SEC Proposes Regulation Crypto Assets: New Offering Exemptions and Investment Contract Safe Harbor

Key Takeaways

A tailored offering framework, not a general crypto exemption. Regulation Crypto Assets (“Reg CA”) would create a one-time startup exemption for up to $5 million over four years and a two-tier fundraising exemption for up to $75 million in any 12-month period. Both are available only for covered investment contracts involving a crypto asset that is not itself a security, and both require specified disclosures.

Rule 400 may be the proposal’s most consequential provision. An issuer that has completed or permanently ceased the essential managerial efforts it promised, and makes no new promises to undertake such efforts, could invoke the safe harbor by filing Form TR. If the conditions are met, the covered investment contract would be deemed to have ended. The issuer’s original representations and disclosures will be central to that analysis.

Free transferability does not solve the launch problem. Reg CA would remove the ordinary restricted-security holding periods for covered investment contracts sold under the new exemptions, but it does not resolve the Exchange Act questions surrounding market makers, trading venues, and other intermediaries. Rule 300 also does not permit at-the-market offerings.

Background and Executive Summary

On August 18, 2026, the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) proposed “Reg CA”, a new framework that would create specific exemptions from Securities Act registration for certain investment contracts involving crypto. The proposal would also allow covered investment contracts to be resold without the holding periods that normally apply to restricted securities and, for the first time, create a mechanism for determining when an investment contract has ended.

Reg CA builds on the Commission’s March 2026 interpretive release, which distinguished a crypto asset from an investment contract to which the crypto asset may be subject. Under that new dichotomy, a crypto asset may not itself be a security, but a contract, transaction, or scheme through which a non-security crypto asset is offered or sold may still satisfy Howey and therefore be deemed a security. That distinction left an obvious practical question: if a crypto asset is only offered and sold pursuant to an investment contract, and that investment contract is a security, how can it be offered without registration or compliance with an exemption from registration? Reg CA is the Commission’s attempt to answer that question.

The resale piece matters because a token network depends on tokens actually moving among users, validators, developers, liquidity providers, and others. Reg CA addresses that problem directly. But allowing the token to be resold does not by itself create a functioning market. As discussed below, Reg CA provides a clearer path for the offering itself, but leaves important questions about liquidity, trading venues, and the broader market structure unresolved.

Structure of the Release

Regulation Crypto Assets is divided into five subparts.

Subpart A (Rules 100–104) sets up the basic framework. Rule 100 defines a “crypto asset” as a digital representation of value recorded on a cryptographically secured distributed ledger. It defines a “covered investment contract” as the contract, transaction, or scheme constituting an investment contract, provided that (1) a crypto asset is subject to it, (2) that crypto asset is not itself a security, and (3) no other asset is subject to the same investment contract. Rule 101 consolidates general provisions—non-exclusivity, integration, electronic filing, insignificant deviations, and rules on the number of units and price per unit. Rule 103 covers disclosures about the token, investment contract, development plan, management and conflicts, source code, security, tokenomics, allocations, governance, and ecosystem risks, organized around ten enumerated topics. Rule 104 contains the disqualification provisions, cross-referencing the Regulation A “bad actor” standard in Rule 262(a).

Subpart B (Rule 200) creates the startup exemption. It is a one-time-use exemption permitting covered transactions of up to $5 million in the aggregate during a period of up to four years beginning after the issuer files Form NOR, subject to required filings and ongoing disclosure. Importantly, similar to Regulation A securities, covered investment contracts sold under Rule 200 would not be restricted securities. An ordinary non-affiliate purchaser therefore generally could resell without the six-month or one-year holding periods that normally apply to privately placed securities, subject to other applicable restrictions. Notably, “covered transactions” are not limited to capital raising: they include distributions of covered investment contracts in connection with past or future network use and as rewards for operating, governing, securing, or testing a network, and noncash consideration counts toward the $5 million limit. The release also cautions that communications made before the required Form NOR filing and disclosures are in place may themselves constitute offers outside the exemption.

Subpart C (Rules 300–307) creates the larger fundraising exemption, modeled in part on Regulation A. Tier 1 permits offerings of up to $20 million, and Tier 2 permits offerings of up to $75 million, during a twelve-month period. Unlike Regulation A, both tiers require public offering-like disclosure materials, financial statements, and ongoing reporting, with audited financial statements required for Tier 2. The proposal also limits how much non-accredited investors can invest under both tiers.

Subpart C also requires a substantial U.S. connection. Among other things, the issuer must be organized in the United States, a majority of its executive officers or directors must be U.S. citizens or residents, more than half of its assets must be located here, and its business must be principally administered here. Rule 300 also does not permit at-the-market offerings, which could matter for projects that expect to distribute tokens into the market over time. Rule 305(c) allows an issuer to suspend ongoing reporting once the relevant class is held of record by fewer than 300 persons, subject to the rule’s other conditions, by filing Form TR.

Subpart D (Rule 400) may be the most significant part of the proposal. If an issuer has completed or permanently ceased the essential managerial efforts it represented or promised to undertake, and makes no new promises to undertake those efforts, it may rely on the safe harbor by filing Form TR with the required certification and supporting analysis. If those conditions are satisfied, the covered investment contract is deemed to have ended, and the crypto asset is no longer treated as being subject to that investment contract for purposes of the Securities Act and Exchange Act definitions of “security.” 

The Commission estimates that approximately 475 issuers each year will rely on this standalone safe harbor, more than three times its combined estimate for the other two offering exemptions. So while much of the proposal focuses on fundraising, Rule 400 may ultimately be the provision that gets used most often.

Subpart E (Rule 500) addresses state blue-sky laws. It defines “qualified purchaser” in a way that preempts state registration and qualification requirements for the initial exempt offering and certain secondary transactions. But the secondary-market provision does not cover transactions by an issuer, underwriter, or dealer, and the preemption continues only while the issuer remains subject to and current on its Reg CA filings.

Rule 500 also addresses a practical issue with fungible tokens. A secondary purchaser does not have to determine which exempt issuance produced the particular token being resold. That matters for a token that may have moved through multiple wallets and transactions.

The Offering Problem Is Not the Launch Problem

The biggest practical limitation of Reg CA is that it addresses the offering problem, but not necessarily the launch problem. As Manatt Partner James Williams discusses in Crypto Law Tactics & Observations, an offering exemption is only one part of what is needed to get a token into the market and keep it trading.

Liquidity is probably the clearest example. Rules 200 and 300 remove the ordinary restricted-security holding periods from covered investment contracts. But that does not mean there will be a functioning market for the token. Someone still needs to provide liquidity, which often means market makers quoting both sides, holding inventory and hedging. Depending on how those activities are conducted, they may raise separate dealer-registration questions under the Exchange Act. Section 4(a)(1), meanwhile, is unavailable for transactions by an issuer, underwriter, or dealer.

Rule 500 highlights the issue because it specifically excludes dealers from its secondary-market preemption provision.And where a project provides treasury tokens to a market maker for distribution into the market, the arrangement may also raise a separate question about whether the market maker is acting as an underwriter under Section 2(a)(11).

The release recognizes the broader issue but does not resolve it. It notes that commenters asked the Commission to provide exemptions from the Exchange Act definitions of “exchange,” “broker,” and “dealer,” but expressly states that the proposal does not address those recommendations. A project therefore should not, under the current draft of the proposal, retain a market maker for U.S. markets without careful consideration of Reg CA’s potential impact on issuer-sponsored secondary liquidity.

There is a similar question around where the token trades. U.S. crypto spot platforms generally are not registered national securities exchanges, and the proposal does not create a new trading-venue framework for covered investment contracts. Existing securities-market infrastructure does provide potential venues for covered investment contracts: Trading and Markets staff guidance expressly contemplates that alternative trading systems can accommodate crypto asset securities, including security/non-security trading pairs, and that an ATS’s broker-dealer operator may perform brokerage, custody, and certain clearing functions, subject to applicable requirements. But these structures do not necessarily fit neatly with a token designed to move into self-custodied wallets, automated market makers, lending protocols and other onchain applications. Therefore, a number of these assets may need to trade through offshore decentralized exchanges and will not benefit from U.S. regulatory scrutiny and diligence.

The restriction on at-the-market offerings raises a separate issue. Reg CA is intended in part to allow tokens to circulate more freely, but Rule 300 does not allow an issuer to sell into the market on an ongoing, at-the-market basis, unlike other securities offered by certain registered public companies. For projects that expect to distribute tokens gradually or through market-based mechanisms, that may limit how useful the exemption is in practice.

More broadly, Reg CA does not create the market-structure framework needed to make free transferability fully useful. The exemptions may remove an important restriction on resale, but separate securities-law questions still determine who can facilitate that resale, where it can occur, and how the token can move through the broader crypto ecosystem.

There are two other points worth flagging:

First, there is some tension between Rule 103’s disclosure requirements and Rule 400’s safe harbor. Rule 103 requires the issuer to explain its development plans. Rule 400 later asks whether the issuer has completed or permanently stopped the essential managerial efforts it represented or promised to undertake. The Commission expects an issuer relying on Rule 400 to look back to its Rule 103(b)(1) disclosures when making that determination. So the way an issuer describes its roadmap at the offering stage could matter to when it can later rely on Rule 400.

That does not mean issuers should disclose less. It means they need to be precise about what they are promising to do. Counsel should distinguish between the managerial efforts that are essential to bringing the network to the point described to purchasers and ordinary development, maintenance, or ecosystem activity that may continue afterward. The Commission itself recognizes that an issuer’s post-fulfillment activity—continued work that does not itself constitute essential managerial efforts—does not revive or extend the investment contract. An issuer therefore does not need to promise that development will stop altogether, but it should be careful about describing every future development as something purchasers are relying on it to deliver. 

Second, Rule 300 creates a real issue for projects that use a U.S. development company and a separate offshore issuer. There may be good regulatory, tax, governance, or liability reasons for that structure. Rule 300, however, requires a substantial U.S. nexus, including a U.S.-organized issuer. The Commission frames the nexus requirement partly as a response to the concern that regulatory uncertainty has pushed crypto projects offshore. For some projects, the answer may be to restructure. For others, the more sensible conclusion may simply be that Rule 300 is not the right exemption. 

Of course, none of the above should suggest the proposal is not useful. Rule 400 gives developed networks a concrete mechanism for establishing that the investment contract has ended. Rule 103’s disclosure categories may also become a useful framework for token offerings even where a project never relies on Reg CA.

For an actual token launch—including token generation, market making, exchange listings, and secondary trading—Reg CA is not the whole answer. It creates a clearer path for offering the investment contract and removing some restrictions on later transfers. The harder market-structure questions—who can provide liquidity, where trading can occur, and how the token moves from the exempt offering into a functioning crypto market—remain largely unresolved.

What to Do Next

Reg CA is a significant attempt to create a tailored offering and transition framework for covered investment contracts, but it does not purport to resolve the full set of Exchange Act and other regulatory questions implicated by a token launch. Market participants evaluating the proposal should therefore consider not only whether Rules 200 or 300 provide an attractive offering pathway, but also the treatment of liquidity providers, trading venues, ongoing network distributions, and the eventual transition out of investment-contract status.

Companies planning token launches. Map every planned sale and distribution, including rewards and other noncash distributions, against Rules 200 and 300. Test the Rule 300 U.S. nexus requirements against the project’s entity, personnel, asset, and operating structure, and build Form NOR timing into the communications plan. Separately analyze market making, listings, custody, self-custody, and onchain uses.

Existing networks. Assess whether the essential managerial efforts described to purchasers have been completed or permanently ceased and whether the record would support a Form TR filing. Review offering materials, public statements, development roadmaps, governance materials, and evidence of actual network functionality.

Investors. Do not equate unrestricted resale status with liquidity or a compliant trading market. Diligence should cover the exemption relied upon, the issuer’s current filings, any Form TR analysis, market-maker arrangements, available venues, and whether the issuer remains current on the filings needed to preserve state-law preemption.

Market makers, exchanges, and other intermediaries. Continue to analyze broker, dealer, underwriter, exchange, ATS, custody, and clearing issues independently. Particular attention should be paid to treasury-token arrangements, issuer-supported liquidity, and how tokens are expected to move between regulated venues and onchain markets.

Industry participants. Consider using the comment period to address the issues that will determine whether the exemptions work in practice, including at-the-market offerings, secondary liquidity, trading venues, Rule 400’s standard, and the U.S. nexus requirements. Comments are due October 20, 2026.

It is important to note that even after a covered investment contract has ceased to exist, the federal securities antifraud provisions continue to apply to conduct that occurred while it existed, and other federal and state laws continue to govern transactions in the asset.

Comments on proposed Regulation Crypto Assets are due 60 days after the release is published in the Federal Register. Projects, trading firms, exchanges, and other market participants have practical experience with the parts of a token launch that the proposal does not fully address. Industry participants with active or planned token launches therefore have an opportunity not only to evaluate how the proposed rules would apply to them, but also to help shape how the Commission addresses these issues before the rules are finalized.

Reg CA, Release Nos. 33-11434; 34-106150, File No. S7-2026-27, at 1 (Aug. 18, 2026) [hereinafter Proposing Release].

Proposing Release at 60, 74–75 (discussing resale treatment under the startup exemption); id. at 164 (Rule 400 framework discussing investment contract safe harbor). Specifically, Reg CA creates exemptions for certain offerings of covered investment contracts and provides a mechanism for an issuer to establish that a covered investment contract has ended. Once the covered investment contract has ended, the underlying crypto asset would no longer be subject to that investment contract.

Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Release Nos. 33-11412; 34-105020, File No. S7-2026-09, 91 FR 13714 (Mar. 17, 2026) (effective Mar. 23, 2026) (“2026 Interpretation”).

2026 Interpretation at 11-12 (setting out the Howey test: “a contract, transaction, or scheme whereby a person invests money in a common enterprise and reasonably expects profits to be derived from the efforts of others”); id. at 13 (“as with any asset that is not a security, a non-security crypto asset can be offered and sold subject to an investment contract, which is a security”).

Id. at 38.

Id. at 36 (defining “covered investment contract”).

Id. at 43.

Id. at 66 (Rule 103 request for comment following the ten enumerated topics).

Id. at 69–70.

Id. at 75–76, 82 (Rule 200(b)(4) $5 million offering limit).

Id. at 60.

Id. at 107–09.

Id. at 137–38 (financial statements; audited financial statements for Tier 2); id. at 272 (ongoing reporting required for both Tier 1 and Tier 2, unlike Regulation A).

Id. at 110 (citing proposed 17 C.F.R. § 228.300(b)(1)).

Id. at 127 n.310.

Id. at 159–60 (Rule 305(c)(1)).

Id. at 164–65 (Rule 400(a)–(b)).

Id. at 164.

Id. at 282 (130-offering estimate for the two exemptions); id. (475-issuer safe-harbor estimate).

Id. at 170.

Id. at 170 (Rule 500 preemption limited to “a person other than an issuer, underwriter, or dealer”).

Id. at 170–71.

Id. at 178–79.

See generally James Williams, Crypto Law Tactics & Observations (Substack), https://jemhs.substack.com.

Proposing Release at 60, 104–05.

Cf. Id. at 74 n.192 (noting, but declining to resolve, related Exchange Act concerns raised by commenters).

15 U.S.C. § 77d(a)(1) (Securities Act § 4(a)(1)).

Proposing Release at 170 (Rule 500 preemption limited to “a person other than an issuer, underwriter, or dealer”).

15 U.S.C. § 77b(a)(11) (Securities Act § 2(a)(11) underwriter definition); see Proposing Release at 74 n.192.

Proposing Release at 74 n.192.

Cf. Proposing Release at 100 (commenter concern regarding “uncertainty regarding whether tokenized assets that trade via decentralized exchanges or alternative trading systems can trade freely on the secondary market,” unresolved by the release).

Proposing Release at 127 n.310.

Proposing Release at 66 (Rule 103 request for comment following the ten enumerated topics).

Proposing Release at 164–65 (Rule 400(a)–(b)).

Proposing Release at 166 (“[W]e expect that the issuer would refer to information it disclosed in response to proposed Rule 103(b)(1) … “).

2026 Interpretation at 29 (“A non-security crypto asset ... is no longer subject to the associated investment contract once the issuer has fulfilled its representations or promises to engage in essential managerial efforts, even if the issuer continues to provide efforts that are not essential managerial efforts ... “).

Proposing Release at 110 (citing proposed 17 C.F.R. § 228.300(b)(1)).

Proposing Release at 10 (noting that, “in response to these regulatory challenges, some issuers may choose to conduct their crypto asset transactions offshore, limiting investment options … for U.S. investors”). Regulation S provides a safe harbor under which offers and sales of securities made outside the United States are deemed to occur outside the United States and are therefore not subject to the registration requirements of Section 5 of the Securities Act. See 17 C.F.R. §§ 230.901–905; see also 17 C.F.R. § 230.903 (issuer safe harbor). Securities sold in a Category 1 Regulation S offering are generally not “restricted securities”; Category 2 and Category 3 offerings, however, are subject to offering restrictions (and, for Category 3, distribution-compliance requirements) that limit free resale. See 17 C.F.R. § 230.903(b).

Proposing Release at 1.