Securities Regulation Daily Wrap Up, NASAA NEWS AND SPEECHES—NASAA urges SEC to withdraw proposed crypto exemptions, (Oct 27, 2026)

By R. Jason Howard, J.D.

NASAA says the proposed framework lacks retail-investor safeguards and exceeds the SEC’s authority to preempt state registration and qualification requirements.

A NASAA comment letter to the SEC urges it to withdraw proposed Regulation Crypto Assets and repropose exemptions with stronger retail-investor protections. In its letter, NASAA said the framework would remove key disclosure, filing, and resale protections and exceed the SEC’s authority to preempt state securities regulation. According to NASAA, the proposal would provide federal registration exemptions for covered investment contract offerings, create a safe harbor through which the SEC could deem issuers no longer subject to federal securities laws, and preempt state registration and qualification requirements.

Startup exemption. Proposed Rule 200 would let crypto issuers raise up to $5 million over four years without federal registration, according to the letter. NASAA predicted that the rule’s combination of exemptive features could foster pump-and-dump schemes, or “rug pulls.” If the SEC does not withdraw the proposal, NASAA recommended “replacing the proposed principles-based disclosure regime with existing prescriptive disclosure requirements, augmented as necessary to capture the unique aspects of blockchain-based offerings and combined as needed with staff guidance.”

NASAA also urged the SEC to require financial disclosures and EDGAR filings for startup-exemption issuers. It said EDGAR would preserve amendment histories, help investors compare issuers, and reinforce public-document materiality standards. NASAA objected that Rule 200 would require an amendment within 30 calendar days after year-end only when material changes existed at year-end, potentially allowing some material events to go unreported for as long as 13 months. It recommended current reporting similar to proposed Rule 305(a)(4).

The association said Rule 200 would permit immediate resale by insiders and other pre-offering holders. It recommended mandatory resale restrictions for related persons and anyone who obtained the securities before the offering, regardless of how they acquired them. NASAA also recommended limiting the exemption to U.S. businesses, excluding natural-person issuers, and applying a concentration limit comparable to Rule 300’s limit for non-accredited investors.

NASAA further asked the SEC to align proposed Rule 104’s disqualification provision with Securities Act Rule 262 rather than exclude specified disqualifying events that predate an eventual effective date. It noted that Rule 262 permits good-cause waivers.

Proposed Rule 300, by contrast, would establish a two-tiered, Regulation A-style fundraising exemption with financial disclosures, affiliate sales limits, a U.S. issuer limitation, filing requirements, ongoing and current reporting, and concentration limits, NASAA said. Even so, the association urged the SEC to apply the same Regulation S-K-based disclosure, resale, and disqualification changes because Rule 300 would retain principles-based disclosures and permit some immediate affiliate sales.

Safe-harbor challenge. Proposed Rule 400 would permit the SEC to deem an issuer using either exemption no longer subject to federal securities laws if the issuer said it had stopped providing essential managerial efforts, including by fulfilling or failing to fulfill its promises, NASAA said. The association challenged the proposal’s treatment of blockchain maintenance or system support as non-essential, arguing that economic realities control under SEC v. W.J. Howey, 328 U.S. 293 (1946), and citing district-court decisions involving blockchain or ecosystem support.

NASAA recommended requiring Form TR to describe any continuing involvement by the issuer, its personnel, or affiliates in operating the project and explain how the underlying blockchain would be maintained.

State preemption. NASAA’s preemption challenge focused on proposed Rule 500, which the letter said would preempt state registration and qualification requirements for offerings and secondary transactions that comply with either exemption. NASAA argued that defining every purchaser, including retail investors, as a “qualified purchaser” exceeds the SEC’s authority under Securities Act Section 18(b)(3) and the National Securities Markets Improvement Act of 1996. The proposal would retain state anti-fraud authority, the letter said.

The letter also objected to preemption for secondary transactions in covered investment contracts initially sold under other federal exemptions. NASAA argued that extending Rule 500 beyond Regulation Crypto Assets without analysis of the affected exemptions would be arbitrary and capricious. Any such change, it said, would require a new notice-and-comment proposal identifying each affected rule and supplying the required economic and statutory analyses.

NASAA said the proposal also could intrude on state authority over small, regional, or intrastate offerings because some crypto offerings are local or regional. The letter concludes by stating that the SEC should withdraw the framework, repropose exemptions that condition relief on retail-investor protections, and avoid preemption that NASAA views as inconsistent with federal law.

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