There is never a dull moment – so, a quick update here on new SEC guidance. Also, I wanted to say “thank you” to the readers of this Substack. After my last post, I received two things I have never received before: (1) critical (constructive) feedback (requesting a “tldr” summary at the beginning of articles, which I debut below), and (2) a paid subscription. The expectation with this writing was never to make any money, but it still feels really nice to know that people appreciate the work that goes into putting these posts together, and it is helpful to have a little additional revenue to reinvest into this project. So, again, thank you all.
Summary
The SEC’s Division of Corporation Finance has issued new guidance clarifying how U.S. securities laws apply to the issuance and registration crypto assets, signaling a further shift in the SEC’s approach from blunt “regulation-by-enforcement” to a more nuanced approach. That said, the guidance is unofficial and narrow, so the skies are not yet clear, and, while these steps in the right direction are heartening, they are just steps and there is still a long road to travel before crypto founders, investors, and other market participants are standing on solid ground.
Key Points from the April 10 Statement
On April 10, 2025, the SEC’s Division of Corporation Finance released a statement “Offerings and Registrations of Securities in the Crypto Asset Markets” addressing how federal securities laws apply to certain crypto asset offerings and “investment contracts” involving digital tokens.
- Securities offerings are securities offerings are securities offerings. The staff is clear that existing disclosure requirements (under the Securities Act of 1933 and Exchange Act of 1934) apply to traditional equity or debt offerings by crypto firms and any offer of a token that functions as an “investment contract” (what the SEC calls a “subject crypto asset” in the statement). So, as has been the guidance to clients for years, merely calling something a “utility token” doesn’t exempt it from securities law considerations. If it is being sold as part of an investment scheme (from the perspective of regulators), securities laws apply in the U.S.
- The SEC staff lays out specific areas that crypto-related issuers should cover in their disclosures. The statement highlights topics an issuer should address in its registration documents (like a Form S-1 for an IPO or Form 10 for listing). For example, companies should clearly explain their Business Model and Technology – what the protocol, network, or application does, the current development stage and roadmap, how the token or crypto asset fits into the business, and how (or if) the company will continue to be involved after a token network launches. The guidance emphasizes using plain language and not just hyping “crypto” buzzwords unrelated to the actual business. While this guidance is explicitly applicable to public reporting issuer / registrants, there is typically much that can be gleaned by the private issuers from public guidance – public companies and their disclosures are often the north star for purposes of risk and other disclosures.
- Risk Factors must be candid and crypto-specific. Crypto businesses are required to enumerate the major risks in investing with them. The SEC notes that issuers should tailor these to the crypto context – for instance, risks around cybersecurity, regulatory uncertainty, volatility of crypto markets, tech failures, legal challenges to the token’s status, etc. The guidance implies that boilerplate risk disclosures aren’t enough; they should reflect the real hazards of the project as observed in staff reviews of past filings.
- Describe the Token (or “Security”) in detail. If a token or digital asset is part of the offering, the SEC wants a Description of the Securities being offered that covers the token’s characteristics. This means disclosing the token’s rights and utility (if any), how it’s created or burned, its governance, and any economic rights (such as dividends, distribution of fees, etc., if applicable). The staff gives examples: companies have been asked to spell out token holder rights, technical specs of the protocol, the total token supply and how it’s determined (fixed or inflationary), and any lock-up or vesting arrangements. Essentially, when a token is sold as part of an investment, investors should know what exactly they are getting and how it works under the hood.
- Who’s running the show? The guidance reiterates that crypto companies must disclose the key people (executives, directors, significant employees) and their experience, just like any issuer. If a project’s success depends on certain developers or founders, that’s material information. Likewise, financial statements and any legal agreements (exhibits) involving the token or platform must be provided as required.
In sum, the SEC’s April 10 statement points to how this instantiation of the staff may apply securities disclosure standards to common crypto-asset scenarios. Notably, this is staff guidance – which means it’s the Division of Corp Finance’s view of how the law applies, not a formal SEC rule. However, it is a helpful signal and useful guidance which we would be remiss to ignore.
Written by David Lopez Kurtz