On August 18, 2026, the Securities and Exchange Commission proposed Regulation Crypto Assets, an offering and disclosure framework for “covered investment contracts” involving crypto assets that are not themselves securities. The proposal represents the next phase of the SEC’s “Project Crypto” initiative, building on recent regulatory developments, in particular the SEC’s March 2026 interpretation regarding the application of the federal securities laws to certain types of crypto assets and transactions,[2]and public comments provided to the SEC’s Crypto Task Force in response to Commissioner Hester M. Peirce’s 2025 request for input on certain aspects relating to crypto regulation.[3] In his statement accompanying the proposed rules, Chairman Paul S. Atkins noted that Regulation Crypto Assets “would create a fit-for-purpose framework” that “would facilitate capital formation and allow crypto asset innovation to flourish in the United States in the years ahead.” With respect to pending market structure legislation, Chairman Atkins noted that the “SEC has and will continue to support Congress in delivering the CLARITY Act,” as legislation remains indispensable to enacting “future-proofed” rules of the road.[4]
Regulation Crypto Assets, if adopted, would apply exclusively to “covered investment contracts,” which would be defined as an investment contract in which (i) a “crypto asset”[5] is subject to the investment contract, (ii) such crypto asset is not a security, and (iii) no asset other than such crypto asset (including any security or non-security asset) is subject to the investment contract. The term is used throughout the proposed regulation, and neither the startup exemption nor the fundraising exemption would be available with respect to offers and sales of other types of securities (for example, investment contracts that involve crypto asset securities, other types of securities or non-security assets other than crypto assets). The exemptions would, for example, not be available for a single investment contract that contemplates the sale of both a crypto asset and a share of the issuer’s stock. The term “investment contract” itself would not be defined in Regulation Crypto Assets, but instead continue to be subject to the Howey[6] test, applied in accordance with the guidance in the SEC’s March 2026 interpretation and the proposing release.[7]
Appendix A to this memorandum compares the startup exemption and the fundraising exemption with other relevant exemptions under the SEC’s current registration framework.
Registration Exemptions
Regulation Crypto Assets, if adopted, would provide for two registration exemptions: (i) a “startup exemption” for offerings of up to $5 million during a four-year period, and (ii) a two-tier “fundraising exemption,” modeled on Regulation A, for offerings of up to $20 million and up to $75 million, each in any 12-month period.
Startup Exemption
The startup exemption, which would be codified in Rule 200, would exempt “covered transactions”[8] of up to $5 million during a four-year period from the registration requirements of the Securities Act. It is intended to provide issuers with a four-year regulatory runway during which they could attempt to fulfill their representations or promises to engage in essential managerial efforts under covered investment contracts, whether or not the exemption is used principally for capital raising purposes. For example, the startup exemption would enhance legal certainty for the issuance of a native token via airdrop or over time as rewards for sequencers, validators or network users, to the extent they may be deemed to involve an “investment contract,” and the issuer can certify to its intent to fulfill within four years the essential managerial efforts represented or promised to investors under the covered investment contract.
The requirements of the startup exemption, if adopted, are as follows:
- Issuer Eligibility: The issuer may be an entity, an individual, or a group of individuals or entities.[9]
- One-Time Use: The issuer and its affiliates must not have previously relied on the startup exemption with respect to the same subject crypto asset, or a substantially similar crypto asset. As the SEC recognizes, the limitation on “substantially similar crypto assets”[10] could potentially inhibit utilizing the startup exemption with respect to separate but functionally identical crypto asset projects.
- Offer Limit: The sum of the “aggregate offering price”[11] in the covered transaction plus the gross proceeds from all covered transactions must not exceed $5 million during a four-year period.
- Notice of Reliance: The issuer must file with the SEC a “Notice of Reliance” on Form NOR prior to the commencement of the offering, including basic issuer information; the crypto asset name; the website address where Rule 103 disclosure is available; and a certification that the information is true and that the issuer intends to fulfill within four years the essential managerial efforts the issuer represented or promised investors it would engage in under the covered investment contract.
- Transition Report: The proposed rules would require the issuer to file a transition report containing the information required by Form TR no later than four years after the date on which the issuer filed a notice of reliance. This report would serve to make investors, the SEC, and other members of the public aware that the issuer has ceased relying on the startup exemption and disclose, among other information, whether the issuer had successfully completed its essential managerial efforts represented or promised to investors under the covered investment contract.
- Bad Actor Disqualification: Neither the issuer nor any person listed in Rule 262(a)[12] may be subject to the “bad actor” disqualification under Rule 262, which includes certain criminal convictions; court injunctions; orders from certain regulators (SEC, banking, insurance, etc.) barring association with regulated entities; SEC disciplinary orders suspending or revoking registration; SEC cease-and-desist orders involving fraud or manipulation; and self-regulatory organization sanctions.
- Disclosure Obligations: Issuers relying on the startup exemption would be required to make certain disclosures publicly accessible (free of charge) at a website address specified in the issuer’s Notice of Reliance, and issuers would be required to update the disclosure annually for material changes. See “Principles-based Disclosure Requirements” below for the disclosure requirements applicable to issuers relying on the startup exemption.
Securities issued under the startup exemption would not be restricted securities, general solicitation would be permitted, and there would be no accredited-investor or similar limitation. Together with the proposed State law preemption, discussed below, this means that securities issued under the startup exemption would, subject to any contractual restrictions, be freely transferable.[13]
Fundraising Exemption
The “fundraising exemption,” which would be codified in Rule 300, would establish a two-tier exemption from the registration requirements of the Securities Act. The fundraising exemption is largely modeled on Regulation A, but with important modifications, and is intended to provide issuers of covered investment contracts with a tailored framework to raise larger amounts of capital to finance the development of the subject crypto asset and its associated crypto network or application, while ensuring that investors receive information and protections appropriate to a public offering.
The requirements of the fundraising exemption, if adopted, are as follows:
- Offer Limit: In Tier 1 offerings, issuers may make offers and sales of up to $20 million of covered investment contracts in a 12-month period, including no more than $6 million offered by selling securityholders who are affiliates of the issuer. In Tier 2 offerings, issuers may make offers and sales of up to $75 million of covered investment contracts in a 12-month period, including no more than $22.5 million offered by selling securityholders who are affiliates of the issuer.
- Issuer Eligibility: The fundraising exemption is only available to issuers that are entities organized and administered in the United States, with a majority of the issuer’s executive officers or directors being U.S. citizens or residents and more than 50% of the issuer’s assets being located in the United States. The issuer must have been current in its SEC reporting obligations for two years before the filing of the offering statement (or for such shorter period that the issuer was required to file such reports). Development stage companies with no specific business plan or purpose (or that have indicated that their business plan is to merge with or acquire an unidentified company), investment companies registered or required to be registered under the Investment Company Act, business development companies under the Investment Company Act, and issuers subject to an order of the SEC pursuant to Section 12(j) of the Exchange Act within five years before the filing of the offering statement would be ineligible to rely upon the fundraising exemption.
- Bad Actor Disqualification: Consistent with the startup exemption, neither the issuer nor any person listed in Rule 262(a) may be subject to the “bad actor” disqualification under Rule 262.
- Restrictions on Communications: Other than solicitation of interest communications that satisfy the testing-the-waters requirements of proposed Rule 304, no offer of securities may be made prior to the filing of an offering statement with the SEC. Following the filing of an offering statement, but prior to SEC qualification, an issuer relying on the fundraising exemption may make oral offers, written offers consisting of a preliminary offering circular pursuant to proposed Rule 303, and solicitations of interest that satisfy the testing-the-waters requirements of proposed Rule 304. Following qualification, an issuer may make written offers and sales, but post-qualification written offers must be accompanied by the most recently filed offering circular.
- Investor Limitations: Non-accredited investors may participate in offerings under the fundraising exemption. However, the purchase price to be paid by the purchaser may not exceed 10% of the greater of the purchaser’s annual income or net worth, calculated on the basis of the definition of “accredited investor” in Rule 501 of Regulation D.
- Offering Circular Delivery: In an offering under the fundraising exemption by the issuer or an underwriter, or by a dealer within 90 calendar days[14] after qualification of the offering statement, each issuer, underwriter or dealer selling in the transaction must deliver a final copy of the offering circular to the purchaser within two business days after the completion of the sale. The delivery requirement may be satisfied by providing the purchaser with a notice that the sale was made pursuant to a qualified offering statement and providing a link to where the final offering circular can be obtained.
- Continuous and Delayed Offerings: Continuous and delayed offerings would be permitted in the following contexts: (i) offerings of covered investment contracts by selling securityholders; (ii) offerings of covered investment contracts pursuant to an employee benefit plan; (iii) offerings of covered investment contracts to be issued upon the exercise of outstanding options, warrants or other rights; (iv) offerings of covered investment contracts to be issued on the conversion of other outstanding securities; (v) offerings of covered investment contracts pledged as collateral; and (vi) continuous offerings of covered investment contracts that are commenced within two business days after the qualification date. A new offering statement would need to be qualified after three years.
- Offering Statement: Issuers must file an offering statement on Form 1-CRYPTO, consisting of narrative disclosure and U.S. GAAP-compliant financial statements of the issuer. The financial statements in Tier 1 offerings may be unaudited whereas financial statements in Tier 2 offerings must be audited. See “Principles-based Disclosure Requirements” below for additional disclosure requirements applicable to issuers relying on the fundraising exemption.
- Ongoing Disclosure Requirements: Issuers relying on the fundraising exemption with a qualified offering statement are required to make annual, semiannual and current reports with the SEC. Annual and semiannual reports must contain GAAP-compliant financial statements (unaudited for Tier 1, audited for Tier 2), and narrative discussion of the issuer’s financial condition modeled on Regulation Crowdfunding’s narrative discussion requirement including, to the extent material, changes in financial condition, liquidity, capital resources and historical results of operations.
- Transition Report: The proposed rules would establish transition reporting provisions pursuant to which issuers would be able to suspend and terminate their duty to file reports under the fundraising exemption. Subject to certain conditions, the duty to file reports would be suspended upon the filing of a Form TR when the relevant covered investment contracts are held of record by fewer than 300 holders. Similar to the startup exemption, the report would also serve to make investors, the SEC, and other members of the public aware that the issuer has ceased relying on the fundraising exemption and disclose, among other information, whether the issuer had successfully completed its essential managerial efforts represented or promised to investors under the covered investment contract.
Principles-based Disclosure Requirements
Both the startup exemption and the fundraising exemption require issuers to comply with “principles-based” disclosure requirements set forth in the proposed Rule 103. Rather than prescribing specific line item requirements (as under Regulation S-K or Form 1-A), the principles-based disclosure requires issuers to describe the “material aspects” of each specified topic, tailored to the issuer’s particular facts and circumstances. Disclosure must be presented in clear, concise, and understandable language and must be consistent with the issuer’s public statements (including on its website, social media and in any whitepapers). Importantly, disclosure is not required where a particular requirement is inapplicable or responsive information is unknown or not reasonably available.
The ten specified disclosure topics are as follows:
- Covered Investment Contract: Describe the material terms of the covered investment contract, including the issuer’s representations or promises to engage in essential managerial efforts, its progress with respect to such representations or promises, purchaser obligations, conditions and any other material terms.
- Offering: Describe the material terms of the offering, including number of units, purchase price (or pricing methodology), offering period duration, purchaser qualifications or restrictions, material distribution agreements, estimated net proceeds and expenses, intended use of proceeds and a link to any whitepapers or offering materials.
- Subject Crypto Asset: Disclose the name and material aspects of the subject crypto asset.
- Management, Related Persons, and Conflicts of Interest: Describe the material aspects of the issuer’s management and related persons, conflicts of interest or related-person transactions and whether related persons are subject to transfer or resale restrictions (and, if so, their material terms).
- Associated Crypto Network/Application and Plan of Development: Describe the material aspects of the associated crypto network or application and the issuer’s plan of development, including progress to date.
- Security and Source Code: Describe the material aspects of the security of the subject crypto asset and the associated network or application, and, to the extent publicly available, the URL at which the source code is accessible.
- Subject Crypto Asset Economics and Allocations: Describe the material aspects of the subject crypto asset’s economics and allocations, including supply, pricing, lockups, distribution methods, insider holdings, release schedules, mechanisms for generating and destroying tokens and methods to verify transaction history.
- Governance: Describe the material aspects of the subject crypto asset’s and the associated network’s or application’s governance mechanisms, smart contract governance and permissions.
- Subject Crypto Asset Ecosystem: Describe the material aspects of the subject crypto asset’s current and anticipated ecosystem (the system or network of contributors, participants and infrastructure that support and interact with the crypto asset and associated network or application), both onchain and offchain.
- Risk Factors: Provide, in short and concise statements, the material factors that make an investment in the offering speculative or risky, including risks specific to the covered investment contract, the issuer, the subject crypto asset and the associated network or application. Generalized risk statements are prohibited.
For issuers relying on the startup exemption, the disclosures would be made publicly accessible (free of charge) at a website address specified in the issuer’s Notice of Reliance, and issuers would be required to update the disclosure annually for material changes. Under the fundraising exemption, the disclosures would be incorporated into the offering statement and updated through ongoing periodic reports.
As noted above, issuers relying on the fundraising exemption are required to file GAAP-compliant financial statements in connection with any offering statement and annual and semiannual reports, with annual financial statements included in offering statements and annual reports having a two-year lookback. The offering statements and annual reports of Tier 2 issuers must be audited, but Tier 1 issuers may include unaudited financial statements for such filings.
State Law Preemption
Regulation Crypto Assets would add a new definition of “qualified purchaser” for purposes of Section 18(b)(3) of the Securities Act to include any person to whom covered investment contracts are offered or sold under Regulation Crypto Assets. These covered investment contracts would be “covered securities” preempted from State registration requirements. The proposed amendments would also preempt State securities law registration and qualification requirements for secondary market transactions in a covered investment contract, regardless of whether that covered investment contract was initially offered and sold pursuant to an exemption in Regulation Crypto Assets or under another exemption from registration (such as Section 4(a)(2) or Regulation D), so long as the issuer has satisfied the requirements of the startup exemption or the fundraising exemption with respect to that covered investment contract and remains subject to (and current with respect to) that exemption’s disclosure and filing requirements and/or periodic reporting obligations.[15] For example, according to the proposed rule, if an issuer issued covered investment contracts under the fundraising exemption, and later issued some of the same covered investment contracts under Regulation D, secondary market transactions in all of those covered investment contracts would be equally subject to preemption.[16]
Investment Contract Safe Harbor
The proposed non-exclusive investment contract safe harbor, which would be codified in Rule 400, would provide that a “covered investment contract” will be deemed to have ceased to exist, and the crypto asset that was subject to the covered investment contract will be deemed not to constitute or represent or to be subject to that investment contract, if the following conditions are satisfied:
- The issuer of the covered investment contract has completed or otherwise permanently ceased all essential managerial efforts that it represented or promised it would engage in under the covered investment contract and is not making and does not intend to make any new representations or promises to engage in essential managerial efforts with respect to the crypto asset; and
- The issuer files a transition report with the SEC containing the information required by Form TR, including, among other information, the issuer’s analysis of the conditions of the safe harbor such that a reasonable investor could understand how the issuer made its determination.
If the conditions of the safe harbor are satisfied, the SEC would deem the covered investment contract to have ceased to exist, and therefore to no longer be a “security.” This proposed safe harbor would codify this part of the SEC’s March 2026 interpretation—i.e., when a covered investment contract ceases to be an investment contract. It would not codify the test for determining when the sale of a crypto asset initially involves an investment contract, which remains a determination under Howey. The SEC’s March 2026 interpretation, consistent with statements of Chairman Paul S. Atkins,[17] provides guidance with respect to the interpretation of Howey. Specifically, a purchaser’s “reasonable profit expectations depend on the issuer’s representations or promises to engage in such essential managerial efforts.”[18] Whether it would be reasonable for a purchaser to expect profits based on such representations or promises to engage in managerial efforts depends on the specific facts and circumstances, with an emphasis on the source of the representations or promises, when they are made, the medium by which they are communicated, and the level of detail provided. For example, according to the SEC’s 2026 interpretation, representations or promises that are vague or that contain no semblance of an actionable business plan, such as those lacking milestones, funding, or other plans for needed resources, likely would not create reasonable expectations of profit.
Whether and when an issuer fulfills its representations or promises and may rely on the proposed non-exclusive investment contract safe harbor depends on how it defines or otherwise describes such efforts in marketing and promoting the investment contract. For example, the SEC’s 2026 interpretation notes that if the issuer represents or promises to achieve decentralization or certain functionality, whether the issuer has achieved decentralization or functionality would be based on how the issuer defined or otherwise described these terms, not a general market conception of what constitutes decentralization or functionality. To the extent issuers make representations or promises about essential managerial efforts they plan to undertake, the SEC encourages issuers to clearly and in sufficient detail outline those efforts, provide a timeline and milestones for completing those efforts, explain the resources needed to complete those efforts, and publicly disclose the completion of those efforts. Consistent with this guidance, the proposing release notes that in conducting its analysis for purposes of the safe harbor, “we expect that the issuer would refer to information it disclosed in response to proposed Rule 103(b)(1).”[19] Accordingly, an issuer’s initially disclosed “representations and promises” that became the subject of the investment contract will determine when the issuer is able to satisfy the conditions of the safe harbor.
Key Takeaways
- Together with the SEC’s recent guidance on the application of the federal securities laws to crypto assets,[20] proposed Regulation Crypto Assets marks a significant step forward in the SEC’s efforts to provide clarity and certainty for crypto issuers.
- The proposed startup exemption, if adopted, would provide covered investment contract issuers with an on-ramp that permits general solicitation without accredited investor limitations or limitations on resales in the secondary market. While the startup exemption will make it easier for projects to offer tokens as incentive for past or future use of a crypto network or as a reward or incentive for sequencers, validators or others, the $5 million issuance limitation and the “one-time-use” limitation make the startup exemption less suitable for traditional capital raising purposes.
- The proposed fundraising exemption, if adopted, would provide covered investment contract issuers with a tiered framework to raise larger amounts of capital, built on Regulation A, but tailored to crypto asset issuers, which we expect will be attractive for issuers that are prepared to file an offering statement for qualification with the SEC and subsequently comply with ongoing annual, semiannual and current reporting requirements under the exemption.
- To the extent an issuer contemplates a large institutional capital raise, we expect that a private placement pursuant to Section 4(a)(2) or Rule 506(c) will remain a practical alternative for issuers. These exemptions permit offerings and sales of securities without size limitations or ongoing disclosure requirements. To the extent an issuer makes “representations and promises” with respect to its managerial efforts in connection with an institutional capital raise, it could still rely on the proposed non-exclusive safe harbor to establish that the covered investment contract has ceased to exist if the representations and promises are satisfied.
- Given the purpose of the startup exemption and its $5 million aggregate issuance limitation, consideration should be given as to whether additional integration guidance should be provided in the adopting release, consistent with the 2015 Regulation Crowdfunding adopting release,[21] to provide certainty as to when issuers may utilize the fundraising and/or a private placement exemption for capital raising efforts while the startup exemption is used for continuous on-chain rewards and incentives. In addition, because the issuer’s Notice of Reliance on Form NOR requires the issuer to certify to its “intent” to satisfy its representations and promises with respect to its managerial efforts within four years, the SEC should consider clarifying in the adopting release that the failure of an issuer relying on the startup exemption to satisfy such representations and promises will not call into question the availability of the exemption.
- The proposed “principles-based” disclosure framework would reduce compliance burdens by offering meaningful disclosure rationalization for covered investment contract issuers (as compared to alternative pathways such as an SEC-registered offering), consistent with the SEC’s ongoing efforts to refocus disclosure requirements on materiality as the “north star.”[22]
- The SEC’s view that “covered investment contracts” are not “equity securities” and, therefore, are not subject to Section 12(g),[23] is a helpful clarification and avoids compliance burdens associated with issuers inadvertently becoming subject to Exchange Act reporting obligations.
This post is based on a Sullivan & Cromwell LLP memorandum, “SEC Proposes Regulation Crypto Assets,” dated August 21, 2026, and available here.
Appendix A: Exempt Offering Comparison
| Startup Exemption | Fundraising Exemption | Regulation A | Regulation D | Regulation Crowdfunding | |
| Eligible Securities | Covered investment contracts only | Covered investment contracts only | Equity, debt, and securities convertible or exchangeable into equity (excludes asset-backed securities) | Any securities | Any securities |
| Offering Limit | $5 million over four-year period |
Tier 1: $20 million over 12 months Tier 2: $75 million over 12 months |
Tier 1: $20 million over 12 months Tier 2: $75 million over 12 months |
Rule 504: $10 million over 12 months Rule 506: None |
$5 million over 12 months |
| Issuer Eligibility |
Entity, individual, or group of individuals/entities Bad actor disqualifications apply |
U.S.-organized entity only, with majority of executive officers and directors U.S. citizens or residents; >50% of assets and principal administration in the U.S.[24] Bad actor disqualifications apply |
U.S. or Canadian issuers[25] Bad actor disqualifications apply |
Rule 504:Bad actor disqualifications apply[26] Rule 506: Bad actor disqualifications apply |
U.S.-organized entity only[27] Bad actor disqualifications apply |
| Investor Eligibility | None | Non-accredited investors capped at 10% of the greater of annual income or net worth (natural persons) or revenue/net assets (entities) |
Tier 1: None Tier 2: non-accredited investors capped at 10% of the greater of annual income or net worth (natural persons) or revenue/net assets (entities), unless securities will be listed |
Rule 504: None Rule 506(b):accredited plus up to 35 sophisticated non-accredited investors in a 90-day period Rule 506(c):accredited investors only, and issuer must take reasonable verification steps |
No limits for accredited investors Non-accredited investors are subject to investment limits based on the greater of annual income or net worth (with the cap scaling from 5% to 10% based on the investor’s annual income or net worth) |
| General Solicitation | Permitted | Permitted, subject to offering communication restrictions | Permitted, subject to offering communication restrictions |
Rule 504: permitted in limited circumstances Rule 506(b): not permitted Rule 506(c): permitted |
Permitted with limits on advertising after Form C is filed |
| Financial Statements | Not required |
Tier 1: unaudited financial statements Tier 2: U.S. GAAP audited under U.S. GAAS or PCAOB standards by a Reg S-X Rule 2-01 independent auditor |
Tier 1: unaudited financial statements Tier 2: U.S. GAAP audited under U.S. GAAS or PCAOB standards by a Reg S-X Rule 2-01 independent auditor |
Rule 504: none. Rule 506(b): if non-accredited investors, financial statements consistent with Regulation A Rule 506(c): none prescribed |
$124k or less: financial statements certified by PEO $124k-$618k: financial statements reviewed by independent public accountant Over $618k: audited financial statements (with first-time issuers exemption) |
| SEC Filings | Notice of Reliance on Form NOR filed before offering; Form TR transition report at end of four-year period | Offering statement on Form 1-CRYPTO, including two years of financial statements (unaudited for Tier 1, audited for Tier 2); ongoing reporting consisting of annual, semiannual and current reporting, and Form TR transition reporting |
Tier 1: Form 1-A, including two years of unaudited financial statements; exit report Tier 2: Form 1-A, including two years of audited financial statements; ongoing reporting consisting of annual, semiannual, current, and exit reports |
Form D notice of sale filed with the SEC 504 only: Delivery of a disclosure document to non-accredited investors with financial statements consistent with Regulation A (not filed with SEC) |
Form C, including two years of financial statements that are certified, reviewed or audited, as required Progress and annual reports |
| Resale Restrictions | None | None | None |
Rule 504: Restricted securities except in limited circumstances Rule 506: Restricted securities |
12-month resale limitation |
| State Law Preemption[28] | Yes (primary and secondary transactions), so long as issuer remains subject to and is current with disclosure obligations | Yes (primary and secondary transactions), so long as issuer remains subject to and is current with disclosure obligations |
Tier 1: No Tier 2: Yes (primary and secondary transactions) |
Rule 504: No Rule 506: Primary transactions only |
Primary transactions only |
ENDNOTES
[1] Regulation Crypto Assets, Release Nos. 33-11434; 34-106150 (Aug. 18, 2026) (“Proposed Rule”), available athttps://www.sec.gov/files/rules/proposed/2026/33-11434.pdf.
[2] Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Release Nos. 33-11412, 34-105020 (March 17, 2026) (the “March 2026 interpretation”), available athttps://www.sec.gov/files/rules/interp/2026/33-11412.pdf; see also our memo to clients, Sullivan & Cromwell LLP, SEC and CFTC Issue Interpretation Regarding the Application of Federal Securities Laws to Crypto Assets, (March 19, 2026), https://www.sullcrom.com/insights/memo/2026/March/SEC-Clarifies-Application-Securities-Laws-Crypto-Assets.
[3] See Proposed Rule at 20-29.
[4] See Paul S. Atkins, Fit-for-purpose Exemptions for Crypto Market Innovation (August 18, 2026), https://www.sec. gov/newsroom/speeches-statements/atkins-statement-regulation-crypto-assets-081826.
[5] The term “crypto asset” would be defined as any digital representation of value that is recorded on a cryptographically-secured distributed ledger.
[6] See SEC v. W.J. Howey Co., 328 U.S. 293 (1946).
[7] See Proposed Rule at 74, n.193 (“we believe the determination as to whether a crypto asset is subject to an investment contract is based on whether a crypto asset purchaser’s profit expectations depend on the issuer’s representations or promises to engage in essential managerial efforts.”).
[8] The term “covered transaction” would be defined as an offer, sale, or other distribution of a covered investment contract in reliance on the startup exemption, including, but not limited to: (i) any public or private offering, including a distribution, of a covered investment contract in one or a series of capital raising transactions; or (ii) 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. The SEC notes that these examples of certain types of distributions “are meant to be illustrative and are not intended to suggest that these are the only or preferred types of offers, sales, or distributions of covered investment contracts that can be conducted under the startup exemption.” Proposed Rule at 37-38.
[9] If the issuer is a group of individuals or entities, each member of the group must sign the notice of reliance and transition report and provide the certifications thereunder.
[10] The SEC has noted that this “substantially similar” standard is intended to prevent an issuer or its affiliate from circumventing the one-time use restriction “by making superficial changes to a crypto asset or the associated crypto network or associated crypto application. For example, two crypto assets would be substantially similar if they have different names but the crypto asset and the associated crypto network or associated crypto application are functionally identical.” Proposed Rule at 81, n.206.
[11] The term “aggregate offering price” would be defined as the sum of all cash and other consideration to be received for the covered investment contracts being offered. If covered investment contracts are not offered for cash, the aggregate offering price must be based on the value of the consideration as established by bona fide sales of that consideration made within a reasonable time, or, in the absence of sales, on the fair value as determined by an accepted standard. Valuations of non-cash consideration must be reasonable at the time made. See Proposed Rule at 34 and 322-323.
[12] In addition to the issuer, Rule 262(a) lists the following persons: any predecessor of the issuer; any affiliated issuer; any director, executive officer, other officer participating in the offering, general partner or managing member of the issuer; any beneficial owner of 20% or more of the issuer’s outstanding voting equity securities, calculated on the basis of voting power; any promoter connected with the issuer in any capacity at the time of filing, any offer after qualification, or such sale; any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with such sale of securities; any general partner or managing member of any such solicitor; or any director, executive officer or other officer participating in the offering of any such solicitor or general partner or managing member of such solicitor.
[13] See Proposed Rule at 105, n.250 (“Covered investment contracts issued pursuant to the fundraising exemption would not be restricted securities or otherwise subject to rule-based resale restrictions, and the fundraising exemption would not unduly limit an issuer’s ability to sell covered investment contracts to retail investors (by, for example, prohibiting sales to non-accredited investors).”).
[14] Where the offering is made on a continuous or delayed basis, the 90-calendar day period for dealers will commence on the day of the first bona fide offering of securities under the offering statement. Where the security is listed on a registered national securities exchange, no offering circular need be delivered by a dealer more than 25 calendar days after the later of the qualification date or the first date on which the security was bona fide offered to the public.
[15] See Proposed Rule at 171.
[16] See Proposed Rule at 179.
[17] Paul S. Atkins, The SEC’s Approach to Digital Assets: Inside “Project Crypto” (Nov. 12, 2025), https://www.sec.gov/newsroom/speeches-statements/atkins-111225-secs-approach-digital-assets-inside-project-crypto.
[18] March 2026 Interpretation at 25.
[19] See Proposed Rule at 166.
[20] See, e.g., Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Release Nos. 33-11412, 34-105020 (March 17, 2026), available at https://www.sec.gov/files/rules/interp/2026/33-11412.pdf; Division of Corporation Finance, Statement on Certain Protocol Staking Activities (May 29, 2025), https://www.sec.gov/newsroom/speeches-statements/statement-certain-protocol-staking-activities-052925.
[21] Crowdfunding, Securities Act Release No. 33-9974, Exchange Act Release No. 34-76324, 80 Fed. Reg. 71,388 (Nov. 16, 2015).
[22] See Paul S. Atkins, Remarks at the Texas Stock Exchange Event: Welcome to the Boom Belt: A Return to First Principles in Public Markets (Apr. 7, 2026), https://www.sec.gov/newsroom/speeches-statements/atkins-remarksboom-belt-040726; Paul S. Atkins, Remarks at the Texas A&M School of Law Corporate Law Symposium (Feb. 17, 2026), https://www.sec.gov/newsroom/speeches-statements/atkins-02-17-2026-remarks-texas-am-schoollaw-corporate-law-symposium.
[23] See Proposed Rule at 74, n.192 (“To the extent concerns have been raised about whether an issuer may need to register a class of covered investment contracts under Section 12(g) of the Exchange Act, we do not view covered investment contracts as equity securities, and, therefore, we believe they are not subject to Section 12(g). Specifically, a covered investment contract is not an ‘equity security’ under Section 3(a)(11) of the Exchange Act, 17 CFR 240.3a11-1, or 17 CFR 230.405.”).
[24] Excludes blank check companies, investment companies registered or required to be registered under the Investment Company Act, business development companies, issuers of certain securities, certain issuers subject to a Section 12(j) order within the preceding five years.
[25] Excludes blank check companies, investment companies registered or required to be registered under the Investment Company Act, business development companies, issuers of certain securities, certain issuers subject to a Section 12(j) order, and Regulation A and Exchange Act reporting companies that have not filed certain required reports.
[26] Excludes blank check companies, Exchange Act reporting companies and investment companies.
[27] Excludes blank check companies, Exchange Act reporting companies, investment companies, and issuers delinquent in required annual reports during the two years preceding the offering statement filing.
[28] Note that the proposed amendments would preempt State securities law registration and qualification requirements for secondary transactions in a covered investment contract regardless of how that covered investment contract was initially offered and sold, so long as the issuer has satisfied the requirements of the startup exemption or the fundraising exemption with respect to that covered investment contract and remains current with respect to such exemption’s disclosure, filing and/or periodic reporting requirements. See “State Law Preemption” in the attached memo for additional discussion relating to State law preemption.