On April 10, 2025, the SEC Division of Corporation Finance (“CorpFin”) issued a statement on disclosurs in offerings and registrations of securities in the crypto asset markets. This is the third statement issued by CorpFin on various topics dealing with cryptocurrencies and digital assets in a matter of weeks. For a review of CorpFin’s statement on certain proof of work mining activities see HERE and on stablecoins, see HERE.
The statement is meant to give guidance related to specific disclosure topics when either registering crypto assets or when filing a registration statement for an issuer in the crypto asset business. The guidance cuts across all Regulation S-K disclosures whether in a Securities Act form (S-1; F-1; etc..) or an Exchange Act form (10-K; 20-F etc..).
Description of Business – Item 101 of Regulation S-K
Item 101 of Regulation S-K – Description of Business – requires an issuer to provide detailed background information material to understanding the general development of its business. For example, Item 101(a) requires a description of the general development of the business of the company and includes a non-exclusive list of the types of information that should be disclosed. Item 101(c) requires a narrative description of the business done and intended to be done by the company, focusing on the segments that are reported in the company’s financial statements and likewise includes a non-exclusive list of topics to be covered, to the extent relevant and material. For more on Item 101 see HERE.
The new guidance suggests that disclosure: (i) should specifically relate to the company’s current or proposed business as opposed to a dissertation on crypto networks, crypto assets, or other technologies that are not specific or material to the company’s current or proposed business; (ii) should address the current stage of development of the business and clearly delineates any forward-looking or future plans of development; (iii) should be consistent with the company’s public statements regarding its business.
In addition, CorpFin suggests disclosure the following to the extent material: (i) the company’s specific business activity, such as operating or developing a network, and the current stage of development; (ii) whether the company intends to continue to operate the business after the launch of the network or application and details of such operations; (iii) if the company will not continue to operate the network or application, how will it be operated; (iv) to the extent the business has not been fully implemented, milestones (including technology development milestones) needed to fully implement the business; (v) how the company generates or expects to generate revenues and profits; and (vi) whether the security or crypto asset has any function(s) in the operation of the business, including whether it has any intended use or role in an associated network or application.
When a company is developing or acquiring or intending to develop or acquire a network or application, CorpFin suggests disclosing the following:
- Whether the initial development team is developing a network and/or application and/or a crypto asset for the network or application.
- The current state and timeline for the development of the network and/or application to show how and when the initial development team intends to achieve network maturity or deploy the application.
- Milestones needed to fully develop the network, application, and/or crypto asset, including an estimated timeline, the estimated costs to reach key milestones, and the source of funds for the development of the network, application, and/or crypto asset.
- The objectives of the network and how the technology of the network or application functions and accomplishes its objectives, including its architecture, software, cryptographic key management, and functionality.
- Whether the technology is derived from proprietary or open-sourced software, and a description of any licenses or intellectual property rights relating to the technology.
- The process for validating transactions, the consensus mechanism, the block size, the transaction speed, the transaction (or “gas”) fees, and reward mechanism, if any.
- A description of any products and services that will be offered through the network and/or application.
- The various roles that exist or are intended to exist in connection with the network and/or application, such as users, onchain and offchain service providers, developers, transaction validators, and governance participants.
- The process of how network and application upgrades and updates are disclosed, proposed, developed, reviewed, and ultimately deployed.
- The measures, if any, taken to ensure network and/or application security.
- A description of the network or application’s governance system, as applicable.
Risk Factors – Item 105 of Regulation S-K
Item 105 of Regulation S-K requires disclosure of the most significant factors that make an investment in the company or offering speculative or risky and specifies that the discussion should be concise and organized logically. The disclosure of risk factors has always been principles-based with the SEC consistently discouraging the use of boilerplate items. For more information on Risk Factors, see HERE.
Related to Risk Factors, CorpFin suggests disclosing: (i) risks relating to the company’s planned business operations, such as risks relating to technology and cybersecurity, and implementation of the company’s business, as well as reliance on another network or application; (ii) risks relating to the security, such as the risks relating to any unique characteristics of the security including its form, price volatility, the rights of holders or their lack of rights, valuation and liquidity, supply, and custody; and (iii) risks related to other applicable laws and regulations, such as whether the company’s activities may require it to register with the Financial Crimes Enforcement Network or certain state financial services agencies under money transmission laws, or to register with another regulatory authority, such as federal or state banking regulators or the Commodity Futures Trading Commission.
Description of Securities – Item 202 of Regulation S-K
Item 202 of Regulation S-K requires a company to provide a materially complete description of its securities, including any securities being registered or otherwise available for issuance by a company. The specific disclosure depends on the particular type of security, with these rules setting forth requirements for specifically identified types of securities, such as traditional capital stock, debt securities and “other kinds of securities.”
Where an offering involves crypto securities, a company should include a description of the terms, rights, and characteristics of the security in their specific context and in a manner that investors can understand. Disclosures should include:
- Rights, Obligations and Preferences – (a) how rights are documented or memorialized and conveyed (transferred) and who can modify them; (b) what the rights are such as with respect to dividends, distributions, profit sharing, voting rights, etc..; (c) with respect to voting rights – how the company intends to comply with the proxy rules; (d) rights related to mergers, liquidations, bankruptcies, re-organizations, etc..; and (e) characteristics of the security such as term, maturity, transfer restrictions, custody, redemption, burning, pledging, etc..
- Technical Specifications – (a) specifics of the network and application including how code can be modified and how modifications impact the rights of holders; (b) technical requirements for holding, accessing and transferring the crypto including related to wallets and keys; and any transaction fees; (c) where the definitive record of ownership exists and who maintains it; (d) whether the crypto is divisible and any limits; and (e) whether the crypto and any smart contracts are subject to third party security audits and if so, who and the results
- Supply – (a) rules governing the total supply, including if fixed, the method for minting or generating new crypto, whether there is a process for redeeming, retiring, freezing or burning the crypto, and whether any supply is reserved and for who and what purpose; (b) whether any entity, person or group is responsible for implementing rules governing the total supply and/or has the authority or ability to change the rules; and (c) whether the company intends to enter into any arrangements with market makers or similar firms to distribute and/or provide liquidity for the crypto and the terms of any such arrangement.
Directors, Executive Officers , and Significant Employees – Item 401 of Regulation S-K
Item 401 of Regulation S-K requires disclosure of identifying and background information about a company’s directors, executive officers, and significant employees. For more information on Item 401 see HERE. Item 401 also requires similar disclosure for persons who do not hold formal titles or positions as executive officers or directors but who perform policy-making functions typically performed by executive officers or perform similar functions as directors. For example, certain trusts – such as the spot crypto exchange-traded products – have a sponsor with directors and executive officers who perform functions similar to directors or executive officers of the trust.
Exhibits – Item 601 of Regulation S-K
SEC rules require a company to file as an exhibit any instrument defining the rights of security holders. In connection with offerings and registrations of securities in the crypto asset markets, to the extent that the rights, preferences, and obligations of holders of the securities are memorialized in smart contract(s) or otherwise programmed into the code of a network or application, company’s should include as an exhibit the code of the smart contract(s) and/or the network or application, with the company updating any such exhibit in response to subsequent changes in such code.
Financial Statements – Regulation S-X
SEC rules require company’s to provide financial statements that comply with applicable requirements. Rather than give specific guidance, CorpFin suggests that company’s with questions as to the form and contents of these financial statements should contact the Division’s Office of Chief Accountant.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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