SEC Proposes New Rules for Crypto Token Offerings with $75 Million Exemption

SEC Introduces Regulation Crypto Assets for Token Offerings

The U.S. Securities and Exchange Commission (SEC) has proposed new rules called Regulation Crypto Assets. These rules would allow companies issuing crypto tokens to raise up to $75 million in a year without registering the offering with the SEC. The proposal also includes a safe harbor that could remove some tokens from being classified as securities.

The SEC’s proposal aims to clarify when a crypto token stops being considered a security, a question that has led to years of legal disputes. The rules were approved by all three current SEC commissioners in a vote held outside a public meeting.

Key Details of the Proposal

• The proposal creates two exemptions for token offerings: a startup exemption (up to $5 million over four years) and a fundraising exemption (up to $75 million in 12 months).
• Companies using the $75 million exemption must provide audited financial statements and ongoing reports.
• A safe harbor allows tokens to be removed from the definition of a security if the issuer completes or stops all promised managerial efforts and files a public certification.
• The rules preempt state securities laws for offerings made under this regulation.
• Comments on the proposal are due 60 days after it is published in the Federal Register.

What the SEC Proposal Says

The SEC’s proposing release defines a crypto asset as a digital value recorded on a cryptographically secured ledger. The rules cover "covered investment contracts," which are investment contracts involving crypto assets that are not themselves securities.

The startup exemption allows up to $5 million over four years with minimal filings, while the fundraising exemption has two tiers: up to $20 million (Tier 1) and up to $75 million (Tier 2) in a 12-month period. Tier 2 requires audited financial statements and ongoing reporting.

The safe harbor applies once an issuer stops all essential managerial efforts and files a public certification. This means a token could no longer be considered a security, even if the project remains centralized.

Commissioners’ Statements on the Proposal

All three SEC commissioners—Chairman Paul Atkins, Hester Peirce, and Mark Uyeda—supported the proposal. Commissioner Peirce noted that the rules may not fit every model and invited public feedback. She also asked for comments on how tokens could function like equity, allowing holders to share in the growth of a crypto network.

Commissioner Uyeda criticized the SEC’s past approach of using enforcement actions instead of rulemaking, saying it deprived the public of input on workable rules.

What Is Confirmed

• The SEC has proposed Regulation Crypto Assets, which includes two exemptions for token offerings and a safe harbor for tokens no longer deemed securities.
• The proposal was approved by all three current SEC commissioners in a seriatim vote.
• The rules allow up to $75 million in fundraising without full SEC registration, subject to disclosure and reporting requirements.
• The safe harbor removes the "investment contract" label from tokens if certain conditions are met.
• The proposal preempts state securities laws for offerings under this regulation.

What Is Still Unclear

• How the SEC will define "essential managerial efforts" for the safe harbor, as decentralization is not a requirement.
• Whether the proposal will face legal challenges or significant changes after the public comment period.
• How companies will structure their token offerings to comply with the new rules while making tokens attractive to buyers.

Why This Proposal Matters for Crypto Projects

The SEC’s proposal could provide clearer rules for crypto projects seeking to raise funds without full SEC registration. The $75 million exemption and safe harbor may reduce legal uncertainty for issuers, making it easier to launch and distribute tokens. However, the rules still require disclosures and ongoing reporting, which could add compliance costs.

The preemption of state securities laws could simplify fundraising by removing the need to comply with multiple state regulations. The proposal also signals a shift from enforcement actions to rulemaking, which may encourage more engagement between the SEC and the crypto industry.

Next Steps for the Proposal

The SEC is accepting public comments on the proposal for 60 days after it is published in the Federal Register. After the comment period, the SEC may revise the rules before finalizing them. The proposal is part of a broader effort to clarify crypto regulations, alongside the Digital Asset Market Clarity Act, which is still pending in Congress.

Sources

• The Defiant
• SEC Proposing Release
• SEC Fact Sheet