SEC Regulation Crypto Assets Proposal: A Guide to the SEC’s Proposed Framework for Crypto Offerings

The U.S. Securities and Exchange Commission has proposed “Regulation Crypto Assets,” a new framework intended to make federal securities rules work more effectively for certain crypto-related offerings.¹

The proposal focuses on certain crypto-related investment contracts, which it calls “covered investment contracts.” Put simply, the term may apply when purchasers fund a crypto project and depend on its developers or managers to do significant work that could influence the value or usefulness of the crypto asset.

Why Existing Securities Rules May Not Fit Crypto Well

Many federal securities requirements were developed before Bitcoin and blockchain-based networks became widely used. Applying traditional offering rules to this type of project can create uncertainty about registration, disclosure, ongoing obligations, and later trading.

According to the SEC, rules not designed for crypto may complicate transaction planning, slow capital formation, discourage innovation, and push some activity offshore.³ Regulation Crypto Assets attempts to strike a balance. It would make it easier for qualifying projects to raise money without completing a fully registered Securities Act offering, but it would still require investor disclosures and continued compliance with federal rules against fraud and market manipulation.

Proposal Components

Four features form the core of the proposal: two routes that could avoid Securities Act registration, a conditional investment contract safe harbor, and a “qualified purchaser” definition that would affect state registration and qualification requirements.

1. The startup exemption would give early-stage crypto projects a temporary way to raise up to $5 million over as many as four years without registering the offering under the Securities Act. In exchange, the issuer would still need to make required public filings, give investors useful disclosures, and follow federal anti-fraud and anti-manipulation rules.

• The fundraising exemption would create a larger, two-tier path for crypto projects that need more capital. “Tier 1” would allow offerings up to $20 million, and “Tier 2” would allow offerings up to $75 million, in each case during a 12-month period, with public offering materials and ongoing reporting requirements. Because Tier 2 would permit substantially larger offerings, it would come with additional investor protections, most notably, the issuer’s financial statements would have to be audited.

• The investment contract safe harbor would help answer when the securities-law relationship around a crypto asset may be treated as “over.” If the issuer has finished or permanently stopped the promised managerial work and makes a supporting public certification, the SEC would deem the covered investment contract to have ceased to exist for the relevant federal securities definitions. This would not necessarily mean that every crypto asset automatically stops raising securities law questions after a certain amount of time. Rather, the safe harbor would be conditional and would depend on the issuer’s actual conduct, prior promises, and public filing. Still, it could give projects, investors, trading platforms, and other market participants a clearer way to evaluate when the original investment relationship has concluded.

• The qualified purchaser definition would create state-law preemption for covered offers and sales made under Regulation Crypto Assets and for certain later secondary-market transactions. In practical terms, eligible transactions would not have to satisfy separate state registration or qualification processes, although other legal obligations could still apply.

Together, these provisions are intended to give crypto businesses clearer paths for raising capital in the United States while preserving disclosures, reporting obligations, and protections against fraud and market manipulation.

Importantly, this is a proposal, not a final rule. Comments are due October 20, 2026, according to the proposing release.¹ Its details could change through the SEC’s rulemaking process.

The Proposal at a Glance

Proposal component	Basic purpose	Key limit or condition
Startup exemption	Gives early-stage projects temporary relief from Securities Act registration	Up to $5 million during a period of up to four years
Fundraising exemption	Provides a larger capital-raising route modeled in large part on Regulation A	Tier 1: up to $20 million; Tier 2: up to $75 million, each during a 12-month period
Investment contract safe harbor	Clarifies when a covered investment contract may be treated as having ceased to exist	Essential managerial efforts must be completed or permanently stopped, followed by a public certification
Qualified purchaser definition	Creates more uniform treatment under federal and state securities laws	Preempts certain state registration and qualification requirements for covered offers and sales and qualifying secondary transactions

Conclusion

The SEC’s proposed Regulation Crypto Assets represents an effort to replace uncertainty with a framework designed around how some crypto projects actually develop. Rather than forcing every covered project into the same traditional registration model, the proposal would offer different paths for startups and larger fundraising efforts. At the same time, it would require public information, continued reporting in appropriate cases, and compliance with federal anti-fraud and anti-manipulation laws. The proposal’s safe harbor could be particularly important because it addresses not only how a crypto project begins but also how the investment contract surrounding an asset may end. Combined with the proposed state-law preemption, the framework could give issuers, investors, and secondary market participants more predictable rules.

Regulation Crypto Assets remains only a proposal, and comments are due October 20, 2026. Whether the final version achieves the right balance will depend on the details adopted after public comment. For now, the proposal provides a useful picture of how the SEC may approach crypto fundraising: tailored exemptions and clearer transition rules, paired with disclosure and investor protection.

Shustak Reynolds & Partners, P.C. focuses its practice on securities/financial services law and complex business disputes.
We represent many investment advisors, financial professionals, broker-dealers,
registered representatives, investors and businesses.
Attorney Robert R. Boeche, II can be reached at (619) 696-9500.

¹ U.S. Securities and Exchange Commission, Regulation Crypto Assets fact sheet; Regulation Crypto Assets, Release Nos. 33-11434; 34-106150; File No. S7-2026-27; Federal Register publication date August 21, 2026; comments due October 20, 2026.

² SEC Regulation Crypto Assets fact sheet, summary of proposed startup exemption, fundraising exemption, investment contract safe harbor, and qualified purchaser definition. ³ SEC Regulation Crypto Assets fact sheet, Background.