SEC Unveils "Reg Crypto" Proposal, Including $5M and $75M Capital-Raise Exemptions

The U.S. Securities and Exchange Commission has introduced a long-awaited rule proposal, Regulation Crypto Assets ("Reg Crypto"), aimed at creating two new, purpose-built registration exemptions for certain crypto investment contracts and a conditional safe harbor that could allow an asset to stop being treated as an "investment contract." Reg Crypto is designed to give qualifying crypto issuers a defined way to raise capital without completing full Securities Act registration, while still requiring disclosures, reporting and other investor-protection conditions. The SEC stressed that the proposal is an agency rulemaking that overlaps with, but does not replace, pending legislation such as the Digital Asset Market Clarity Act ("CLARITY Act"). Two fundraising pathways 1) Small-offering exemption: Eligible issuers could offer up to $5 million in crypto investment contracts over a four-year period without full registration. The SEC positioned this track as a lower-cost option for smaller projects. 2) Larger-offering exemption: A second track would permit offerings of up to $75 million in any 12-month period. This pathway would carry more stringent requirements, including financial statements and post-offering ongoing reporting. Shared conditions and limits Both exemptions would require issuers to provide "principles-based narrative disclosures" under standards laid out in the proposed rules. The SEC also emphasized that neither exemption functions as a blanket carveout for tokens or token sales; eligibility would depend on meeting the rule's conditions, and not every crypto asset or transaction would qualify. Conditional safe harbor Beyond the exemptions, Reg Crypto proposes a conditional safe harbor under the Securities Act and the Exchange Act that could remove the "investment contract" label once certain conditions are met. The SEC framed the concept as focusing on the contractual relationship rather than permanently attaching securities treatment to a token. State law preemption and secondary markets The proposal would preempt state registration and qualification requirements for offers and sales that meet the exemptions' terms, and for certain secondary-market transactions that also comply. The SEC noted the preemption is limited in scope, targeting registration and qualification rather than eliminating every potentially applicable state rule. How it fits into the broader policy timeline Reg Crypto follows the SEC's March 2026 interpretive guidance addressing when crypto assets are sold as part of investment contracts and when that relationship can end. The rule had already entered White House review under RIN 3235-AN38. The SEC had planned an Aug. 14 open meeting to consider the framework but canceled it due to scheduling issues. An Aug. 18 press release announced the proposal's publication and its entry into the formal public rulemaking process. The SEC's approach differs from the CLARITY Act, which would statutorily define categories of digital assets and allocate oversight between the SEC and the CFTC. Reg Crypto is narrower, focusing on securities offering mechanics, disclosures and potential exit conditions from investment-contract status. It does not fully resolve the securities-versus-commodities line or establish a market-structure regime for spot trading. What issuers and investors should watch If adopted, U.S. issuers could structure fundraising and subsequent transactions around the two exemption tracks. Investor information would vary by pathway, with the $75 million route requiring financial statements and ongoing reporting. Public comments will be accepted for 60 days after the proposal's publication. The rules are not final and do not immediately change registration obligations; the SEC could revise the proposal based on feedback. Separately, the SEC is developing an Innovation Exemption for tokenized securities and on-chain trading through a different rulemaking process, distinct from the two Reg Crypto fundraising exemptions. Market watchers, including Galaxy Digital's Alex Thorn, had expected the SEC to publish Reg Crypto, the Innovation Exemption, or both within weeks. Bottom line Reg Crypto would provide a limited, SEC-led framework for certain crypto investment contracts to raise capital through tailored exemptions and to potentially exit investment-contract treatment via a conditional safe harbor. Larger structural questions, and any broader legislative overhaul, remain open. The proposal moves the policy debate into the formal rulemaking phase while offering the industry a more structured compliance pathway for capital raises and clearer mechanics for ending investment-contract relationships.