On August 18, 2026, the SEC took its most historic step toward modernizing digital market rules by proposing Regulation Crypto Assets. This landmark proposal establishes a purpose-built federal pathway for token fundraising transactions and a conditional exit from investment contract status. By shifting from a policy of regulation by enforcement to a codified set of exemptions and safe harbors, the SEC has provided clear parameters that public company boards, founders, and advisers need to structure compliant offerings.
The proposed new rules, titled “Regulation Crypto Assets” : (i) establishes a startup registration exemption for certain offers, sales, and other distributions of covered investment contracts during a period of up to four years permitting offerings up to $5 million over that rolling four-year period; (ii) creates a registration exemption that would permit up to $75 million during each 12 month period, modeled in large part after Regulation A, including with a two tier system; (iii) creates a safe harbor from the term “investment contract” in the definition of a “security”; and (iv) defines “qualified purchaser” such that the state law preemption provisions of Section 18 of the Securities Act would apply to the offers and sales under Regulation Crypto Assets as well as certain secondary markets transactions.
Chairman Paul S. Atkins framed the new rulebook as a vital mechanism to onshore innovation and revitalize capital formation in the United States. Rather than subjecting digital tokens to outdated S-1 registration requirements, the SEC has proposed a principles-based regime that separates the underlying blockchain asset from the investment contract wrapped around its distribution. This long-awaited change establishes a legal runway for issuers while protecting retail participants through strict limits on individual investments.
This Part 1 details background including the March, 2025 joint SEC and CFTC guidance on crypto asset classifications. Part 1 also sets for the high level registration exemptions of Regulation Crypto. Part 2 of the series will drills down into the operational aspects of the new exemptions including integration matters, secondary market trading, and state law pre-emption.
Background – the March SEC and CFTC Joint Guidance on Crypto Asset Classification
This modernization initiative follows a series of critical regulatory actions in 2025 and early 2026. First, in April 2025, the SEC Division of Corporation Finance issued a statement on disclosures in offerings and registrations involving crypto (see my prior blog HERE). Second, the SEC and CFTC released their landmark joint classification interpretation under Project Crypto in March, as discussed herein. Finally, regulators approved Nasdaq’s and the NYSE’s secondary trading tokenized framework.
The Joint Interpretation (the “Interpretation”) introduces a five-category functional taxonomy to help market participants categorize digital assets based on their characteristics and uses:
- Digital Commodities: Crypto assets that derive value from the programmatic operation of a functional crypto system and supply-and-demand dynamics, rather than from an expectation of profits based on the essential managerial efforts of others. These are generally treated as non-securities.
- Digital Collectibles: Assets primarily acquired for personal use or expressive purposes (e.g., NFTs and “meme coins” driven by social/cultural value). These are treated as non-securities.
- Digital Tools: Often referred to as “utility” tokens, these are on-chain analogues to memberships, tickets, or credentials that derive value from practical functionality rather than financial rights. These are treated as non-securities.
- Stablecoins: Digital assets designed to maintain a stable value relative to the U.S. dollar. The Interpretation notes that while some stablecoins may be securities, “payment stablecoins” issued under the GENIUS Act are specifically excluded from both “security” and “commodity” definitions. For more on the SEC’s view of stablecoins, see HERE .
- Digital Securities (Tokenized Securities): Financial instruments that already meet the statutory definition of a “security” but are formatted as or represented by a crypto asset. This category reaffirms the SEC’s January 2026 statement that format does not alter securities status.
Technical Drill Down: The Investment Contract Pivot
A central theme of the Interpretation is a significant shift in the SEC’s approach to the Howey test. The agencies have moved toward a transaction-focused analysis, emphasizing that a crypto asset is not “intrinsically” a security in all circumstances.
- Asset vs. Scheme: The Interpretation distinguishes the asset itself from the offer or sale of that asset. A non-security crypto asset (like a digital commodity) becomes subject to securities laws only if it is offered and sold as part of an investment contract—where purchasers reasonably rely on an issuer’s essential managerial efforts for profit.
- The “Exit” from Securities Status: Crucially, the Interpretation provides a roadmap for when an asset may cease to be subject to an investment contract. This occurs when the issuer’s representations or promises have been fulfilled or abandoned, or when purchasers no longer reasonably rely on the issuer’s ongoing managerial efforts for the asset’s value.
- Secondary Market Relief: The agencies clarified that a non-security asset sold as part of an investment contract in a primary offering does not necessarily remain a security in secondary market transactions.
Guidance on Mining, Staking, and Airdrops
The Interpretation provides specific, long-awaited clarity on common blockchain activities:
- Mining and Protocol Staking: These activities are generally treated as outside the securities laws because participants rely on their own computational power or staked resources to validate transactions rather than the efforts of others. For more on the SEC’s view of certain protocol staking activities see HERE and related to proof-of-work mining activities see HERE.
- Airdrops: No-consideration airdrops used to promote a software application or support decentralization are typically not considered securities transactions.
- Meme Coins and Governance Tokens: Governance tokens allowing holders to vote on technical matters and “meme coins” driven by supply and demand are explicitly categorized as likely being non-securities.
Regulation Crypto Assets
Regulation Crypto Assets will be broken into 5 subparts. Subpart A contains rules applicable to all Regulation Crypto Asset offerings including: (i) Rule 100- Definitions; (ii) Rule 101 – General Provisions; (iii) Rule 102 – Inflation adjustments for offering limits; (iv) Disclosure Requirements for both the startup exemption and fundraising exemption; and (v) Disqualification – the bad actor rules.
Subpart B details the start-up exemption, Subpart C details the fundraising exemption, Subpart D provides for the investment contract safe harbor and Subpart E provides for state law preemption.
Definitions
New Rule 100 sets forth definitions that apply only to Regulation Crypto Assets. Any terms not defined will have the meaning they currently have under Rule 405. The new definitions include: (i) aggregate offering price; (ii) aggregate sales; (iii) associated crypto application; (iv) associated crypto network; (v) business day; (vi) covered investment contract; (vii) covered transaction; (viii) crypto asset; (ix) final offering circular; (x) related person; and (xi) subject crypto asset.
Without going into each definition, the most notable are:
Associated Crypto Application – means, with respect to a crypto asset, the smart contract or similar executable software program that is deployed to an associated crypto network and within which such crypto asset may be used for the transmission or storage of value or for which the crypto asset facilitates access or participation.
Associated Crypto Network – means, with respect to a crypto asset, the blockchain or similar distributed ledger technology network on which such crypto asset is generated, minted, or mined.
Covered Investment Contract – means a contract, transaction, or scheme that constitutes an investment contract; provided that the investment contract must meet the following requirements: (1) a crypto asset is subject to the investment contract; (2) such crypto asset is not a security; and (3) no asset other than such crypto asset (including any security or non-security asset) is subject to the investment contract. The definition: (1) includes investment contracts that involve a crypto asset, (2) excludes investment contracts that involve crypto assets that are themselves securities (e.g., digital securities); and (3) investment contracts that involve any asset other than a non-security crypto asset. By isolating the contract from the underlying token, the SEC has codified the separate asset doctrine. This doctrine has deep roots in federal securities jurisprudence. In Howey, the orange groves were not securities standing alone; the land-sale and service arrangements, viewed together, formed the investment contract.
Covered Transaction – means an offer, sale, or other distribution of a covered investment contract in reliance on the startup exemption, including, but not limited to: (1) any public or private offering, including a distribution, of a covered investment contract in one or a series of capital raising transactions; or (2) any public or private offering, including a distribution and transactions referred to as “airdrops,” of a covered investment contract in one or a series of transactions in exchange for, in recognition of, or as incentive for past or future use of an associated crypto network or associated crypto application, or as a reward or incentive for conducting activities primarily related to operating, governing, or securing an associated crypto network or associated crypto application. To be clear the term “covered transaction” is only applicable in the context of the start-up exemption.
Crypto Asset – means any digital representation of value that is recorded on a cryptographically-secured distributed ledger.
Related person – includes founders, promoters, employees, affiliates, and any person that is a director, officer, trustee, consultant, contractor, or advisor to the issuer, in each case together with any immediate family member.
Subject Crypto Asset – means a crypto asset that is subject to a covered investment contract.
The Startup Exemption: A Four-Year Capital Runway for Early-Stage Projects
For early-stage projects, the proposed rules establish a startup exemption under a newly proposed rule of the Securities Act of 1933. This non-exclusive safe harbor allows an issuer or developer group to raise up to $5 million over a rolling four-year period for “covered investment contracts” as defined above. By providing this regulatory buffer, the SEC intends to give teams sufficient time to build out their technology before facing the full weight of public reporting.
New Rule 200(a) creates the exemption and Rule 200(b) sets for the conditions including: (i) four-year duration; (ii) issuer eligibility; (iii) one-time use for the same or substantially similar crypto asset; (iv) offering limit ($5 million); (v) disclosure and filing requirements; and (vi) general conditions. Rule 200(c) sets forth the Form NOR filing requirement. Rule 200(d) requires that the disclosures be made public on a website and for such information to be periodically updated. Finally, Rule 200(e) requires the filing of a Form TR when the offering is completed but in no event later than four years after the filing of the Form NOR.
Broad issuer eligibility is a key feature of this exemption. Unlike the fundraising exemption, the issuer does not need to be a domestic entity; it can be an individual, a partnership, or even an informal development team. To help ensure that investors remain sufficiently protected and that each such member of the group of individuals or entities acknowledges responsibility under the proposed rule, each member of the group (or an authorized person for each member) would be required to sign the notice of reliance and transition report and provide the certifications thereunder. The members of the group would be responsible, individually and collectively, for satisfying the conditions of the exemption.
To rely on the startup exemption, issuers must meet three core conditions:
First, the project must file a Form NOR (Notice of Reliance) on the EDGAR system before commencing any promotional activity or sales. This notice is a simple filing that alerts the public that a covered transaction is underway. A Form NOR includes: (i) information regarding the issuer; (ii) the name of the crypto asset; (iii) the website where disclosures can be found; and (iv) a certification that the information in the Form NOR is true, complete, and correct and that the issuer intends to fulfill, within four years after the date of the filing of the Form NOR, the essential managerial efforts the issuer represented or promised investors it would engage in under the covered investment contract
Second, the developer team must publish narrative disclosures on a public website free of charge. No audited financial statements are required under this pathway. Instead, proposed Rule 103 mandates principles-based disclosures covering ten distinct categories: the terms of the investment contract, the offering details, the subject crypto asset specifications, management and related persons, the associated network or application architecture, security audits and source code availability, token economics and allocations, governance rights, the broader ecosystem, and detailed risk factors.
Third, while general solicitation is permitted—allowing developers to market their project openly—the SEC has established strict investor protection limits. Non-accredited individuals are capped at committing no more than 10% of their annual income or net worth (whichever is greater) to any single project. Commercial entities face a similar 10% limit based on their annual revenues or net assets.
Crucially, tokens sold under this exemption are deemed unrestricted securities under federal law. This means they are immediately free-trading, avoiding the typical one-year lockup friction under Rule 144. The exemption also covers a broad scope of covered transactions. This includes airdrops (provided they require recipients to satisfy conditions like performing tasks or purchasing services), staking and governance distributions, gas fees, and testing compensation. At the conclusion of the four-year runway, the issuer must file a Form TR (Termination of Reliance) with the SEC, outlining whether the project has completed its development or intends to transition to a larger capital-raising exemption.
The Fundraising Exemption: Scaled Offerings and the Form 1-CRYPTO Regime
For projects requiring larger amounts of capital, the SEC has proposed a dedicated fundraising exemption modeled loosely on the Regulation A framework for offerings of “covered investment contracts” as defined above. This pathway is split into two distinct tiers:
Tier 1 allows an issuer to raise up to $20 million in any 12-month period. Under this tier, companies are not required to provide audited financial statements, making it an attractive option for mid-sized projects.
Tier 2 allows for offerings of up to $75 million in any 12-month period, matching the limits of Regulation A+. To protect investors at this scale, the SEC requires Tier 2 issuers to provide audited financial statements.
Unlike the startup path, the fundraising exemption carries strict eligibility requirements. The issuer must be a domestic entity of which a majority of its executive officers or directors are U.S. citizens or residents, more than 50% of assets are located in the country, and its business is administered principally within our borders. Blank-check corporations, registered investment vehicles, business development entities, and issuers subject to Section 12(j) orders within five years are excluded.
Furthermore, both tiers require the formal filing of an offering statement on Form 1-CRYPTO via the EDGAR system. This form incorporates the same principles-based narrative disclosures as the startup exemption, along with a discussion of the issuer’s financial condition. No sales may occur until the SEC staff has reviewed and qualified the offering statement, a process that parallels Regulation A’s qualification path. Issuers are permitted to “test the waters” by soliciting non-binding indications of interest before qualification.
Furthermore, issuers relying on the fundraising exemption must commit to ongoing periodic reporting to keep the market informed. This continuous disclosure regime requires annual updates on Form 1-KC filed 120 days after fiscal year-end, semiannual summaries on 1-SC within a 90-calendar window, and current notifications on 1-UC dispatched four business cycles following any material event.
Non-accredited investors are subject to the same 10% purchasing ceiling as the startup pathway. By providing a scaled, transparent framework, this exemption allows mature projects to raise substantial public capital cleanly and compliantly.
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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