SEC Proposes New Cryptocurrency Rules: Regulation Crypto Assets

On August 18, 2026, the United States Securities and Exchange Commission (“SEC”) proposed new rules and regulations, titled “Regulation Crypto Assets” (the “Proposal”), to create a clear and fit-for-purpose framework and tailored offering regime for certain investment contracts involving crypto assets (“covered investment contracts”). The Proposal follows the SEC’s March 2026 interpretation clarifying how the federal securities laws may apply to certain crypto assets and transactions involving crypto assets.

Crypto and digital asset markets have grown significantly since Bitcoin was first launched in 2009. However, before the Proposal, the SEC had not adapted its rules to address the unique aspects of these new asset classes, resulting in difficult interpretive questions regarding their application. Without contemporary rules, the enforcement of existing regulatory requirements (most of which were adopted well before the proliferation of crypto assets) could complicate an issuer’s transaction planning and impede capital formation and innovation in the market.

Among other things, the Proposal includes (1) A “startup exemption,” which would exempt offerings of up to $5 million from the registration requirements of the Securities Act of 1933 (“Securities Act”)^[1] during a four-year period; (2) a “fundraising exemption,” which would exempt offerings of up to $75 million from the registration requirements of the Securities Act during each 12-month period; (3) an “investment contract safe harbor,” which would provide a conditional safe harbor from the term “investment contract” in the definitions of “security” in both the Securities Act and the Securities Exchange Act of 1934 (“Exchange Act”)^[2]; and (4) a definition of “qualified purchaser” for purposes of the Securities Act, which would preempt state securities law registration and qualification requirements regarding offers and sales of covered investment contracts issued pursuant to the Proposal, as well as certain secondary market transactions.

The four key regulatory provisions of the Proposal are summarized below.

Startup Exemption

The startup exemption would provide a non-exclusive exemption from Securities Act registration, available to an entity, individual or group, permitting issuers to conduct offers, sales, and other distributions of covered investment contracts of up to $5 million over a period of up to four years. The exemption would be available to the issuer and its affiliates only once with respect to the same or a substantially similar subject crypto asset. Issuers would be required to (a) make public filings at the beginning and end of the period and (b) make publicly available, and periodically update, certain disclosures concerning the offering. The startup exemption is intended to provide issuers with temporary relief from Securities Act registration requirements while simultaneously ensuring that investors remain sufficiently protected and informed.

Fundraising Exemption

Modeled in part on Securities Act Regulation A,^[3] the fundraising exemption would provide a non-exclusive, two-tier exemption from Securities Act registration requirements. Under Tier 1, issuers would be permitted to conduct offerings of up to $20 million of covered investment contracts in a twelve-month period. Under Tier 2, issuers would be permitted to conduct offerings of up to $75 million of covered investment contracts in a twelve-month period. Issuers relying on the fundraising exemption would be required to publicly file (a) offering materials consisting of the same principles-based narrative disclosures required under the startup exemption; (b) a discussion of the issuer’s financial condition; and (c) financial statements (independent audit required for Tier 2 offerings). The fundraising exemption is intended to facilitate larger capital raising transactions for covered investment contract issuers than would be permitted under the startup exemption.

Safe Harbor

The Proposal would provide a conditional safe harbor from the term “investment contract” in the definitions of “security” for the Securities Act and the Exchange Act.^[4] If the safe harbor conditions are satisfied, then a covered investment contract would be deemed by the SEC to have ceased to exist, and the crypto asset that was subject to the covered investment contract would be further deemed not to constitute or represent or to be subject to such investment contract for purposes of the statutory definitions of “security.” In other words, the underlying crypto asset would no longer qualify as an “investment contract” under the traditional Howey^[5] test.

An issuer of a covered investment contract would satisfy the safe harbor if it has: (a) completed or otherwise permanently ceased all essential managerial efforts that it represented or promised it would engage in under the covered investment contract and is not making and does not intend to make any new representations or promises regarding the same; and (b) made a public filing certifying safe harbor condition satisfaction with a supporting analysis. The investment contract safe harbor builds on the SEC’s March 2026 interpretation and would provide additional clarity as to when a covered investment contract has ceased to exist because of a lack of essential managerial efforts.

State Law Preemption

The Proposal would add a definition of “qualified purchaser” under the Securities Act such that state securities law registration and qualification requirements would be preempted with respect to offers and sales of covered investment contracts to qualified purchasers pursuant to exemptions under the Proposal. With respect to secondary market transactions by any person other than an issuer, underwriter, or dealer, the Proposal would preempt state securities law registration and qualification requirements for covered investment contracts that were initially sold by the issuer to qualified purchasers either pursuant to an exemption in the Proposal or another exemption available under the federal securities laws. Secondary market preemption would continue for the period during which the issuer continues to satisfy the exemption obligations under the Proposal.

Additional Information

Covered investment contracts issued under the Proposal exemptions would not be restricted securities and therefore would not be subject to Rule 144^[6] holding periods or resale limitations. The availability of any exemptions under the Proposal would be conditioned on the issuer and certain other related persons and insiders not being “disqualified persons” as defined in Regulation A. Furthermore, neither exemption would be available to an issuer that is registered or required to register as an investment company or a business development company under the Investment Company Act of 1940^.[7] Issuers must carefully consider their investment company status before relying on Proposal exemptions to offer interests in pooled investment vehicles. Finally, Issuers relying on the Proposal exemptions would remain subject to the antifraud and antimanipulation provisions of the federal securities laws.

Conclusion

The Proposal would provide substantial relief and important clarity for issuers, investors, and other crypto and digital asset market participants alike. However, since the Proposal is targeted at smaller, non-registered offerings, the Proposal likely would not provide a permanent regulatory framework, and is therefore not a substitute for related pending legislation such as the CLARITY Act^[8] that would serve as a more comprehensive set of rules for crypto markets. The public comment period for the Proposal will remain open for 60 days following the date of publication of the proposing release in the Federal Register on August 21, 2026. For additional information related to the Proposal or securities matters generally, please contact one of the authors, or any member of our Securities Law Practice Group.

[1] 15 U.S.C. 77a et seq.

[2] 15 U.S.C. 78a et seq.

[3] 17 C.F.R. 230.251 et seq.

[4] 15 U.S.C. 77b(a)(1); 15 U.S.C. 78c(a)(10).

[5] SEC v. W.J. Howey Co., 328 U.S. 293 (1946).

[6] 17 C.F.R. § 230.144.

[7] 15 U.S.C. 80a-1 et seq.

[8] Digital Asset Market Clarity Act of 2025, H.R. 3633, 119th Cong. (2025), available at https://www.congress.gov/bill/119th-congress/house-bill/3633.