SEC proposes “Regulation Crypto Assets” – new offering exemptions and safe harbor

The proposed framework 

On August 18, 2026, the SEC proposed Regulation Crypto Assets (Release Nos. 33-11434; 34-106150). It contains three operative components: the Startup Exemption, the Fundraising Exemption (modeled on Regulation A) and the Investment Contract Safe Harbor.

Startup Exemption (Rule 200)

The Startup Exemption is a one-time, non-exclusive exemption for offerings of covered investment contracts up to $5 million over four years. It covers capital raises, airdrops and network incentive distributions. Issuers must file public disclosures at the start and end of the offering period, including principle-based narrative disclosures. Bad-actor disqualification provisions (modeled on Regulation A) and antifraud/antimanipulation rules apply.

Fundraising Exemption (Rules 300–307)

The Fundraising Exemption establishes a non-exclusive, two-tier offering structure modeled on Regulation A, with ongoing reporting obligations. Securities issued under this exemption are not restricted. The table below summarizes the key features of each tier.

Feature	Tier 1	Tier 2
Maximum offering	$20M/12 months	$75M/12 months
Affiliate selling limit	$6M	$22.5M
First-year secondary-sale cap	30% of aggregate offering price	Same
Financial statements	US GAAP; no audit required	US GAAP; audited )GAAS or PCAOB); Article 8 or Reg S-X
Non-accredited investor	10% of greater of income or net worth	Same

 

Investment Contract Safe Harbor (Rule 400)

The Investment Contract Safe Harbor provides a conditional offramp from the “investment contract” definition under the Securities Act and Exchange Act. If the issuer has completed or ceased all promised essential managerial efforts, makes no new such promises and files Form TR with a supporting certification, the crypto asset is no longer subject to an investment contract for Securities Act and Exchange Act purposes. It is available regardless of which exemption the issuer used for the initial offering. Importantly, the safe harbor does not extend to the Advisers Act or Investment Company Act. 

State-Law Preemption (Rule 500)

Rule 500 defines “qualified purchaser” under the Securities Act, preempting state registration requirements for primary offerings under Regulation Crypto Assets and for secondary-market transactions by persons other than issuers, underwriters or dealers. Preemption applies only to the covered investment contract, not to the underlying crypto asset, whose treatment under state law may vary. Preemption remains in effect only while the issuer stays current with its reporting obligations. States retain authority over fraud, broker-dealer misconduct, notice filings and fees.

Disclosure Framework (Rule 103)

Both exemptions require principles-based narrative disclosure (Rule 103) covering ten topic areas: investment contract terms, offering terms, subject crypto asset, management and conflicts, network/application development, security and source code, token economics, governance, ecosystem and risk factors. Disclosures must be tailored to the issuer’s specific circumstances and presented in plain language.

Key observations for advisers, broker-dealers and funds

Limited scope

Regulation Crypto Assets applies only to “covered investment contracts”—investment contracts where (1) a crypto asset is subject to the contract; (2) the crypto asset is not itself a security and (3) no other asset is subject to the contract. Notably, the proposal does not address market structure, broker-dealer registration, exchange definitions, custody or qualified custodian requirements, each of which is discussed more fully below.

The Safe Harbor covers Securities Act and Exchange Act only—not the Advisers Act or Investment Company Act

The investment contract safe harbor (Rule 400) addresses only the term “investment contract” as used in the Securities Act of 1933 and the Securities Exchange Act of 1934. It does not extend to the identical term as used in the Investment Advisers Act of 1940 or the Investment Company Act of 1940.

The Commission expressly asks whether the safe harbor should be extended to these statutes, confirming that this was a deliberate omission rather than an oversight. As a result, even after an issuer satisfies the safe harbor and the crypto asset is no longer deemed subject to an investment contract for Securities Act and Exchange Act purposes, it remains an open question whether that same asset continues to be a “security” under the Advisers Act and Investment Company Act for purposes of:

• adviser registration and exemptions
• custody obligations and the qualified custodian requirement
• form ADV reporting of regulatory AUM
• investment company status and registration thresholds

Custody under the Advisers Act remains unaddressed

The proposal leaves entirely unaddressed how advisers should custody crypto assets. There is no amendment to the Advisers Act custody rule, no “qualified custodian” definition, no guidance on self-custody or cold-wallet arrangements and no Form ADV crypto disclosures. Although the Crypto Task Force has solicited input on custody issues, this rulemaking does not address those comments. 

Broker-dealer implications

• No special-purpose broker-dealer or exchange exemption is created; existing registration and conduct requirements remain fully in place.
• The Fundraising Exemption imposes offering-circular delivery obligations on dealers and requires underwriting disclosure with FINRA clearance of compensation.
• No requirement to use a registered intermediary for offerings under the Startup or Fundraising Exemptions. 
• Unrestricted securities and state preemption could significantly expand secondary-market activity and intermediary opportunities for broker-dealers affecting secondary trading in those tokens.

Investment company and fund implications

• The Fundraising Exemption excludes RICs and BDCs as eligible issuers.
• The “qualified purchaser” definition for state preemption differs from the Investment Company Act definition; private fund sponsors must distinguish between the two.
• No guidance on fund valuation of covered investment contracts or post-transition crypto assets.

Broader context and next steps

The comment period closes October 21, 2026. The SEC has specifically requested input on the scope of the covered investment contract definition, disclosure requirements, offering limits and safe harbor conditions.

This proposal should be viewed alongside pending legislation, which may alter or supplement the Regulation Crypto Assets framework. While the CLARITY Act is awaiting action in the Senate, Chairman Paul Atkins emphasized that rulemaking cannot substitute for comprehensive statutory reform. Key areas remain unresolved, including exchange/ATS registration, a special-purpose broker-dealer framework, intermediary custody and customer protection, SEC/CFTC jurisdictional boundaries, and the treatment of staking, lending and DeFi. The Commission acknowledges it “does not address those recommendations” and will “continue to consider whether further action . . . is warranted.” On the CFTC side, Chairman Michael Selig has directed agency staff to begin crafting crypto rules in the event that market structure legislation fails to move forward in September.

Our team is monitoring these developments closely and is prepared to help clients assess the proposal’s operational impact and prepare comment submissions. Please contact us with any questions.

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.