SEC Proposes "Regulation Crypto Assets"

On August 18, 2026, the Securities and Exchange Commission (the “SEC”) proposed new rules that would establish an offering regime designed specifically for certain investment contracts involving crypto assets (“covered investment contracts”).¹ These proposed rules, which expand upon the SEC’s interpretive guidance issued earlier this year, would be implemented through a new regulation called “Regulation Crypto Assets.” The comment period on the proposed rules will remain open for 60 days after publication of the SEC’s proposing release in the Federal Register.

In the proposing release, the SEC acknowledged that applying the existing securities law framework to crypto assets and crypto asset transactions poses distinct challenges, and, as a result, such assets and transactions should be analyzed under a different framework than that applied to traditional securities and transactions involving traditional assets. Regulation Crypto Assets would establish two exemptions from the registration requirements of the Securities Act of 1933 for offers of covered investment contracts: (i) the startup exemption and (ii) the fundraising exemption.

The startup exemption is a one-time exemption that would allow offerings of up to $5 million during a four-year period. To rely on the startup exemption, the issuer would file a notice of reliance with the SEC on a new form called “Form NOR.” Issuers seeking to rely on the startup exemption would also need to provide investors with “certain principles-based narrative disclosures.”

The fundraising exemption, which is a two-tier exemption partially based on Regulation A, would allow offerings of up to $75 million in each 12-month period. To rely on the fundraising exemption, issuers would be required to file offering statements with the SEC on a new form called “Form 1-CRYPTO.” Such offering statements would contain the “principles-based narrative disclosure” that is required for the startup exemption as well as the issuer’s financial statements and a discussion of the issuer’s operations and financial condition. In addition, issuers relying on the fundraising exemption would be subject to ongoing reporting obligations.

The startup exemption and the fundraising exemption would be non-exclusive exemptions. The antifraud and antimanipulation provisions of the Federal securities laws would continue to apply to issuers relying on these exemptions.

Regulation Crypto Assets would also create a safe harbor from the term “investment contract” in the definitions of “security” under the Federal securities laws. According to the SEC, this proposed conditional safe harbor aims to “provide market participants with greater clarity as to when a covered investment contract has ceased to exist because of a lack of essential managerial efforts and, therefore, the crypto asset is no longer a ‘subject crypto asset.’”

Further, Regulation Crypto Assets would add a new definition of “qualified purchaser” under the Securities Act of 1933 that would preempt state securities law registration and qualification requirements with respect to offers and sales of covered investment contracts issued pursuant to an exemption in Regulation Crypto Assets. This preemption would also extend to certain secondary market transactions in covered investment contracts, whether initially sold pursuant to a Regulation Crypto Assets or other Federal securities law exemption, by persons other than an issuer, underwriter, or dealer, for so long as the issuer continues to satisfy the applicable information, filing, and periodic reporting requirements of the relevant exemption.

The release explicitly acknowledges that concerns have been raised about the definitions of “exchange,” “broker,” and “dealer” under the Exchange Act as applied to crypto transactions, but states: “This proposal does not address those recommendations.” This means that even with the offering exemptions in place, intermediaries facilitating secondary market trading of covered investment contracts may face ongoing uncertainty about their registration obligations.

Takeaways:

Interested clients should review the proposal closely to assess how the proposed exemptions, safe harbor, and preemption provisions may affect their crypto asset activities. Clients may also wish to coordinate with industry groups as they evaluate the proposal and its potential impact. Given the significance of these proposed rules, clients should consider submitting comments to the SEC before the 60-day comment period closes.

Footnote

1 Under the proposed rules, the term “covered investment contract” would be defined to mean a contract, transaction, or scheme that constitutes an investment contract; provided that the investment contract must meet the following requirements: (1) a crypto asset is subject to the investment contract; (2) such crypto asset is not a security; and (3) no asset other than such crypto asset (including any security or non-security asset) is subject to the investment contract.