Publication

On August 18, 2026, the Securities and Exchange Commission (the “SEC”) issued proposed rules titled “Regulation Crypto Assets” related to the offer and sale of certain types of crypto assets.  These proposed rules build on and complement interpretive guidance issued in March 2026 by the SEC and the Commodity Futures Trading Commission (the “CFTC”).  The interpretive guidance addressed SEC and CFTC views of the proper treatment of certain types of crypto assets, given their unique characteristics and the fact that the federal securities laws were not crafted with these sorts of assets in mind (the “March 2026 Crypto Guidance”).

The public may provide comments to the SEC regarding proposed Regulation Crypto Assets by, among other options, submitting an email to [email protected] and referencing File Number S7-2026-27 on the subject line.  The comment period officially ends on October 20, 2026.

The goal of Regulation Crypto Assets is to address the distinctive nature of crypto assets and create a tailored framework within the United States for issuing crypto assets that are not themselves securities but may be subject to an investment contract. Through these rules, the SEC hopes to address existing barriers to capital formation and innovation within the United States and slow the offshore migration of crypto asset investment products, while preserving and shaping protections for U.S. investors.

SEC Commissioner Hester Peirce, as well as Commissioner Uyeda and Chairman Atkins, have been long-time advocates for releasing SEC rules and passing Congressional reforms that would provide guidance and greater certainty to issuers of crypto assets and their related investment products. The proposed rules included in Regulation Crypto Assets are a significant step forward. The SEC continues to advocate strongly for the adoption by Congress of legislative reforms that address crypto assets within the statutory framework of the federal securities laws, with the Digital Asset Market Clarity Act (the “CLARITY Act”) currently being the leading legislative contender. 

Overview. Proposed Regulation Crypto Assets contains the following key provisions:

• One-Time Start-Up Exemption.  Creates an exemption from registration for offerings of covered investment contracts up to $5 million during a four-year period, subject to tailored website disclosure and certain SEC notice filing requirements.
• Fundraising Exemption.  Creates a two tiered exemption from registration for offerings of covered investment contracts, up to $75 million within a 12-month period, subject to more detailed disclosures (including financial statements) and certain SEC offering statement and annual, periodic and current filing requirements. 
• Conditional Investment Contract Safe Harbor.  Provides a safe harbor, subject to certain conditions, for investment contracts involving crypto assets, relieving the issuer of continuing federal securities law compliance once essential managerial efforts have been completed or cease. 
• State Law Preemption.  Preempts state securities law registration and qualification requirements if the offer and sale of the crypto assets come within one of the exemptions in Regulation Crypto Assets.

“Crypto Asset,” “Covered Investment Contract” and Other Tailored Definitions. To address the innovative and highly technological nature of the crypto asset class, the proposed regulations include a number of detailed and technical terms designed to fit the current crypto markets but which are adaptable as those markets evolve. In particular, the proposed rules only relate to “crypto assets,” which are defined as any digital representation of value that is recorded on a cryptographically-secured distributed ledger.  In addition, the proposed rules address “covered investment contracts,” which are contracts, transactions or schemes involving a crypto asset that is an “investment contract,” as long as the crypto asset is not itself a security and no other asset is subject to the investment contract. 

Through these new definitions, the SEC is attempting to address the novel mechanics of certain crypto assets which may, at the time they are first offered or sold, be subject to investment contracts, but which may at a later point no longer be subject to such contracts.  Existing SEC rules do not generally envision or specifically address this sort of transition.  The recognition of such a transition for crypto assets in particular is related to their “network effects” – the manner by which the value of a crypto asset increases as more users, developers and projects use and interact with its network system. Under the proposed rules, the SEC makes clear that the “security” being addressed is the covered investment contract rather than the underlying crypto asset and that being subject to an investment contract does not transform the underlying crypto asset itself into a security.

Historically, “investment contract” status has been determined by analyzing the body of law developed under SEC v. W.J. Howey Co.[1]  However, the application of Howey to arrangements involving the issuance of certain crypto assets has been complex and has resulted in a string of SEC enforcement actions and litigation with differing outcomes. While the proposed rules under Regulation Crypto Assets would continue to rely on Howey for the determination of whether an “investment contract” has been created when crypto assets are issued, the proposed rules are designed to provide more clarity to issuers and investors about when, for how long and under what circumstances investment contracts that are so created would continue to exist and require securities law compliance by the issuer. The proposed rules clarify that an investment contract may no longer be considered to exist once the representations and promises made by the issuer at issuance have been fulfilled or cease. Generally for crypto assets, these representations relate to the maturity of the crypto network such that it becomes decentralized and its functioning is no longer dependent on the managerial efforts of the issuer or its affiliates.

Start-Up Exemption.  The start-up exemption is intended to allow issuers (which can include an entity, an individual or a group of individuals or entities) time to fulfill essential managerial efforts that have been promised to investors in connection with the issuance of a covered investment contract. Under the start-up exemption, issuers may enter into covered investment contracts with a purchase price of up to $5 million, as long as a notice filing on Form NOR is filed with the SEC prior to the commencement of the offering and certain tailored disclosures are publicly provided through a referenced website to potential purchasers. These disclosures would not be required to be filed with the SEC under the start-up exemption (but would be included in the offering statement that is required to be filed with the SEC under the fundraising exemption, discussed below).

  The specific disclosures required by proposed Regulation Crypto Assets are directed toward the unique nature of investment contracts involving crypto assets and considerations on which investors in these types of assets would be focused, including details of:

• the covered investment contract, including representations being made about essential managerial efforts that will be undertaken and progress in achieving them;
• the offering, including the number of units of covered investment contracts to be offered, the purchase price per unit, the duration of the offering period and any required purchaser qualifications, material agreements related to the offering, websites for applicable whitepapers and intended use of proceeds;
• the crypto assets, including their material features;
• management, related persons, and conflicts of interest, including any restrictions applicable to related persons;
• the crypto network or application, including the current stage of and plan for development;
• the security and source code, including the material aspects of the security for the crypto assets, network and application and the website address at which the code underlying the crypto network or application is accessible, if publicly available;
• Subject crypto asset economics and allocation, including supply, distribution methods, holdings by related persons, lockups, release schedules, pricing, mechanisms for generating and destroying the crypto assets and methods to verify transaction history;
• governance, including mechanisms and permissions related to the crypto assets, the network and the application;
• the ecosystem, including the technology infrastructure and network of contributors that support and interact with the crypto asset, network and application; and
• risk factors.

Required disclosures for the start-up exemption would not include traditional financial information that is required to be provided under Regulation A or as part of a registered public offering of securities. Updates to the initial notice filing would be required to be filed with the SEC to correct material mistakes or reflect material changes. Disclosures included at the referenced website would be required to remain publicly available for the duration of the offering and would be required to be updated within 30 days after the end of each calendar year if, as of the end of that year, there are material changes in the information previously disclosed.  A transition report on Form TR must be filed with the SEC via EDGAR no later than four years after the date of the initial notice filing (and can be filed earlier if the promised essential managerial efforts have been completed or otherwise permanently ceased).

An issuer (including all members of a group that constitute an “issuer” for the start-up exemption) and its affiliates may only use the start-up exemption for one four year offering period with respect to the same or a substantially similar crypto asset. The offering limits require aggregation of securities sold by the issuer and all of its affiliates. Covered investment contracts issued under this exemption would not be restricted securities, could be sold through general solicitation and would not be limited by the type of investor, allowing sales to non-accredited investors. This means that most non-affiliate purchasers would be able to resell the crypto assets subject to the investment contracts on secondary markets without satisfying traditional holding periods or other limitations under Rule 144 (but the proposed rules do not address compliance issues for trading platforms and market intermediaries), thereby facilitating the adoption and use of the underlying crypto assets on the developing network.

The start-up exemption allows offers and sales in public and private offerings and specifically covers “airdrops” of covered investment contracts in exchange for, in recognition of, or as an incentive for past or future use of its crypto network or application or as a reward for conducting activities related to operating its crypto network or application. The $5 million exemption limit would be subject to automatic periodic adjustment to reflect inflation. Existing antifraud and antimanipulation provisions of the federal securities laws would apply, and the exemption would not be available if the issuer or certain insiders are disqualified as “bad actors” (as defined under Regulation A) after the date the proposed regulations are adopted.

Fundraising Exemption. The fundraising exemption is intended to provide U.S. entity issuers with a framework to more efficiently raise capital, while ensuring that investors remain adequately informed and protected. The fundraising exemption is modeled in part on current requirements under Regulation A, with two tiers of investment requiring different levels of disclosures: 

^* The offering limits require aggregation of securities sold by an issuer and all of its affiliates.
^** In addition, the proposed rules contain additional limits on the issuer’s first offering and subsequent offerings that are qualified within one year of the qualification date of the issuer’s first offering.  In those circumstances, selling securityholders cannot represent more than 30% of the aggregate offering.
^*** Generally, two fiscal years or such shorter period as the issuer has been in existence and interim financial statements for the first six months of the issuer’s fiscal year and the corresponding period of the preceding fiscal year.

 Unlike the start-up exemption, the fundraising exemption requires the preparation and filing with the SEC via EDGAR of an offering statement on new Form 1-CRYPTO, which must include the disclosures required by the start-up exemption, as well as a discussion of the issuer’s financial condition and financial statements of the issuer (which must be audited for Tier 2 offerings).  The offering statement must be qualified by the SEC, but confidential submissions are permitted, as long as the offering statement is not qualified less than 15 calendar days after the public filing. An offering circular to be provided to investors would contain most of the information included in the offering statement.

The fundraising exemption will only be available to entity issuers that:

• Are organized in the United States;
• A majority of whose executive officers or directors are U.S. citizens or residents;
• Have more than 50% of their assets located in the United States;
• Principally administer their business in the United States;
• Are not development stage companies that either have no specific business plan or have indicated their business plan is to merge with or acquire unidentified companies;
• Are not investment companies or business development companies under the Investment Company Act of 1940;
• Have not been subject to an SEC order under Section 12(j) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), within five years before the filing of the offering statement (with certain exceptions);
• Have filed all reports required to be filed under new periodic filing requirements included in the proposed rules or required under the periodic reporting requirements of the Exchange Act, during the two years prior to the filing of the offering statement (or such shorter period during which the issuer was subject to such requirements); and
• Have not been disqualified as “bad actors” under Regulation A (including certain of its insiders) following the adoption of final rules.

Other than testing the waters communications, no offers of securities would be permissible under the fundraising exemption unless an offering statement has been filed with the SEC. No sales would be permitted until the offering statement has been qualified, with various offering circular delivery requirements. The delivery requirements are generally modeled on Regulation A.  Certain delayed and continuous offerings would also be permitted subject to various limitations, although other delayed and at the market offerings would not be permitted.

Covered investment contracts issued under the fundraising exemption would not be restricted securities, and would not be limited by the type of investor, allowing sales to non-accredited investors. However, purchasers that are not accredited investors would be restricted to purchasing an amount of securities that does not exceed 10% of the greater of the purchaser’s annual income/revenue or net worth/net assets. The $20 million and $75 million exemption limits would be subject to automatic periodic adjustment to reflect inflation. Existing antifraud and antimanipulation provisions of the federal securities laws would apply.

Going forward, issuers that file offering statements that have been qualified by the SEC under the fundraising exemption must file certain annual, special, semiannual and current reports created under the proposed rules, unless they are subject to the periodic reporting requirements under the Exchange Act and have made the required filings pursuant to those rules during the 12 months preceding the due dates for the new crypto filings (or the portion of such 12 months during which the issuer was subject to such rules):

• Annual reports on Form 1-KC for the fiscal year in which the offering statement became qualified and for any fiscal year thereafter; 
• Special financial reports if the offering statement did not contain certain financial statements (to be filed on either Form 1-KC or Form 1-SC depending on the type of financial statements);
• Semiannual reports on Form 1-SC covering the first six months of each fiscal year of the issuer; and
• Current reports on Form 1-UC with respect to certain designated topics, including entry into or termination of material agreements that would result in a fundamental change to the nature of the issuer’s business, bankruptcy, material modifications to the rights of holders of securities, changes in accountants engaged to audit the issuer’s financial statements, determinations that previously issued financial statements cannot be relied upon, changes in control of the issuer, and departures of certain executive officers.

Once the issuer has completed its promised essential managerial efforts, it can file a Form TR with the SEC certifying that milestone.  Unlike the start-up exemption, there is no time period under the fundraising exemption within which the issuer must complete or cease its essential managerial efforts.  The annual, special, semiannual and current filing obligations terminate once the Form TR reflecting the completion of the issuer’s essential managerial efforts has been filed with the SEC.

Investment Contract Safe Harbor. The proposed rules would create a conditional safe harbor from being an “investment contract” under the definition of “security” under the federal securities laws, if certain conditions are satisfied (generally consistent with views expressed by the SEC and CFTC in the March 2026 Crypto Guidance).  To satisfy the safe harbor, an issuer must:

• Have completed or otherwise permanently ceased all essential managerial efforts that it promised to engage in, under the covered investment contract;
• Not be making or intend to make any new representations to engage in essential managerial efforts with respect to the underlying crypto asset; and
• Make a public filing (on Form TR) certifying satisfaction of the safe harbor conditions and providing a supporting analysis.

State Law Preemption.  The proposed rules would add a new definition of “qualified purchaser” under the Securities Act of 1933, as amended, which would preempt state securities law registration and qualification requirements with respect to transactions conducted in reliance on one or more of the exemptions in Regulation Crypto Assets. The preemption would also apply to secondary market transactions by persons other than an issuer, underwriter or dealer involving covered investment contracts, if the issuer satisfied the exemption requirements under Regulation Crypto Assets when the covered investment contract was issued and the issuer remains subject to and is current with the applicable exemption’s disclosure and filing requirements and any periodic reporting obligations. Consistent with existing state preemption provisions, states would retain jurisdiction to bring antifraud enforcement actions.

Conclusion. Proposed Regulation Crypto Assets represents a meaningful step forward in providing greater certainty to issuers as to the requirements under the federal securities laws of issuing non-security crypto assets that are the subject of investment contracts. It also reflects an advancement in the type of disclosures required to be provided to potential investors, focused on the nature of crypto assets. However, Regulation Crypto Assets does not fully address all aspects of federal securities law compliance for all market participants in a proposed crypto trading network, in particular trading platforms and market intermediaries.  We will be monitoring comments that are submitted by the public, and any SEC action related to adoption of final rules, in the coming months.

Eileen Duffy Robinett and Jennifer Post in Thompson Coburn’s Los Angeles office prepared this summary of proposed Regulation Crypto Assets. Eileen Duffy Robinett can be reached at [email protected] or (310) 282-2545, and Jennifer Post can be reached at [email protected] or (310) 282-2512. 

[1] 328 U.S. 293 (1946).  Under Howey, an “investment contract” means any contract, transaction, or scheme whereby a person invests money in a common enterprise and reasonably expects profits to be derived from the “essential managerial efforts” of others.

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