The SEC’s Crypto Rulebook Closes for Comment on 20…

The U.S. Securities and Exchange Commission's most significant crypto-specific securities rulemaking is approaching its October 20 public-comment deadline, putting two new fundraising exemptions and an investment-contract safe harbor on the table.Called Regulation Crypto Assets, the proposal was approved by the SEC on August 18 and published in the Federal Register on August 21. It follows the SEC and CFTC's March interpretation addressing how federal securities laws apply to different crypto assets and transactions.The proposal focuses specifically on crypto assets sold as part of investment contracts. Rather than requiring those offerings to fit conventional securities-registration rules, the SEC wants to create tailored routes for raising capital while retaining disclosure, antifraud and antimanipulation protections.

Projects Could Raise $5M or $75M

The first route is a "startup exemption." It would permit an issuer to offer up to $5 million of covered investment contracts during a four-year period without registering the offering under the Securities Act. The second, considerably larger "fundraising exemption" would allow offerings of up to $75 million during each 12-month period.Both would require principles-based disclosures designed specifically for crypto projects rather than conventional public companies. The $75 million exemption carries additional obligations, including financial statements and ongoing reporting. Audited financial statements would also become necessary at specified fundraising thresholds.SEC Chairman Paul Atkins argues the structure addresses a longstanding mismatch between crypto fundraising and securities rules originally developed for conventional companies. Importantly, exemption does not mean exemption from securities law altogether.Issuers using either pathway would remain subject to federal antifraud and antimanipulation provisions. The proposal would also preempt state securities registration and qualification requirements for qualifying offerings and certain related secondary-market transactions.

Safe Harbor Creates an Exit From Securities Treatment

Potentially more consequential is the proposed investment-contract safe harbor. It addresses the question of what happens when a token originally sold through an investment contract later becomes independent of the managerial promises that made the transaction a securities offering.Under the proposal, an issuer could certify to the SEC that it has completed or permanently ceased all "essential managerial efforts" it represented or promised it would undertake. If the remaining conditions are satisfied, the crypto asset would no longer be deemed subject to an investment contract for purposes of the Securities Act and Exchange Act definitions of a security.That distinction separates the token itself from the contractual relationship surrounding its original sale. Commissioner Hester Peirce described the mechanism as allowing issuers to "delink" a crypto asset from the investment contract with which it was previously associated.The SEC's proposal is not final. The Commission is explicitly requesting feedback on its fundraising limits, disclosures, safe-harbor conditions and how the framework should accommodate different crypto structures. Comments must be submitted by October 20 under File Number S7-2026-27.After reviewing responses, the SEC could modify the proposal before voting on a final rule. There is also a larger political constraint.Atkins has acknowledged that SEC rulemaking cannot substitute completely for legislation. Administrative rules can potentially be modified by future commissions, while legislation such as the CLARITY Act could establish a more durable division of authority between the SEC and CFTC.For crypto companies, however, Regulation Crypto Assets could resolve two immediate problems under existing law: how to raise capital without forcing a token offering into conventional registration, and how a token associated with an investment contract can eventually leave that securities relationship behind.October 20 is therefore more than another regulatory consultation deadline. It is the industry's final scheduled opportunity to influence what could become the SEC's first purpose-built federal securities framework for crypto fundraising.