• A public Form NOR filing on the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system before any covered transaction, including a certification that the issuer intends to fulfill its promised essential managerial efforts within four years
• Free public website access to Rule 103 disclosures, with updates within 30 calendar days after each calendar year-end for material changes
• A public Form TR filing no later than four years after Form NOR, certifying whether the issuer has completed or permanently ceased all promised essential managerial efforts and, if not, describing its current status and plans

The startup exemption could cover capital-raising transactions and related distributions (for example, development, testing, launch, staking, governance, or incentives). No financial statements or individual investor limits would be required.

Fundraising exemption

For larger offerings, the proposal would create a public, two-tier fundraising exemption modeled in part on Regulation A:

• Tier 1 would permit up to $20 million and Tier 2 up to $75 million in a 12-month period, with affiliated selling securityholders limited to $6 million under Tier 1 or $22.5 million under Tier 2.
• As an additional limitation on secondary sales, during the first year of reliance, securities offered by all selling securityholders generally could account for no more than 30% of the aggregate offering price in specified offerings.

The exemption generally would be available only to a U.S.-organized entity that has a majority of executive officers or directors who are U.S. citizens or residents, has more than 50% of its assets located in the U.S., and administers its business principally in the U.S. Blank-check companies, investment companies, business development companies, issuers under specified SEC orders, and delinquent filers would be ineligible.

An issuer would file Form 1-CRYPTO, including an offering circular with the Rule 103 disclosures, a discussion of financial condition, and U.S. GAAP financial statements. The SEC would qualify the offering statement before sales could occur. For a purchaser that is not an accredited investor, the aggregate purchase price generally could not exceed 10% of the greater of income or net worth (or revenue or net assets for a nonnatural person). Financial reporting and assurance requirements would include:

• Tier 1: U.S. GAAP financial statements with no assurance requirement, unless the issuer has obtained an audit that meets the proposal’s requirements
• Tier 2: Statements audited under U.S. generally accepted auditing standards (GAAS) or Public Company Accounting Oversight Board standards by an accountant that is independent under Regulation S-X
• Both tiers: Annual reports on Form 1-KC within 120 days after fiscal year-end, semiannual reports on Form 1-SC within 90 days after the end of the first six months of the fiscal year, and current reports on Form 1-UC within four business days of specified events

The proposal also includes a conditional safe harbor from the term “investment contract” in the definition of “security,” transition provisions for covered investment contracts, and preemption of certain state registration requirements.

What’s next

The proposal has not been adopted. The public comment period will remain open until Oct. 20, 2026.

Issuers, auditors, investors, trading platforms, and other market participants should consider commenting on the proposal’s scope, offering limits and eligibility, disclosures, financial statement and assurance requirements, and ongoing reporting, including the specific items on which the SEC has requested comment, such as the “covered investment contract” definition and the frequency of inflation adjustments to the offering limits.