SEC Proposes Tailored Exemptions for Cryptoasset Offerings

The Proposal would establish two offering exemptions, a conditional safe harbor for investment contracts and broad preemption of state securities laws registration and qualification requirements.

By Paul M. Dudek, Zachary Fallon, Stephen P. Wink, and Deric Behar

Key Points:

• The proposed rules would create two new offering exemptions for “covered investment contracts” involving cryptoassets: a Startup Exemption (permitting raises of up to $5 million over a four-year period, with no financial statement requirements) and a tiered Fundraising Exemption modeled on Regulation A (permitting raises of up to either $20 million or $75 million annually, with varying disclosure and reporting obligations).
• The proposal builds on the SEC’s March 2026 Interpretive Release and the Howey framework by re-emphasizing the distinction between an investment contract (the security) and the underlying cryptoasset (not itself a security).
• A new investment contract safe harbor would allow an issuer to self-certify that its covered investment contract has “ceased to exist” once all promised essential managerial efforts have been completed or permanently ceased, but the SEC retains authority to challenge such certification.
• If finalized, the rules would broadly preempt state securities laws registration and qualification requirements for primary and secondary market transactions, though states would retain antifraud enforcement authority.