Securities Regulation Daily Wrap Up, BLOCKCHAIN—SEC proposes Regulation Crypto Assets, (Aug 18, 2026)
The proposal comes as major crypto legislation is bogged down in the Senate, but SEC Chairman Paul Atkins said the SEC continues to support Congress in passing the long-delayed CLARITY Act.
The SEC has proposed “Regulation Crypto Assets” to create a new regulatory framework for non-security crypto assets subject to an investment contract. The proposed rules build on a March 2026 interpretation that clarified how the federal securities laws apply to certain crypto assets and transactions (Regulation Crypto Assets, Securities Act Release No. 11434 (Aug. 18, 2026)).
The proposed rules would create two new exemptions for securities offerings and a conditional safe harbor from the term “investment contract.” The proposal would also preempt state securities law requirements for offers and sales of covered investment contracts issued pursuant to the regulations.
“Today, we are charting a new course with a package of exemptions that would facilitate capital formation and allow crypto asset innovation to flourish in the United States in the years ahead,” said SEC Chairman Paul Atkins.
According to a fact sheet, the proposed rules are intended to facilitate capital formation and accommodate crypto innovation while ensuring investor protection.
The proposal was issued by seriatim vote after a scheduled open meeting was canceled.
Covered investment contracts. The term “covered investment contract” is used throughout the proposed rules. It would be defined as a contract, transaction, or scheme that constitutes an investment contract that meets the following requirements:
A crypto asset is subject to the investment contract;
Such crypto asset is not a security; and
No asset other than such crypto asset (including any security or non-security asset) is subject to the investment contract.
“Crypto asset” would be defined as “any digital representation of value that is recorded on a cryptographically-secured distributed ledger.”
Startup exemption. The proposal would create a one-time, non-exclusive exemption from Securities Act registration requirements that allows issuers to conduct offerings of covered investment contracts of up to $5 million, during a period of up to four years.
Issuers would need to make public filings at the beginning and end of the period as well as certain “principles-based narrative disclosures” to investors during the period. Issuers relying on the exemption would still be subject to the antifraud and antimanipulation provisions of the federal securities laws.
Fundraising exemption. The proposal would also create a non-exclusive, two-tier exemption for larger capital-raising transactions, modeled in part on Regulation A.
Under Tier 1, issuers could conduct offerings of up to $20 million of covered investment contracts in a twelve-month period.
Under Tier 2, issuers could conduct offerings of up to $75 million of covered investment contracts in a twelve-month period.
Issuers would need to publicly file the same principles-based narrative disclosures as the startup exemption, plus financial statements and a discussion of the issuer’s financial condition. Financial statements would need to be audited for Tier 2 offerings. Issuers would still be subject to antifraud and antimanipulation provisions.
Safe harbor. The investment contract safe harbor clarifies when a covered investment contract has ceased to exist because of a lack of “essential managerial efforts” and therefore the crypto asset is no longer subject to an investment contract for purposes of definitions of “security.”
An issuer of a covered investment contract would satisfy the investment contract safe harbor if it has:
Completed or otherwise permanently ceased all essential managerial efforts that it represented or promised it would engage in under the covered investment contract and is not making and does not intend to make any new representations or promises to engage in essential managerial efforts with respect to the underlying crypto asset; and
Made a public filing certifying that it has satisfied the conditions of the safe harbor and providing an analysis supporting that certification.
Preemption of state laws. The proposal would effectively preempt state securities registration and qualification requirements for offers and sales of covered investment contracts issued pursuant to a Regulation Crypto Assets exemption, as well as certain secondary market transactions.
The proposal would add a new definition of “qualified purchaser” under Section 18(a)(3) of the Securities Act, which determines whether state requirements apply. A qualified purchaser would be any person to whom securities are offered or sold pursuant to:
An offering under Regulation Crypto Assets (§§ 228.100 through 228.500); or
An offering pursuant to a transaction by any person other than an issuer, underwriter, or dealer with respect to a covered investment contract (as defined in § 228.100).
Issuers would have to satisfy exemption requirements and would remain subject to reporting and disclosure requirements.
The SEC said it does not expect that crypto issuers will conduct regional or intrastate offerings and that it would be “difficult and inefficient” for issuers to conduct review and qualification of covered investment contracts on a state-by-state basis.
“This potential difficulty and inefficiency supports using section 18(b)(3) to preempt State registration and qualification requirements in this context,” the proposal stated.
Need for CLARITY Act. The proposed rules would be somewhat of a stopgap, as crypto legislation has been held up in the Senate over concerns about customer protection and other issues.
Commissioner Mark Uyeda indicated that nothing in the proposal precludes the SEC from responding to legislative developments.
“To the contrary, legislative CLARITY would be beneficial to market participants and regulatory agencies,” said Uyeda.
Atkins said crypto legislation is still needed. “[L]egislation remains indispensable to enacting ‘future-proofed’ rules of the road that are durable enough to protect the work we are undertaking today from being unwound by a future rogue regulator.”
He added that the SEC “will continue to support Congress in delivering the CLARITY Act to President Trump’s desk.”
Call for comment. The proposal provides for a 60-day comment period following publication in the Federal Register.
SEC Commissioner Hester Peirce encouraged the public to comment, especially about “facilitating the ability of crypto assets to serve a role akin to equity to enable token holders to share in the growth and value of the enterprise that builds a crypto network.”
“This proposal is one step on a long road toward a clear, sensible, enforceable regulatory framework for crypto. The Commission cannot walk that road alone, so please send us your thoughts during the sixty-day comment period,” Peirce said.
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