On August 18, 2026, the US Securities and Exchange Commission (SEC) proposed a comprehensive new offering and disclosure regime for crypto asset securities entitled “Regulation Crypto Assets.” The proposed rules are specifically designed for the offer and sale of what the SEC terms “covered investment contracts,” which are investment contracts whose subject is a crypto asset that is not itself a security and that has no other asset as its subject.
Overview
Since the introduction of digital assets with Satoshi Nakamoto’s famous white paper on Bitcoin in 2008, federal regulators have struggled to calibrate an appropriate regulatory framework around the emerging asset class. Over time, the SEC has approached the regulation of crypto asset securities through a series of speeches, formal and informal guidance documents, and enforcement cases. But formal rulemaking on the subject has been in short supply. Until now.
The foundational legal premise of the proposed rules is that a crypto asset is not itself a security, but that an investment contract arises and a security is created for purposes of the federal securities laws when an issuer offers or sells a crypto asset accompanied by representations or promises to engage in “essential managerial efforts” on behalf of purchasers. This framework builds directly on the Supreme Court’s seminal case, SEC v. W.J. Howey Co., 328 U.S. 293 (1946), as well as the SEC’s March 2026 interpretive release (the 2026 Interpretation), which classified crypto assets into five categories and provided that only those crypto assets offered with such representations constitute the subject of an investment contract.
Rather than attempting to shoehorn crypto assets into the SEC’s existing offering regimes such as Regulation A or Regulation Crowdfunding, the proposal would create a standalone structure comprising five subparts: general definitional and disclosure rules applicable to all transactions (Rules 100–104); a “startup exemption” for early-stage offerings up to $5 million over four years (Rule 200); a “fundraising exemption” organized in two tiers capped at $20 million and $75 million, respectively, over rolling 12-month periods (Rules 300–307); an investment contract safe harbor that formally extinguishes security status upon satisfaction of specified conditions (Rule 400); and a preemption mechanism rendering all qualifying offerings “covered securities” for purposes of federal preemption of state blue sky registration requirements (Rule 500).
Definitions and General Rules
The general rules in Subpart A lay out defined terms and other basic requirements for the entire offering framework. Rule 100 defines “crypto asset” broadly as any digital representation of value on a cryptographically secured distributed ledger, which is a definition drawn verbatim from the GENIUS Act. Rule 100 also defines “covered investment contract” as an investment contract whose subject is a crypto asset that is not itself a security and that has no other asset as its subject. The key implication of the “covered investment contract” concept is that the security is the investment contract, not the crypto asset, with significant downstream consequences for offering mechanics, investor disclosure, and the ultimate pathway to deregistration.
Rule 102 would require periodic inflation adjustments to amounts set forth in the Regulation. Rule 103 would impose a principles-based disclosure regime organized around 10 topics: the material terms of the covered investment contract and the issuer’s representations regarding essential managerial efforts; the offering terms; a description of the subject crypto asset; management, related persons, and conflicts of interest; the associated crypto network or application and the issuer’s plan of development; security features and source code; asset economics and allocation schedules; governance structures; ecosystem participants and network effects; and material risk factors. Rule 104 would exclude certain bad actors from participating in offerings under Regulation Crypto Assets.
The Offering Exemptions
Regulation Crypto Assets includes two separate offering exemptions. The “startup exemption” (Rule 200) would provide a four-year window during which an issuer (defined broadly to include individuals and groups, with no US-nexus requirement) may sell up to $5 million in covered investment contracts without registration under Section 5 of the Securities Act. The exemption would be subject to a one-time use restriction that bars both the issuer and its affiliates from relying on the exemption for any “substantially similar” crypto asset, a limitation the SEC acknowledges is potentially broad but necessary to prevent circumvention through technical restructuring. Issuers relying on the exemption would be required to make disclosure to the public accessible via a website rather than through EDGAR, and such disclosure would be required to be updated within 30 days of each calendar year-end if material changes have occurred. At the end of the four-year period, the issuer would be required to file a Transition Report on Form TR, disclosing the current status of the covered investment contract and, if applicable, certifying that the conditions of the investment contract safe harbor under Rule 400 (discussed below) are met.
The “fundraising exemption” (Rules 300–307), modeled closely on Regulation A but with targeted refinements, would be available only if the issuer is a US-organized entity with a US nexus in management, assets, and administration. Tier 1 offerings would be limited to up to $20 million in a 12-month period, whereas Tier 2 offerings would be limited to up to $75 million in a 12-month period. Issuers relying on the exemption would be required to file an offering statement on new Form 1-CRYPTO including the Rule 103 disclosure items.
The proposed fundraising exemption would also impose investment limitations on non-accredited investors of 10 percent of the greater of annual income or net worth in both tiers (unlike Regulation A, which applies this limitation only to Tier 2). Further, it would prohibit at-the-market offerings, and mandate ongoing periodic reporting for both Tier 1 and Tier 2 offerings, including annual reports on Form 1-KC, semiannual reports on Form 1-SC, and current reports on Form 1-UC, a departure from Regulation A, which exempts Tier 1 issuers from ongoing reporting. Financial statements in fundraising exemption offerings must be prepared under US GAAP. Tier 2 offerings would require an independent audit under US GAAS or PCAOB standards, while Tier 1 offerings would not, although voluntarily obtained audits must be disclosed if performed.
Notably, covered investment contracts sold pursuant to either of the exemptions in Regulation Crypto Assets would not be deemed restricted securities under Rule 144 for purposes of the federal securities laws. Absent a contractual or other applicable holding period or restriction, purchasers of covered investment contracts issued under the proposed exemptions would be able to sell those securities immediately upon acquisition. Being able to acquire a freely tradable security has been one of the past stumbling blocks for issuers seeking to offer and sell crypto asset securities under the SEC’s existing offering exemptions.
Safe Harbor and Federal Preemption
The final two subparts address the formal cessation of investment contract status and the preemption of state law. Rule 400 would codify the 2026 Interpretation’s analysis by establishing a non-exclusive safe harbor under which a covered investment contract would be deemed to have ceased to exist and the subject crypto asset would be deemed no longer subject to that investment contract if: (1) the issuer has completed or otherwise permanently ceased all essential managerial efforts it represented or promised it would undertake and does not intend to make new such representations and (2) the issuer files a Form TR on EDGAR containing a certification of, and a supporting analysis for, that determination. The safe harbor would be available to any issuer regardless of which offering pathway it previously used, and its satisfaction would result in the requirements of the federal securities laws no longer applying from the point of satisfaction forward.
Importantly, however, the safe harbor would govern only the SEC’s own administration of the federal securities laws. It would not bind private plaintiffs, state regulators, or other federal agencies, and it would not immunize issuers from enforcement consequences for conduct predating the safe harbor filing. The SEC acknowledges in the proposing release that some issuers may resist using the safe harbor out of concern that doing so implies a prior admission that the asset was subject to an investment contract.
Rule 500, meanwhile, proposes a definition of “qualified purchaser” under Securities Act Section 18(b)(3) such that all primary offerings under either exemption, and secondary market transactions in covered investment contracts for which the issuer remains in compliance with Regulation Crypto Assets, would be “covered securities” preempted from state blue sky registration requirements. States would only retain their antifraud enforcement authority, notice filing rights, and fee assessment powers.
Takeaways
Taken as a whole, the proposal represents the SEC’s most comprehensive attempt to date to create a purpose-built regulatory path for the crypto asset industry, offering issuers of covered investment contracts a defined sequence from early-stage launch through capital formation to de-registration from the federal securities laws. Still, some in the crypto industry may not be satisfied with the proposal’s approach. It is certainly not the wholesale exemption many desired or expected. Nor are the proposed regulations simple or self-effectuating. Moreover, the proposal does not address issues around custody, trading, or exchange registration that have bedeviled many in the crypto asset markets.
Though interesting, the proposed rules would be of little use for issuers outside the crypto industry. Even crypto-adjacent issuers, such as those issuing tokenized securities, would be outside the scope of the proposed exemptions. Companies in other industries would no doubt benefit were they to receive the liberal treatment of covered investment contracts under Rule 144 and state blue sky law. Perhaps the SEC will propose to extend this relief more broadly to non-crypto issuers in one or more future rulemakings.
Congress also continues to debate a more comprehensive crypto market structure bill known as the Clarity Act, which would further allocate jurisdiction of crypto assets between the SEC and the Commodity Futures Trading Commission. The House passed its version over a year ago, but the Senate continues to debate the legislation, and several sticking points remain. The Senate is set to reconsider the bill in September after the summer recess. Passage of the Clarity Act may require future modifications to proposed Regulation Crypto Assets.
Regulation Crypto Assets remains a proposal, with dozens of specific requests for public comment on virtually every substantive provision, and the SEC has not indicated when a final rule would be adopted. Comments will be due 60 days after publication in the Federal Register.
