SEC Chairman Paul Atkins stated: “As we continue the Commission’s efforts to provide clarity for crypto markets, and as Congress works to establish a lasting regulatory framework, Regulation Crypto Assets seeks to provide crypto asset entrepreneurs and market participants with clear pathways to raise capital under the federal securities laws.”²

The proposal follows the Commission’s March 2026 interpretation clarifying how the federal securities laws apply to certain crypto assets (the “2026 Interpretation”),³ which established a taxonomy of crypto asset categories and identified which categories may constitute securities. Building on that foundation, Regulation Crypto Assets proposes: (1) a one-time “startup exemption” from Securities Act registration for offerings of up to $5 million during a four-year period; (2) a two-tier “fundraising exemption” modeled in part on Regulation A for offerings of up to $75 million during each twelve-month period; (3) a conditional investment contract safe harbor; and (4) preemption of state securities law registration and qualification requirements for offerings conducted under the proposed exemptions.

II. Key Definitions

2.1 Crypto Asset

The proposed rules define a “crypto asset” as any digital representation of value recorded on a cryptographically-secured distributed ledger.⁴ This definition is technology-neutral in the sense that it encompasses assets recorded on any cryptographically-secured distributed ledger, regardless of the specific consensus mechanism or protocol architecture employed. It does not require that the asset have any particular function (e.g., serving as a medium of exchange or a governance token) and is broad enough to encompass fungible tokens, non-fungible tokens, and other digital assets recorded on-chain.

2.2 Covered Investment Contract

The central definitional concept of the proposed rules is the “covered investment contract.” A covered investment contract is defined as a contract, transaction, or scheme that constitutes an investment contract (as that term is interpreted under SEC v. W.J. Howey Co.),⁵ provided that three conditions are satisfied: (1) a crypto asset is subject to the investment contract; (2) the crypto asset is not itself a security; and (3) no other asset (whether a security or non-security) is subject to the investment contract.⁶

This definition draws an important distinction between crypto assets that are securities and crypto assets that become subject to investment contracts. The 2026 Interpretation identified five categories of crypto assets: (1) digital commodities (e.g., Bitcoin, Ether); (2) digital collectibles (e.g., non-fungible tokens representing art or collectibles); (3) digital tools (e.g., utility tokens providing access to a decentralized network); (4) stablecoins (tokens pegged to a fiat currency or other reference asset); and (5) digital securities (tokens that are themselves equity or debt securities).⁷

Of these five categories, digital commodities, digital collectibles, and digital tools are generally not securities in and of themselves under the 2026 Interpretation. Stablecoins may or may not be securities depending on their specific structure and the representations made in connection with their offering and sale. Digital securities are, by definition, securities.

The proposed exemptions are therefore targeted at non-security crypto assets (such as digital commodities, digital collectibles, and digital tools) that become subject to investment contracts (for example, when they are offered or sold with promises of essential managerial efforts that would satisfy the Howey test). The exemptions are not available for crypto assets that are themselves securities (i.e., digital securities), as those assets fall outside the definition of “covered investment contract”.

2.3 Non-Exclusivity and Integration

The exemptions and the safe harbor are non-exclusive. An issuer may rely on Regulation Crypto Assets while also relying on other exemptions, such as Regulation D or Regulation Crowdfunding, or while conducting a registered offering, provided that the requirements of each are independently satisfied. Proposed Rule 101(b) directs issuers to Rule 152 for integration analysis, and the Commission is proposing conforming amendments to Rules 152(c) and (d) to specify when an offering under Regulation Crypto Assets is deemed to have commenced and to have terminated or been completed.

III. The Startup Exemption

Subpart B of the proposed rules (Rule 200) establishes a one-time, non-exclusive exemption from Securities Act Section 5 registration requirements for offerings of covered investment contracts involving up to $5 million in crypto assets during a four-year period (the “startup exemption”).⁸ The exemption is designed to provide early-stage crypto asset projects with a streamlined pathway to engage in capital-raising and other token distribution activities without the cost and complexity of full Securities Act registration, while maintaining baseline disclosure and antifraud protections. Because covered transactions extend well beyond sales for cash, the $5 million limit is measured using the “aggregate offering price” definition in proposed Rule 100, which prescribes how non-cash consideration is valued; proposed Rule 101(e) provides that one unit of a covered investment contract corresponds to one unit of the subject crypto asset for this purpose.

3.1 Eligible Issuers and Covered Transactions

The “issuer” under the startup exemption may be an entity, an individual, or a group of the same. This flexibility acknowledges the decentralized and collaborative nature of many crypto asset projects, where development responsibility may be distributed among multiple persons or organizations rather than concentrated in a single corporate entity. However, to ensure that investors remain sufficiently protected, each member of a group constituting an “issuer” remains responsible, individually and collectively, for satisfying the conditions of the exemption.

The scope of “covered transactions” under the startup exemption is deliberately broad. In addition to traditional capital-raising sales, covered transactions include⁹:

• capital-raising transactions (sales of tokens for cash or other consideration);
• airdrops (gratuitous distributions of tokens);
• staking and governance distributions (tokens distributed as rewards for network participation);
• network incentive distributions;
• testing fees and compensation for testing or validating network functionality; and
• gas fee distributions and other protocol-level token allocations.¹⁰

This broad scope reflects the Commission’s recognition that crypto asset projects often distribute tokens through mechanisms that do not fit neatly within traditional offering paradigms.¹¹

3.2 Conditions

To rely on the startup exemption, an issuer must satisfy the following conditions:

Form NOR Filing. The issuer must file a notice of reliance on Form NOR with the SEC before engaging in any covered transaction.¹²

Principles-Based Disclosures. The issuer must make available on its website the principles-based narrative disclosures required by proposed Rule 103. These disclosures are tailored to the crypto asset context and require information about the project, the crypto asset, the development team, and the risks involved. Unlike the fundraising exemption, the startup exemption does not require financial statements.¹³

Related Person Restrictions. The Rule 103 disclosures include whether related persons—founders, promoters, employees, affiliates, and specified advisors and their immediate family members—are subject to any transfer or resale restrictions with respect to the covered investment contract or the subject crypto asset and, if so, the material terms of those restrictions. The Commission has requested comment on whether it should instead impose a mandatory minimum holding period for related persons, whether time-based or tied to development milestones, as a condition to the exemptions.

Annual Updates. The issuer must ensure that the Rule 103 information remains publicly accessible and free of charge at the website address specified in the Form NOR and must amend that information within 30 calendar days after the end of each calendar year if, as of the end of that calendar year, there are any material changes in the information previously disclosed.

Form TR Transition Report. The issuer must file a Form TR transition report with the Commission no later than four years after the date on which it filed the notice of reliance on Form NOR.¹⁴

3.3 Key Features

Several features distinguish the startup exemption from other Securities Act exemptions:

No Investor Accreditation Requirement. Unlike Regulation D Rule 506(c), the startup exemption imposes no restrictions on investor qualifications. Any person may participate in a covered transaction, regardless of accreditation status, income, or net worth.

No Individual Investment Limits. Unlike Regulation Crowdfunding or the proposed fundraising exemption, the startup exemption imposes no per-investor caps on the amount that any single purchaser may invest.

No Resale Restrictions. Covered investment contracts issued under the startup exemption are not restricted securities and are not otherwise subject to rule-based resale limitations, so no Rule 144-style holding period applies. The Commission viewed free tradability as important to the broad distribution on which network effects depend.

General Solicitation Permitted. General solicitation and general advertising are permitted under the startup exemption once the issuer has filed Form NOR and made the required Rule 103 disclosures publicly accessible and free of charge; communications before those conditions are satisfied may fall outside the exemption.

No Financial Statement Requirement. The startup exemption does not require the preparation or disclosure of financial statements, a significant reduction in cost and complexity relative to the fundraising exemption.

Antifraud and Antimanipulation Provisions. Notwithstanding the exemption from registration, all covered transactions remain subject to the antifraud provisions of the Securities Act and the antimanipulation provisions of the Securities Exchange Act of 1934 (the “Exchange Act”).¹⁵

Bad Actor Disqualification. Proposed Rule 104 applies bad actor disqualification provisions, cross-referencing the framework established under Regulation A Rule 262.¹⁶

One-Time Use. The startup exemption is available only once per crypto asset. An issuer and its affiliates may not use the exemption a second time for the same or a substantially similar crypto asset.¹⁷

IV. The Fundraising Exemption

Subpart C of the proposed rules (Rules 300–307) establishes a non-exclusive, two-tier exemption from Securities Act registration modeled in part on Regulation A (the “fundraising exemption”).¹⁸ The fundraising exemption is designed for more established crypto asset projects that seek to raise larger amounts of capital and are willing to comply with more extensive disclosure, financial reporting, and ongoing reporting obligations.

4.1 Offering Limits

The fundraising exemption is structured in two tiers:

Tier 1: Aggregate offering price of up to $20 million in any twelve-month period, with no more than $6 million by affiliated selling securityholders.¹⁹

Tier 2: Aggregate offering price of up to $75 million in any twelve-month period, with no more than $22.5 million by affiliated selling securityholders.²⁰

In both tiers, selling securityholder sales are limited to no more than 30% of the aggregate offering price in the first year of the offering.²¹ These limitations are intended to address concerns about “dump on retail” scenarios where insiders use a public offering as an exit opportunity to offload their holdings onto less sophisticated retail investors.

4.2 Eligible Issuers

Unlike the startup exemption, the fundraising exemption requires the issuer to be a U.S.-organized entity with a U.S. nexus. Specifically, the issuer must: (i) be organized under the laws of the United States or a U.S. state or territory; (ii) have a majority of its officers and directors be U.S. citizens or residents; (iii) hold more than 50% of its assets in the United States; and (iv) have its business principally administered in the United States.²² These criteria may prompt offshore foundations and other non-U.S. sponsors to consider redomestication or the formation of a U.S. issuing entity in order to access the exemption. The Commission has requested comment on whether eligibility should be expanded to certain non-U.S. issuers.

Certain categories of issuers are ineligible for the fundraising exemption, including blank-check companies, registered investment companies, business development companies (“BDCs”), and issuers subject to Exchange Act Section 12(j) orders.²³

4.3 Public Offering Regime

The fundraising exemption operates as a public offering regime. General solicitation and general advertising are permitted after the offering statement is qualified by the Commission.²⁴ Additionally, “testing-the-waters” communications are permitted before qualification, allowing issuers to gauge investor interest before committing to the full offering process.²⁵

4.4 Investment Limits

For non-accredited investors, the aggregate purchase price in a fundraising exemption offering may not exceed 10% of the greater of the investor’s annual income or net worth. Notably, this limitation applies to both Tier 1 and Tier 2 offerings. This differs from Regulation A, where investment limits generally apply only to Tier 2 offerings and where exchange-listed securities are carved out from the limitation. There is no exchange-listing carve-out under the proposed rules.

4.5 Offering Statement and Disclosures

Issuers relying on the fundraising exemption must file an offering statement on proposed Form 1-CRYPTO with the Commission.²⁶ Form 1-CRYPTO is modeled on Form 1-A (used for Regulation A offerings) but is tailored to covered investment contracts. An issuer may submit a draft offering statement to the Commission for nonpublic staff review, but the initial nonpublic submission and any nonpublic amendments must be publicly filed at least 15 calendar days before qualification.

Form 1-CRYPTO requires:

• the principles-based narrative disclosures required by Rule 103, adapted to the crypto asset context;
• a discussion of the issuer’s financial condition²⁷; and
• financial statements prepared in accordance with U.S. GAAP.

4.6 Financial Statements

The financial statement requirements differ by tier:

Tier 1: Financial statements must be prepared in accordance with U.S. GAAP, but no assurance (i.e., no audit or review) is required.

Tier 2: Financial statements must be audited in accordance with either U.S. generally accepted auditing standards (“U.S. GAAS”) or the standards of the Public Company Accounting Oversight Board (“PCAOB”).²⁸

4.7 Ongoing Reporting

One of the most notable aspects of the fundraising exemption is the imposition of ongoing reporting obligations on issuers in both Tier 1 and Tier 2 offerings. This represents a significant departure from Regulation A, where Tier 1 issuers are generally exempt from ongoing reporting requirements. Under the proposed rules:²⁹

• Annual Reports (Form 1-KC): Due within 120 days after the end of the fiscal year.
• Semiannual Reports (Form 1-SC): Due within 90 days after the end of the first six months of the fiscal year.
• Current Reports (Form 1-UC): Due within four business days of the triggering event.

The Commission explained that ongoing reporting for both tiers is warranted given the unique characteristics of covered investment contracts and the need to provide investors with timely, updated information about the status of the issuer’s essential managerial efforts and the development of the underlying crypto asset project.

4.8 Bad Actor Disqualification

The bad actor disqualification provisions applicable to the startup exemption apply equally to the fundraising exemption.³⁰

V. The Investment Contract Safe Harbor

Subpart D of the proposed rules (Rule 400) establishes a nonexclusive safe harbor from being treated as an “investment contract” for purposes of the definitions of “security” under both the Securities Act and the Exchange Act (the “investment contract safe harbor”).³¹ The safe harbor provides a structured, nonexclusive Securities Act and Exchange Act investment-contract off-ramp through which a covered investment contract may be deemed to have ceased to exist, with the result that the underlying crypto asset is deemed not to be subject to that investment contract for purposes of those definitions.

5.1 Conditions

To satisfy the investment contract safe harbor, two principal conditions must be met:

Completion or Cessation of Essential Managerial Efforts. The issuer must have completed or permanently ceased all essential managerial efforts that it represented or promised in connection with the covered investment contract. Additionally, the issuer must not be making, and must not intend to make, any new promises of essential managerial efforts with respect to the crypto asset.³²

Form TR Filing. The issuer must file a Form TR with the Commission that includes a certification that the conditions of the safe harbor have been satisfied and a supporting analysis demonstrating that compliance.³³

5.2 Effect of the Safe Harbor

Once both conditions are satisfied, the covered investment contract is deemed to have ceased to exist, and the crypto asset is deemed not to be subject to that investment contract for purposes of the Securities Act and Exchange Act definitions of “security.”³⁴ The proposed safe harbor does not extend to the definitions of “security” under the Investment Company Act of 1940 or the Investment Advisers Act of 1940, and the Commission may challenge whether the safe-harbor conditions were actually satisfied. Private plaintiffs and state regulators may also assert claims.

5.3 Availability

The investment contract safe harbor is available to any issuer, regardless of whether the issuer relied on the startup exemption, the fundraising exemption, or any other exemption in connection with the original offering of the covered investment contract.³⁵ It is also available to issuers that conducted registered offerings.

5.4 Non-Exclusivity

The Commission has emphasized that the safe harbor is not the exclusive route by which a crypto asset may cease to be subject to an investment contract under the Securities Act and the Exchange Act.³⁶ An investment contract may independently fail to satisfy the Howey test (for example, because investors no longer reasonably expect profits from the essential managerial efforts of others) regardless of whether the issuer has filed a Form TR or formally invoked the safe harbor. The safe harbor provides a structured off-ramp for issuers that satisfy its conditions, but it does not preclude other legal arguments or other parties from asserting that a particular crypto asset is subject to an investment contract or is otherwise a security.

VI. Preemption of State Securities Laws

Subpart E of the proposed rules (Rule 500) would define the term “qualified purchaser” for purposes of Securities Act Section 18(b)(3), thereby preempting state securities law registration and qualification requirements for offerings conducted under Regulation Crypto Assets and for certain secondary-market transactions.³⁷

6.1 Scope of Preemption

The proposed preemption provision applies in two contexts:

Primary Offerings. State registration and qualification requirements are preempted for offerings of covered investment contracts conducted under both the startup exemption and the fundraising exemption; that is, for both tiers of the fundraising exemption. This differs from Regulation A, where only Tier 2 offerings are preempted from state registration.³⁸

Secondary-Market Transactions. State registration and qualification requirements are also preempted for secondary-market transactions in covered investment contracts by persons other than issuers, underwriters, or dealers, provided that (1) the issuer has satisfied the requirements of an exemption under Regulation Crypto Assets with respect to the covered investment contract and (2) the issuer remains subject to, and is current with respect to, that exemption’s disclosure and filing requirements and/or periodic reporting obligations, as applicable.³⁹ Because preemption turns on the issuer’s status rather than on the pathway by which particular units were issued, it may extend to units of the same covered investment contract that were initially sold under a different exemption. In practice, market participants may need to diligence the provenance and fungibility of the covered investment contract and confirm that the issuer remains current; the Commission has requested comment on whether unaffiliated participants can practicably make that determination and whether a reasonableness standard should apply instead.

6.2 Preserved State Authority

The proposed preemption is not absolute. States retain:

Fraud Enforcement Authority. States may continue to investigate and bring enforcement actions with respect to fraud or deceit in connection with the offer or sale of securities, consistent with the savings clause in Securities Act Section 18(c)(1).

Notice Filing and Fee Authority. States may require notice filings and the payment of filing fees.

Authority to Suspend Sales. States retain the authority to suspend the offer or sale of securities within the state where an issuer has failed to make required filings or pay required fees.⁴⁰

The Commission noted that nationwide preemption is appropriate for Regulation Crypto Assets offerings because the digital nature of covered crypto assets and the borderless character of distributed ledger networks make state-by-state compliance impractical and potentially inconsistent with the goal of creating a uniform regulatory framework for crypto asset offerings.

VII. What the Proposal Does Not Address

7.1 Intermediaries and Market Structure

Regulation Crypto Assets is an offering regime, not a market-structure regime. The proposal does not create exemptions from the Exchange Act definitions of “exchange,” “broker,” or “dealer,” and the Commission expressly declined to act on recommendations that it do so, stating that it “will continue to consider whether further action with respect to covered investment contracts beyond the proposed rules in this release is warranted.” Trading venues, custodians, market makers, and other intermediaries transacting in covered investment contracts—including before an issuer has filed a Form TR—therefore remain subject to the existing registration framework. The Commission did, however, state that it does not view covered investment contracts as equity securities and accordingly does not believe they are subject to registration under Exchange Act Section 12(g). Also, as noted, the Commission and its Staff have, through interpretive guidance, provided guidance for brokers, dealers, and exchanges as to how crypto assets can be held and traded by market intermediaries.

7.2 Investment Company Act and Advisers Act Status

The proposal also leaves status questions outside the Securities Act and the Exchange Act unresolved. Proposed Rule 400 addresses only the term “investment contract” as used in those two statutes’ definitions of “security,” and the Commission has requested comment on whether the safe harbor should be extended to the parallel definitions in Section 2(a)(36) of the Investment Company Act and Section 201(a)(18) of the Advisers Act. Sponsors, asset managers, digital asset treasury companies, and protocol foundations should therefore continue to analyze investment company status, adviser registration, custody, and valuation obligations independently of Rule 400.

VIII. Comparison of Regulation Crypto Assets, Regulation A, and Regulation D

The following table summarizes key differences among the proposed Regulation Crypto Assets, Regulation A, and Regulation D:

IX. Conclusion

The proposed Regulation Crypto Assets represents a significant step toward a comprehensive, tailored regulatory framework for crypto asset offerings. By creating purpose-fit exemptions distinct from existing frameworks such as Regulation A and Regulation D, the Commission acknowledges that existing exemptions may be inadequate for many covered investment contract offerings and that Regulation A is unavailable for direct offerings of covered investment contracts as such, although issuers may be able to use other eligible securities to fund crypto projects indirectly. The restrictions of Regulation D (particularly the prohibition on general solicitation under Rule 506(b) and the accredited-investor-only requirement under Rule 506(c)) are poorly suited to the distributed nature of crypto asset markets.

The investment contract safe harbor (Rule 400) provides a nonexclusive Securities Act and Exchange Act investment-contract off-ramp for projects that have fulfilled their development commitments, allowing a covered investment contract to be deemed to have ceased to exist once the essential managerial efforts that gave rise to it have been completed or permanently ceased, subject to the safe harbor’s conditions and limitations. The state preemption provisions provide nationwide uniformity, addressing the practical impossibility of state-by-state compliance for borderless digital assets.

Market participants should evaluate the proposed framework carefully during the public comment period, which concludes on October 20, 2026. Key areas that may attract comment include the scope of the “covered investment contract” definition, the adequacy of the principles-based disclosure framework, the appropriateness of applying investment limits to both tiers of the fundraising exemption, the conditions for the investment contract safe harbor, and the interaction between the proposed rules and any future federal legislation establishing a comprehensive regulatory framework for digital assets.

It is important to note that the proposal remains a proposed rule only. It must go through the notice-and-comment process and may be modified (potentially in material respects) before any final rule is adopted. The Commission specifically requested comment on all aspects of the proposal, and the final rules, if adopted, may differ significantly from the proposal.

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For questions about the proposed Regulation Crypto Assets, its potential implications for your business, or assistance in preparing a comment letter, please reach out to members of the King & Spalding team.