SEC Proposes Reg Crypto with $5M and $75M Fundraising Exemptions

The SEC has rolled out a long-anticipated regulatory proposal — Regulation Crypto Assets ("Reg Crypto") — that would create two tailored registration exemptions for certain crypto investment contracts and a conditional safe harbor that can end an asset’s treatment as an “investment contract.” Why it matters - The plan gives crypto issuers bounded, agency-designed paths to raise capital without full Securities Act registration, while imposing disclosure, reporting and other conditions aimed at investor protection. - It’s an agency-level approach that overlaps with, but does not replace, pending congressional legislation (the Digital Asset Market Clarity Act, aka CLARITY Act). What the proposal would allow - Small-offering exemption: Eligible issuers could offer up to $5 million in crypto investment contracts over a four-year period without full registration. This is meant for smaller projects seeking a more limited, lower-cost route to fundraising. - Larger-offering exemption: Issuers could raise up to $75 million in any 12-month period under a second pathway. That route carries tougher obligations — including the provision of financial statements and ongoing reporting after the offering. Common requirements - Both pathways require issuers to make “principles-based narrative disclosures” to investors under standards set in the proposed rules. - Neither exemption is an automatic blanket carve-out for tokens or token sales. Eligibility depends on satisfying the proposal’s conditions; not every crypto asset or transaction would qualify. Conditional safe harbor - Reg Crypto also proposes a conditional safe harbor from the “investment contract” label under the Securities Act and the Exchange Act. In other words, an asset that starts life tied to an investment contract could cease to be treated as such once the arrangement meets the safe-harbor conditions — focusing on the contractual relationship rather than permanently branding the token. State preemption and secondary markets - The SEC would preempt state registration and qualification requirements for offers and sales that meet the exemptions’ terms — and for certain secondary-market transactions that comply. That reduces duplicative state filings for qualifying issuers but would not eliminate every applicable state rule (the preemption focuses on registration and qualification). Regulatory and legislative context - Reg Crypto follows the Commission’s March 2026 interpretive guidance on when crypto assets are sold as part of investment contracts and when that relationship can end. - The proposal had already entered White House review under RIN 3235-AN38; the SEC planned an Aug. 14 open meeting to consider the framework but canceled that session because of scheduling issues. The Aug. 18 press release announces the proposal’s publication and entry into the public rulemaking process. - The SEC’s approach differs from the CLARITY Act, which would carve out categories of digital assets and assign regulatory authority between the SEC and CFTC by statute. Reg Crypto is an agency rulemaking focused on securities offerings, disclosures and the investment-contract end state — it does not fully settle the securities-versus-commodities boundary or create a congressional-style market structure for spot trading. Practical impact and next steps - U.S. issuers could use the two pathways to structure fundraising and later transactions differently; investors would get varying levels of information depending on whether an issuer uses the $5 million or $75 million route (the larger pathway requires financial statements and ongoing reporting). - Stakeholders will have 60 days to submit comments after the proposal’s publication. The rules are not final and do not immediately change registration duties; the SEC may revise the proposal after reviewing public input. - The SEC is separately developing an Innovation Exemption for tokenized securities and on-chain trading, which would follow its own rulemaking process and is not part of the two Reg Crypto fundraising exemptions. Market analysts such as Galaxy Digital’s Alex Thorn expected the SEC to publish Reg Crypto, the Innovation Exemption, or both within weeks. Bottom line Reg Crypto presents a narrower, agency-led route for certain crypto investment contracts to operate with tailored exemptions and a conditional safe harbor, while leaving broader structural questions — and potential congressional fixes — unresolved. The proposal shifts the policy debate into the formal rulemaking phase and gives the industry a limited, structured path for compliant capital raises and clearer exit mechanics for investment-contract relationships.