SEC Proposes New Offering Framework for Certain Crypto Assets

The proposal builds on the SEC’s March 2026 interpretation addressing the application of the federal securities laws to crypto assets and transactions involving crypto assets. It reflects the SEC’s view that existing offering requirements, many of which predate crypto assets, may not adequately account for the characteristics of these transactions and may unduly complicate capital formation and transaction planning. The proposal also aims to address the President’s Working Group on Digital Assets Markets July 30, 2025 report that, among other things, requested the SEC establish a “fit for purpose” exemption from Securities Act registration. The proposal is not a new exemption for digital or tokenized securities generally, but rather addresses circumstances in which a non-security crypto asset is offered or sold subject to an investment contract.

New Offering Exemptions
The proposal would establish two non-exclusive exemptions from Securities Act registration: a smaller startup exemption intended to provide issuers with a temporary runway to develop a crypto project, and a larger fundraising exemption modeled in part on Regulation A.

Startup Exemption

Scope
The proposed startup exemption would permit an issuer to conduct offerings of covered investment contracts of up to $5 million over a period of up to four years. The exemption is intended to provide temporary relief from Securities Act registration while an issuer works toward completing the “essential managerial efforts” that it represented or promised to investors it would undertake.

The exemption would be available on a one-time basis and generally could not be used again by the issuer or its affiliates for the same or a substantially similar crypto asset. After the startup exemption period ends, the issuer could potentially rely on the fundraising exemption or other available exemptions, subject to meeting the applicable requirements. Unlike the fundraising exemption, the issuer may be an entity, an individual, or a group of individuals or entities. Also unlike many traditional private offering exemptions, the startup exemption would permit participation by retail investors without imposing an individual investment limit.

The exemption would permit general solicitation and would not treat covered investment contracts sold pursuant to the exemption as restricted securities. Accordingly, there would be no rule-based holding period or resale restrictions. Companies should nonetheless consider the applicability of other Securities Act requirements, including with respect to affiliates and underwriter status. The exemption could cover certain distributions relating to the operation, governance, testing, or development of an associated crypto network or application in addition to conventional capital-raising transactions.

Requirements
Issuers would be required to make public filings at the beginning and end of the exemption period and provide investors with principles-based narrative disclosures during the period. Issuers relying on the exemption also would remain subject to the antifraud and antimanipulation provisions of the federal securities laws.

Before relying on the exemption, an issuer would file a notice of reliance (on new Form NOR) identifying the issuer, the covered investment contract, and the underlying crypto asset, among other information. Required disclosures would be made publicly available through a website identified in the filing and generally updated annually for material changes. At the end of the exemption period, the issuer would file a transition report (on new Form TR). If the issuer has satisfied the investment contract safe harbor conditions (described below) at that time, the issuer would certify that fact and provide a supporting analysis; the covered investment contract would be deemed to have ceased to exist, and the crypto asset would no longer be subject to the investment contract (and thus no longer subject to the federal securities laws). If the issuer has not satisfied the safe harbor conditions—including where the covered investment contract otherwise has ceased to exist under the 2026 Interpretation—the Form TR would instead describe the current status of the covered investment contract and the issuer’s plans going forward.

Fundraising Exemption

Scope
For larger offerings, Regulation Crypto Assets would establish a separate, two-tier exemption modeled in part on Regulation A:

• Tier 1 would permit offerings of up to $20 million in a 12-month period.
• Tier 2 would permit offerings of up to $75 million in a 12-month period.

As with Regulation A, general solicitation would be permitted after the offering statement is qualified. Unlike Regulation A, however, the proposal would impose an investment limit on non-accredited investors under both tiers of the fundraising exemption, generally limiting purchases to 10% of the greater of annual income or net worth for natural persons, or 10% of the greater of revenue or net assets for non-natural persons. These limitations reflect awareness of both widespread retail investor desire to participate in digital asset offerings and the general risks associated with investing in digital assets. The proposal also would impose limits on the participation of selling securityholders that are affiliates of the issuer in qualified offerings—up to $6 million for Tier 1 and $22.5 million for Tier 2, with an additional cap of 30% of the aggregate offering price in the issuer’s first year. Covered investment contracts sold under the fundraising exemption, such as those sold under the startup exemption, would not be restricted securities and would not be subject to rule-based resale restrictions. As noted above, companies should nonetheless consider the applicability of other Securities Act requirements, including with respect to affiliates and underwriter status.

Requirements
Issuers relying on either tier would publicly file offering materials containing principles-based narrative disclosures, including a discussion of the issuer’s financial condition and financial statements. Tier 2 financial statements would be required to be audited. Both tiers also would carry ongoing reporting requirements tailored to covered investment contracts.

Eligibility for the fundraising exemption also would be subject to U.S. nexus requirements and other issuer eligibility conditions. Among other things, an issuer generally would need to be organized in the United States, have a majority of its executive officers or directors who are U.S. citizens or residents, have more than 50% of its assets located in the United States, and administer its business principally in the United States. The proposal notes that the U.S. nexus requirements could help reverse the trend of crypto projects moving overseas.

An issuer’s ongoing reporting obligations would terminate upon filing a Form TR if the issuer has satisfied the investment contract safe harbor conditions discussed below (i.e., the issuer has completed or permanently ceased all essential managerial efforts) or if the covered investment contract otherwise ceases to exist. If the issuer has satisfied the safe harbor conditions, the Form TR filing would serve as both the issuer’s exit from the periodic reporting regime and its certification of safe harbor eligibility. If the issuer has not satisfied the safe harbor conditions—including where the covered investment contract otherwise has ceased to exist—the Form TR would instead describe the current status of the covered investment contract and the issuer’s plans going forward.

Tailored Disclosure and Reporting
The proposed disclosure requirements would focus on the characteristics of crypto projects rather than applying traditional corporate securities disclosure frameworks.

Fundraising Exemption

Disclosures
Issuers relying on the fundraising exemption would file a new Form 1-CRYPTO, modeled on Form 1-A. The offering materials would include principles-based disclosures focusing on information the SEC believes would be material to investors in covered investment contracts.

Those disclosures would address, among other matters, the material terms of the covered investment contract and the issuer’s essential managerial efforts; use of proceeds; management and related persons; conflicts of interest; network or application development; network security and source code; the supply, allocation, and distribution of the crypto asset, including lockups; governance mechanisms; the broader ecosystem in which the asset operates; and material risks.

Issuers also would provide a narrative discussion of financial condition and financial statements. Tier 2 financial statements would be audited; Tier 1 financial statements generally would not require an audit. If a Tier 1 issuer obtained an audit for another purpose, however, the proposal generally would require the audited financial statements to be filed. Tier 2 audits could be conducted under U.S. GAAS or PCAOB standards, subject to specified auditor-independence requirements.

Reporting
The proposal also would impose ongoing reporting requirements on issuers using both tiers of the fundraising exemption, modeled on Regulation A but adapted for covered investment contracts.

The proposed reporting regime would include annual reports on new Form 1-KC, semiannual reports on new Form 1-SC, and current reports on new Form 1-UC for specified events. Annual and semiannual reports would update specified disclosures concerning the covered investment contract, the associated network or application, and the issuer's financial condition.

Form 1-CRYPTO could be submitted confidentially for SEC staff review before public filing. All non-public submissions must be publicly filed on EDGAR at least 15 calendar days before qualification. The offering statement would be subject to SEC qualification — issued by the Division of Corporation Finance — before sales could occur. The proposal also would permit "testing the waters" communications before qualification, including before filing or confidential submission of Form 1-CRYPTO, subject to specified conditions.

Startup Exemption
Issuers relying on the startup exemption would make the same principles-based disclosures publicly accessible on a website identified in their notice of reliance, at or before the time the notice is filed. Required disclosures would cover the material terms of the covered investment contract (including the issuer’s promised managerial efforts), the offering, the crypto asset, management and related persons, the associated network or application, security and source code, token economics and allocation, governance, the broader ecosystem, and material risk factors. Issuers would be required to update this information annually within 30 days after the end of each calendar year to reflect any material changes. Unlike the fundraising exemption, the startup exemption would not require SEC-filed offering materials, financial statements, or ongoing periodic reports beyond the annual website updates.

Investment Contract Safe Harbor
Separately from the two offering exemptions, the proposal would establish a conditional investment contract safe harbor designed to provide greater certainty as to when a covered investment contract has ceased to exist and the underlying crypto asset is no longer subject to that covered investment contract. The safe harbor would be available to any issuer that satisfies its conditions and is not limited to issuers that used the startup exemption or the fundraising exemption.

An issuer would satisfy the safe harbor if it:

1. has completed or permanently ceased all of the essential managerial efforts it represented or promised to undertake under the covered investment contract and is not making, and does not intend to make, new representations or promises to undertake essential managerial efforts with respect to the underlying crypto asset; and
2. makes a public filing certifying that the conditions have been satisfied and providing an analysis supporting that certification.

If the safe harbor conditions are satisfied, the SEC would deem the covered investment contract as having ceased to exist, and the underlying crypto asset would be deemed not to constitute, represent, or be subject to such covered investment contract for purposes of the definition of a “security” under the Securities Act and Exchange Act. This would mean ongoing reporting obligations under Regulation Crypto Assets would terminate from the point in time the issuer satisfied the safe harbor, and subsequent transactions in the crypto asset generally would not be subject to Securities Act registration requirements.

In practical terms, the safe harbor seeks to provide a more defined path for a crypto asset to move outside the investment contract framework as the issuer completes or permanently ceases the managerial efforts on which investors had relied.

The safe harbor would be non-exclusive. Accordingly, failure to satisfy its conditions would not necessarily mean that a crypto asset remains subject to an investment contract; that question could still be analyzed under otherwise applicable law.

Preemption of State Securities Law Requirements
The proposal would preempt state “blue sky” registration and qualification requirements for offers and sales of covered investment contracts made under the proposed exemptions. Specifically, purchasers under Regulation Crypto Assets would be defined as "qualified purchasers" for purposes of Section 18(b)(3) of the Securities Act, making the covered investment contracts “covered securities” and thereby preempting state registration and qualification requirements. Unlike Regulation A, where only Tier 2 offerings are preempted, the proposal would preempt both tiers of the fundraising exemption as well as the startup exemption.

The proposal also would extend preemption to secondary-market transactions by persons other than an issuer, underwriter, or dealer. Notably, preemption would apply to secondary sales of covered investment contracts regardless of how they were initially sold—including tokens originally issued under Regulation D or another exemption—so long as the issuer has satisfied an exemption under Regulation Crypto Assets and remains current with the applicable disclosure, filing, or periodic reporting requirements. For startup exemption issuers, preemption would continue during the four-year exemption period while the issuer complies with its disclosure obligations. For fundraising exemption issuers, preemption would continue while the issuer remains current with periodic reporting. In either case, once the issuer files Form TR and is no longer subject to ongoing disclosure or reporting requirements, preemption would no longer apply—but if the safe harbor conditions have been satisfied, the covered investment contract would have ceased to exist and the underlying crypto asset would no longer be subject to such covered investment contract, making preemption moot.

The proposal would not displace state antifraud authority or other state authority preserved under Section 18 of the Securities Act. States would retain jurisdiction to bring antifraud enforcement actions.

Practical Considerations

New capital-raising alternatives, but not necessarily light-touch ones: The startup exemption would provide a relatively streamlined pathway for smaller crypto projects, while the fundraising exemption would carry many features associated with a Regulation A public offering regime, including SEC-filed offering materials, financial statements, and continuing reporting obligations.

Retail participation and potential liquidity: The exemptions are designed to permit broader investor participation than many traditional private offering exemptions, and covered investment contracts sold under the proposed exemptions generally would not be subject to the resale restrictions applicable to restricted securities. As noted above, companies should consider the applicability of other Securities Act requirements, including with respect to affiliates and underwriter status.

Disclosure focused on the specific crypto project and the issuer's representations: Companies considering transactions involving covered investment contracts would need to focus not only on conventional offering disclosure, but also on representations concerning the development and operation of the associated network or application and the managerial efforts expected to drive the project. Notably, the proposal indicates that whether an issuer has fulfilled its represented or promised managerial efforts would be assessed by reference to how the issuer itself defined or described those efforts. For example, if the issuer promises to achieve “decentralization,” the proposal would measure achievement against the issuer’s description of decentralization rather than a general market conception. This approach may make the scope and precision of an issuer's representations particularly consequential, including where the issuer or other project participants continue to perform economically significant functions after the issuer has completed the specific efforts it previously described.

Issuer Identification and Development Teams: The startup exemption raises potentially important questions about who constitutes the “issuer” where multiple developers, entities or development teams collaborate on a project. Although the proposal permits a “group” to be the issuer and borrows the concept of a group from the beneficial ownership rules, it does not clearly specify what collaborative activity causes multiple project participants to constitute an issuer group.

Significance of Public Communications: Websites, whitepapers, social media, and other communications describing a project and the issuer's future efforts may become particularly important because those representations could inform both the disclosure required at the time of an offering and the later determination whether the issuer has completed the essential managerial efforts underlying a covered investment contract. Issuers who anticipate using these exemptions if the proposal is adopted should consider how they track social media and similar communications to ensure compliance with the proposed disclosure requirements.

Safe Harbor Impact: The safe harbor could provide greater certainty about when the covered investment contract status ends and the underlying crypto asset is no longer subject to such covered investment contract. Issuers choosing to rely on the safe harbor would make a public certification and supporting analysis concerning the completion or permanent cessation of their promised managerial efforts. In light of the significance of the safe harbor concept, the factual considerations as to when a covered investment contract ceases to exist may be a frequent topic of comments on the proposal.

Public Company Considerations: Public companies contemplating crypto-related businesses or transactions should also consider the proposed framework alongside their existing Exchange Act disclosure obligations. Depending on the circumstances and materiality, a crypto initiative could have implications for existing disclosures concerning the company's business, risks, financial condition, and disclosure controls even if the offering itself were conducted under Regulation Crypto Assets. Companies also may want to consider the proposal at the product-development stage rather than only when a financing is contemplated. Because the framework turns in significant part on what managerial efforts an issuer represents or promises it will undertake, decisions about project structure, communications, and governance could affect the securities-law analysis from the outset.

What Comes Next
The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register. The SEC has requested comment on numerous aspects of the framework, including the scope and limits of the exemptions, eligibility requirements, disclosure and financial statement requirements, ongoing reporting, the conditions for the investment contract safe harbor, and the scope of state-law preemption.

Given the breadth of the proposal and its relationship to the SEC’s March 2026 interpretation, market participants may wish to consider not only the individual requirements of the proposed exemptions but also how the framework would operate over the life cycle of a crypto project—from initial development and fundraising through ongoing reporting and, potentially, transition out of investment-contract status.

For answers to frequently asked questions about this proposed framework, please visit this related FAQ.

Pillsbury will continue to monitor the proposal and related SEC developments concerning crypto assets and capital formation.

Our Capital Markets and Public Companies team is actively advising clients on the proposal.