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In March 2026, the SEC issued an interpretive release applying federal securities law to certain crypto assets and activities. In August 2026, building on that release, the SEC proposed new rules called “Regulation Crypto Assets” (“Reg. CA”). Reg. CA would create a new offering framework tailored to what the SEC calls "covered investment contracts." In practical terms, “covered investment contracts” under Reg. CA are transactions in which a crypto asset that is not itself a security is sold to investors who reasonably expect the value of the asset to increase based on the issuer's efforts to build, maintain, develop, or otherwise manage the underlying project.

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As proposed, Reg. CA is intended to address the SEC’s concerns that existing securities regulations impede capital formation and encourage offshore crypto asset transactions. The proposal addresses these concerns through the four primary mechanisms discussed below.

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The proposed startup exemption would let a company raise up to $5 million over a period of up to four years without registering the offering with the SEC. Although the offering would be exempt from SEC registration, it would not exempt the company from all filing and disclosure requirements. Issuers relying on this exemption are still required to make principles-based disclosures about the offering, and to make public filings at the beginning and end of the exemption period.

Reg. CA would also create a two-tier exemption for larger offerings:

<span style="text-decoration: underline;">Tier 1</span>: Offerings of up to $20 million of covered investment contracts during a 12-month period.

<span style="text-decoration: underline;">Tier 2</span>: Offerings of up to $75 million of covered investment contracts during a 12-month period.

Again, while the offering would be exempt from SEC registration, it would not be exempt from all filing and disclosure requirements. An issuer relying on either tier would need to publicly file offering materials containing information about the project, the offering, and the issuer’s financial condition, including financial statements and a narrative discussion of the issuer’s financial condition. This narrative discussion must include how the issuer is funded, how it has performed financially, and any significant financial trends or developments that could affect the business. The disclosure would cover both historical financial results and material changes known to management after the financial statements were prepared. Notably, financial statements required under Tier 2 must be audited. The issuer would also have ongoing reporting obligations in the form of semiannual, annual, and current reports based in part on Regulation A, but adapted for crypto asset offerings.

Reg. CA would also create a safe harbor from the definition of “investment contract” for certain crypto asset transactions. Under this safe harbor, once an issuer has finished, or stopped, the managerial work it promised investors it would perform to build and support the underlying crypto asset project, the transaction would no longer be treated as an investment contract. To rely on the safe harbor, an issuer must:

Complete or permanently cease all essential managerial efforts they represented or promised to undertake under the covered investment contract;

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Make no new representations or promises, and have no intention to make new representations or promises, to undertake essential managerial efforts with respect to the underlying crypto asset; and

Make a public filing certifying that the conditions of the safe harbor have been satisfied and providing an analysis supporting that certification.

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4. Preemption of State Securities Requirements

Reg. CA would largely preempt state securities registration and qualification requirements for qualifying crypto asset offerings. The SEC proposes to achieve this by defining purchasers in Reg. CA offerings as "qualified purchasers," which causes those offerings to become "covered securities" under federal law. As a result, issuers generally would not need to comply with separate securities registration regimes in each state where investors are located, and could instead rely primarily on the federal framework established by Reg. CA. States would retain authority to investigate fraud, bring enforcement actions, and require certain notice filings and fees, but would generally be prohibited from requiring their own registration or merit review of qualifying offerings.

Secondary market transactions in covered investment contracts, conducted by persons other than an issuer, underwriter, or dealer, would receive the same treatment. This treatment will continue for the period during which the issuer of the covered investment contract continues to satisfy the applicable information, filing, and periodic reporting requirements under Reg. CA.

If adopted, Reg. CA would give crypto asset issuers new ways to raise capital without completing a registered offering, and could further reduce regulatory burdens for certain transactions through state-law preemption. Companies considering crypto asset offerings should assess how Reg. CA could affect their capital-raising strategies, disclosure practices, and ongoing reporting obligations. Companies that have previously issued crypto assets should evaluate whether the proposed safe harbor may affect the regulatory status of those assets and any associated investment contracts.

The public comment period for Reg. CA will remain open for 60 days following publication of the proposing release in the Federal Register. The Securities and Capital Markets team at Michael Best can assist companies in evaluating the potential effect of Reg. CA, planning offerings under the proposed exemptions, assessing the proposed safe harbor, and preparing comments for submission to the SEC.

Please reach out to a member of our team for more information.

This alert is for informational purposes only and does not constitute legal advice. Reg. CA remains a proposal and is not yet in effect; its terms may change materially before, or may never be, adopted in final form.

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SEC Proposes Tailored Offering Framework for Crypto Assets

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