SEC Proposes “Regulation Crypto Assets”:

Tailored Offering Exemptions, an Investment Contract Safe Harbor, and Broad State Preemption for Token Offerings

August 21, 2026

Key Takeaways

Two new registration exemptions: a $5 million, four-year “startup exemption” and a two-tier “fundraising exemption” of up to $75 million per year, modeled on Regulation A.
A filing-based “investment contract safe harbor” lets an issuer exit investment-contract status by certifying, on Form TR, that it has completed or permanently stopped its promised managerial efforts.
Broad preemption of state securities registration and qualification requirements for offerings and eligible secondary trades.
Nothing is effective yet. Comments are due 60 days after Federal Register publication, and the Commission must still vote to adopt — take no action in reliance on the proposal as written.

The Securities and Exchange Commission (the “Commission” has proposed “Regulation Crypto Assets”, the first offering framework designed specifically for crypto assets sold subject to an investment contract. The proposal is discussed in detail below.

On August 18, 2026, the Commission proposed “Regulation Crypto Assets,” a new set of rules (17 CFR part 228) that would create the first offering regime tailored to crypto assets sold subject to an investment contract.[1] The proposal builds directly on the Commission’s March 17, 2026 interpretive release, which explained how a non-security crypto asset becomes subject to an investment contract (through an issuer’s representations or promises to undertake essential managerial efforts) and how it later separates from that investment contract (when the issuer fulfills those promises or purchasers can no longer reasonably expect it to).[2] The new rules would apply only to “covered investment contracts,” meaning investment contracts to which a non-security crypto asset, and no other asset, is subject. Tokenized securities and instruments that bundle tokens with equity or debt are outside the proposal.

What the Proposal Would Do

Startup exemption (Rule 200). A one-time exemption from Securities Act registration for offers, sales and other distributions of covered investment contracts, including airdrops and network incentives, of up to $5 million in the aggregate over a period of up to four years. The issuer may be an entity, an individual, or a group of individuals or entities. The issuer must file a notice of reliance on new Form NOR before any distribution, post principles-based disclosure on a public website (and keep it there, with annual updates for material changes), and file a transition report on Form TR no later than four years after the notice. No financial statements, investment limits or staff qualification are required. Non-cash consideration, including tokens issued for services, counts toward the $5 million cap at fair value.

Fundraising exemption (Rules 300–307). A non-exclusive, two-tier exemption modeled on Regulation A. Tier 1 permits up to $20 million and Tier 2 up to $75 million of covered investment contracts in any 12-month period (issuer and affiliates aggregated; affiliate resales capped at $6 million and $22.5 million, respectively). Issuers file an offering statement on new Form 1-CRYPTO on EDGAR, which the staff must qualify before any sales; the offering circular contains the same principles-based disclosure as the startup exemption plus a discussion of financial condition and two years of U.S. GAAP financial statements, audited for Tier 2 offerings. Only U.S. entities with majority-U.S. management, more than 50 percent of assets in the United States and a principally U.S.-administered business are eligible. Non-accredited investors are limited to 10 percent of the greater of annual income or net worth at both tiers. Issuers at both tiers must file annual (Form 1-KC), semiannual (Form 1-SC) and current (Form 1-UC) reports. Testing the waters is permitted; at-the-market and variable-price offerings are not.

Investment contract safe harbor (Rule 400). If an issuer has completed or otherwise permanently ceased all essential managerial efforts it represented or promised it would undertake, is not making and does not intend to make new such promises, and files a Form TR certifying and explaining that conclusion, the covered investment contract is deemed to have ceased to exist and the token is deemed no longer subject to it for purposes of the Securities Act and Exchange Act definitions of “security.” The safe harbor is available to any issuer of a covered investment contract, whether or not it used either exemption, and is effective upon filing without staff review. It binds the Commission’s administration of the securities laws only if its conditions are in fact met, and it does not prevent private plaintiffs or state regulators from asserting that a security exists.

State preemption (Rule 500). Using its authority under Securities Act Section 18(b)(3) to define “qualified purchaser,” the Commission would preempt state registration and qualification requirements for all offerings under Regulation Crypto Assets and for secondary market transactions (by persons other than the issuer, an underwriter or a dealer) in a covered investment contract for which the issuer has satisfied a Regulation Crypto Assets exemption and remains current in its filings, including units of the same covered investment contract originally sold under other exemptions such as Regulation D. States would retain antifraud enforcement, notice filings and fees.

Securities sold under both exemptions would not be restricted securities and could be sold to retail investors with general solicitation. Issuers would remain subject to the antifraud and antimanipulation provisions of the federal securities laws, and both exemptions carry a bad-actor disqualification keyed to Regulation A Rule 262.

What You Should Know

The issuer’s own promises are the yardstick. The safe harbor and the required disclosure both turn on the essential managerial efforts the issuer “represented or promised.” The release states that whether an issuer has achieved decentralization is measured by how the issuer itself defined it, not by a general market conception, and that post-launch maintenance, security, improvement and network-promotion services are not essential managerial efforts once a network is functional. Roadmap and milestone language in whitepapers, websites and offering documents will carry direct legal consequences.
Nothing is exempt until the filing is made. Communications made before a Form NOR is filed and the disclosure is posted, or before a Form 1-CRYPTO is filed (other than permitted testing-the-waters communications), may be unexempted offers.
Structuring will follow the eligibility rules. The fundraising exemption is limited to U.S.-organized issuers with U.S. management, assets and administration; the audit requirement applies at Tier 2; pricing must be fixed. Projects organized offshore, or planning auction- or curve-based sales, will need to re-evaluate.
The safe harbor is a certification, not an approval. Form TR is not reviewed, is effective when filed, and can be second-guessed by the Commission if inaccurate. The release itself asks whether issuers will be reluctant to use it because it implies an admission that the token was previously subject to an investment contract.
Preemption depends on status that outsiders cannot easily see. Secondary-market preemption applies only while the issuer is current in its filings; trading platforms and resellers will need a way to verify that status. State regulators, who have opposed similar preemption in the CLARITY Act, can be expected to challenge Rule 500.
Intermediaries and tokenized securities are not addressed. The proposal does not provide relief from the Exchange Act definitions of exchange, broker or dealer, does not address trading venues, transfer agents or custody, and does not cover tokenized securities. The Commission states its view that covered investment contracts are not “equity securities” subject to Exchange Act Section 12(g).
Tax treatment is unchanged. The release does not address tax. Token compensation, conditional airdrops and post-launch funding arrangements remain taxable events under existing law regardless of the securities-law characterization.

The CLARITY Act Overlay:

This proposal does not exist in isolation. The Senate is scheduled to vote on September 15, 2026 on cloture on the motion to proceed to the CLARITY Act (H.R. 3633). Notably, the offering exemptions and exit provisions differ from the proposal. These deviations range from defining when a token is “mature” or decentralized, to how far state preemption reaches.

Practical implications for issuers weighing timing:

An issuer that that has structured its compliance program around Regulation Crypto Assets may be required to build in flexibility for its disclosure, corporate structure, and token mechanics to be adjusted if the CLARITY Act definitions ultimately diverge from the Commission’s.
The CLARITY Act’s passage and effectiveness could still be a year or more away, while Regulation Crypto Assets, if adopted substantially as proposed, could be enforceable sooner.

What to Do Before the Rule Is Final

Regulation Crypto Assets is a proposal only. It is not in effect, may change materially before adoption, and issuers should take no action in reliance on it as written. In the interim, issuers raising capital or distributing tokens today still need to rely on existing exemptions (Regulation D, Regulation CF, Regulation A) or on a registered offering, and should continue to apply the Commission’s March 2026 interpretive framework to determine whether a token is subject to an investment contract at all. Issuers should not treat the existence of this proposal as reducing their current compliance obligations.

Who Is Affected

Token issuers planning U.S. distributions or capital raises; foundations, labs and development entities managing post-launch efforts; issuers of previously distributed tokens considering whether to seek safe-harbor treatment; trading platforms and other secondary-market participants; and investors and funds holding or purchasing covered investment contracts.

Next Steps

The comment period will run 60 days from publication in the Federal Register, which had not occurred as of this alert; the deadline is likely to fall in late October or early November 2026. The release contains 154 numbered requests for comment, including on the offering caps and what counts toward them, the fixed-price requirement, the design of the safe harbor and Form TR, and the scope of state preemption.
The Senate is scheduled to vote on September 15, 2026, on cloture on the motion to proceed to the CLARITY Act (H.R. 3633), whose offering exemption and exit provisions differ from the proposal in several respects. Chairman Atkins’s statement describes legislation as “indispensable,” and the final rule may be conformed to any enacted framework.
Issuers should begin inventorying prior and planned token distributions (including grants and service compensation), reviewing the essential managerial efforts described in their public materials, assessing eligibility for each exemption, and evaluating audit readiness. Trading platforms should consider how they would verify issuer status for purposes of Rule 500.
The proposal is not effective and may change; no action should be taken in reliance on it. If adopted, the bad-actor disqualification would apply only to events occurring after the effective date.

Authored by: David Lopez-Kurtz and Bakhtawar Mirjat

Please contact a member of the CFDB Cryptocurrency, Digital Asset & Web3 team for any inquiries relating to this matter.

[1] Regulation Crypto Assets, Release Nos. 33-11434; 34-106150; File No. S7-2026-27 (Aug. 18, 2026), available at https://www.sec.gov/files/rules/proposed/2026/33-11434.pdf. The proposal was approved without an open meeting; Chairman Atkins and Commissioners Peirce and Uyeda each issued statements in support.

[2] Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Release No. 33-11412 (Mar. 17, 2026), 91 FR 13714 (Mar. 23, 2026).

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