Background

The Securities and Exchange Commission issued a proposed rule, “Regulation Crypto Assets,” 91 Fed. Reg. 54510, on August 21, 2026 (FRN). Comments are due by October 20, 2026. Comments should reference File Number S7-2026-27 and may be submitted through the SEC’s internet comment form or by email to rule-comments@sec.gov. federalregister.gov

The proposal is unusually broad—146 Federal Register pages—and contains 149 numbered requests for comment, together with additional questions concerning paperwork burdens and the effect on small entities. The SEC is not merely requesting information about the crypto asset market. It has proposed a detailed regulatory framework and is asking whether the framework is workable, appropriately tailored, and capable of protecting investors without unnecessarily impeding capital formation and technological development.

The proposed rules would create:

• Clarity on the definition of “investment contract” as it applies to crypto assets 
• Guidance on the application of the “Howey” test for determining whether investment contracts and crypto assets
• A temporary “startup exemption” permitting certain offerings of up to $5 million during a four-year period;
• A more demanding “fundraising exemption” permitting offerings of up to $75 million during a 12-month period;
• Crypto-specific disclosure requirements;
• A safe harbor for determining when a crypto asset is no longer subject to an investment contract;
• “Bad actor” disqualification provisions; and
• Federal preemption of specified State securities registration and qualification requirements.

The exemptions would apply to “covered investment contracts”—investment contracts involving crypto assets—rather than to crypto assets generally. Issuers would remain subject to the antifraud and antimanipulation provisions of the Federal securities laws. federalregister.gov

I. The SEC’s Changing Approach to Crypto Assets

The introductory sections explain why the SEC considers a crypto-specific offering regime necessary.  Before 2025, the SEC generally applied the Supreme Court’s Howey investment-contract analysis to crypto transactions and relied heavily on investigations and enforcement actions. The SEC acknowledges that this approach created uncertainty because the Howey test can be difficult to apply to crypto assets and because disclosure and offering rules originally written for stocks and bonds may not provide investors with the most relevant information.

Beginning in 2025, the SEC shifted toward developing clearer classifications, tailored disclosures, workable registration paths, and express exemptions. That effort included the Crypto Task Force, Project Crypto, staff statements addressing particular crypto activities, and the SEC’s March 2026 interpretation concerning the securities-law status of different categories of crypto assets and transactions.

The proposed rule is intended to convert much of that developing policy into enforceable rules. Its central premise is that a crypto asset may initially be sold as part of an investment contract but later separate from the issuer’s promises or managerial efforts and cease to be subject to that investment contract. Existing securities rules generally do not accommodate that transition. federalregister.gov

The introductory information requests ask whether the SEC has correctly identified the regulatory problems and properly distinguished:

• The crypto asset itself from the investment contract under which it is offered;
• Transactions that should remain within the securities laws from transactions that should be “scoped out”;
• Public crypto offerings from traditional securities offerings; and
• Temporary registration relief from a permanent determination that an investment contract has ceased to exist.

II. Regulation Crypto Assets and the General Rules

A. Definitions

Rule 100 would establish the terminology controlling the entire regulation, including “crypto asset,” “covered investment contract,” “subject crypto asset,” “associated crypto network,” “associated crypto application,” and related persons.  These definitions are critical because they determine who can use the exemptions, which distributions count toward the monetary limits, and when a crypto asset remains connected to an investment contract. Note that “crypto asset” is defined as any digital representation of value that is recorded on a cryptographically secured distributed ledger (FRN at 54520). This is identical to the definition in section (2)(6) of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, (GENIUS Act), Public Law 119–27, 139 Stat. 419 (July 18, 2025). That will make it easier to include rulemaking for stablecoins into the new regulation.  The questions seek information on whether the definitions:

• Accurately reflect current blockchain and crypto technology;
• Are sufficiently flexible to accommodate technological change;
• Draw the proper boundary around covered transactions;
• Appropriately identify insiders and related persons; and
• Provide a workable method for valuing non-cash consideration and calculating offering limits.

B. General Provisions

Rule 101 would address non-exclusivity, integration with other offerings, mandatory EDGAR filing, insignificant deviations from the rules, and the calculation of units and offering prices.  The SEC is asking whether these familiar concepts from Regulations A, D, and Crowdfunding work in a crypto setting. The questions particularly seek guidance on simultaneous or sequential offerings, technical filing requirements, valuation, and when minor compliance failures should cause an issuer to lose an exemption (FRN at 54522).

C. Inflation Adjustments

Rule 102 would establish a procedure for periodically adjusting the $5 million and $75 million offering limits for inflation.  The questions ask whether adjustments should occur automatically, at specified intervals, or only through separate notice-and-comment rulemaking. (see: FRN At 54523).

D. Crypto-Specific Disclosures

Rule 103 is the substantive core of the proposal. It would require clear, concise, principles-based disclosures tailored to the issuer, the crypto asset, and the associated network or application.  The SEC is asking whether these subjects capture the information that investors actually need, whether the disclosures should remain principles-based or become more prescriptive, and whether any requirements would be technically impracticable, commercially sensitive, or unnecessarily burdensome. (FRN at 54527) 

The required subjects include:

• The issuer’s representations or promises and its progress in performing them;
• The offering terms and intended use of proceeds;
• The crypto asset and its material characteristics;
• Management, related persons, conflicts of interest, and insider resale restrictions;
• The associated network or application and its development plan;
• Cybersecurity, technical architecture, and source-code availability;
• Token supply, pricing, allocation, lockups, release schedules, and methods of creation or destruction;
• Governance and smart-contract permissions;
• The onchain and offchain ecosystem; and
• Material risk factors.

E. Disqualification

Rule 104 would import a “bad actor” disqualification regime generally patterned on Regulation A. Issuers and specified associated persons could lose access to the exemptions because of securities-related convictions, orders, judgments, suspensions, or bars.

The questions ask whether the proper persons and events are covered, whether a different existing disqualification rule should be used, and whether crypto offerings require a separate standard. The underlying purpose is to preserve access to simplified offering exemptions while excluding persons presenting an elevated fraud risk (FRN at 54528-9). 

III. Startup Exemption

Rule 200 would permit eligible issuers to distribute covered investment contracts for up to four years and raise no more than $5 million during that period.  The exemption is designed to provide a limited regulatory runway during which an early-stage developer can build, test, and launch a crypto asset, network, or application and fulfill the managerial commitments made to purchasers. Covered distributions could include capital-raising sales, airdrops, staking or governance distributions, gas-fee distributions, testing compensation, and other incentives associated with launching or operating the project (FRN at 54531-6).

The questions seek input on whether four years and $5 million are appropriate; whether individuals and informal development groups should qualify; how airdrops and non-cash distributions should be valued; what information belongs in Forms NOR and TR; and whether the disclosure and updating obligations are realistic for very early-stage projects.

Issuers would have to:

• File a notice of reliance on Form NOR;
• Make the Rule 103 disclosures publicly available without charge;
• Update the information periodically;
• Observe the $5 million and four-year limits;
• Use the exemption only once for the same or a substantially similar crypto asset; and
• File a transition report on Form TR explaining the project’s status when reliance on the exemption ends.

IV. Fundraising Exemption

Rules 300 through 307 would establish a larger offering exemption modeled principally on Regulation A but tailored to covered investment contracts.  An issuer would have to be a qualifying U.S.-organized entity and file an offering statement on proposed Form 1-CRYPTO. The offering statement would include the Rule 103 narrative disclosures, a discussion of financial condition, and financial statements. Tier 2 financial statements generally would require an independent audit. Both tiers would be subject to ongoing reporting requirements. federalregister.gov  The basic purpose is to determine whether the proposal provides a realistic route for substantial U.S. crypto fundraising without recreating the cost and rigidity of a registered public offering.  T he proposal contains two tiers:

• Tier 1: Up to $20 million in a 12-month period, including up to $6 million sold by affiliated selling holders.
• Tier 2: Up to $75 million in a 12-month period, including up to $22.5 million sold by affiliated selling holders.

The SEC’s questions (scattered through FRN pp. 54538 – 54553), examine:

• Whether the Regulation A model is appropriate for crypto offerings;
• Whether the two-tier structure and offering limits are appropriate;
• Whether foreign or Canadian issuers should qualify;
• The treatment of selling security holders and insider resales;
• Investor eligibility and investment limits;
• Offering-circular delivery through blockchain-based technologies;
• “Testing the waters” and wallet preregistration;
• Continuous offerings, delayed offerings, variable pricing, and a “token shelf”;
• The contents of Form 1-CRYPTO;
• Financial statement and audit requirements;
• Annual, semiannual, and current reporting; and
• The circumstances in which ongoing reporting may be suspended or terminated.

V. Investment Contract Safe Harbor

Rule 400 would establish a non-exclusive safe harbor for determining that a covered investment contract has ceased to exist and that the associated crypto asset is no longer subject to that investment contract. An issuer generally would rely on the safe harbor after:

• Completing the essential managerial efforts it promised to undertake; or
• Permanently ceasing those efforts under circumstances in which purchasers would no longer reasonably expect their continuation.

The issuer would file Form TR explaining the basis for its determination. If the conditions were satisfied, the SEC would treat the registration, reporting, and other requirements associated with the investment contract as no longer applicable. The safe harbor would not be the exclusive means of reaching that conclusion under Howey, and it would not prevent private parties from disputing the issuer’s position (FRN at 54555). 

The questions seek input on the proper meaning of “essential managerial efforts,” the evidence necessary to establish completion or permanent cessation, and whether reliance on the safe harbor might be viewed as an admission that the issuer previously sold an investment contract.

VI. Preemption of State Registration Requirements

Rule 500 would define certain purchasers as “qualified purchasers,” thereby preempting State securities registration and qualification requirements for offerings under Regulation Crypto Assets and certain secondary-market transactions.

The SEC considers State-by-State qualification inefficient for crypto offerings, which are ordinarily internet-based, geographically dispersed, and readily traded across jurisdictional boundaries. States would retain antifraud enforcement authority and specified notice-filing and fee authority. federalregister.gov

The questions ask whether preemption should apply to both exemptions, how long it should continue, whether it should extend to secondary transactions, and whether the loss of State-level review would materially reduce investor protection (FRN at 54558).

Conclusion

The proposed regulation represents a substantial change in the SEC’s treatment of crypto asset transactions. Instead of relying almost entirely on Howey analysis and enforcement actions, the SEC proposes defined pathways for early development, larger fundraising, disclosure, ongoing reporting, and eventual separation of a crypto asset from the investment contract under which it was initially distributed.  The breadth of the questions provides issuers, developers, exchanges, investors, auditors, attorneys, State regulators, and technology providers with an opportunity to influence the practical structure of the new regime. Particularly useful comments should explain not only whether a provision is desirable, but also how it would operate in an actual crypto project, what information is technically available, what compliance would cost, and what alternative would better balance innovation, capital formation, and investor protection.