Why It Matters

The Securities and Exchange Commission (SEC) issued a proposed rule on August 18 that would create a tailored offering and disclosure framework for crypto assets. SEC Chairman Paul Atkins called it the most historic step yet to modernize federal securities regulations for crypto assets, but the proposal arrives as Congress prepares to vote on competing legislation, with a Senate cloture vote on the House-passed Digital Asset Market Clarity Act scheduled for September 15. Exchanges, brokers, and dealers could still face securities law liability for listing or trading covered crypto assets before an issuer completes its essential managerial efforts.

The Big Picture

The SEC's proposed Regulation Crypto Assets, detailed in a Congressional Research Service report published September 10, would create two exemptions from securities registration requirements for crypto asset offerings. The startup exemption would allow issuers to raise up to $5 million over four years without registering their offerings as securities, provided they file required notices with the SEC. The fundraising exemption offers two tiers, with Tier 1 permitting offerings of up to $20 million in a 12-month period and Tier 2 allowing up to $75 million, though Tier 2 would require audited financial statements.

The proposal includes a safe harbor codifying the SEC's March 2026 guidance as to when crypto assets issued pursuant to an investment contract separate from that contract. However, the SEC would retain the right to challenge an issuer's certification that it completed or permanently ceased essential managerial efforts, preserving agency oversight even after an issuer claims to have transitioned.

The SEC's approach differs from competing legislative proposals on a critical point: how to determine when disclosure requirements end. The House-passed CLARITY Act would base that determination on whether a blockchain system reaches maturity, while a July 2026 Senate draft released by Senator Cynthia Lummis (R-WY) would focus on whether an issuer's covered parties engaged in more than a nominal level of entrepreneurial or managerial efforts within the previous 180 days. Both legislative proposals would go further than the SEC's rule by providing that secondary-market transactions in covered crypto assets are not securities transactions, even while issuers engage in essential managerial efforts.

The SEC's disclosure framework emphasizes flexibility, requiring issuers to describe material information on ten topics including the investment contract, the crypto asset, management, the associated network, and asset economics, without prescribing rigid detail requirements. Issuers under the startup exemption would update disclosures annually for material changes, while those using the fundraising exemption would face annual, semiannual, and current reporting obligations until filing a transition report.

The Bottom Line

Even if the SEC finalizes its proposed rule, the outcome may hinge on Congress, since intermediaries would still face potential liability for listing or trading covered crypto assets before promised managerial efforts conclude. Chairman Atkins stated the SEC "has and will continue to support Congress in delivering the CLARITY Act to President Trump's desk," and acknowledged that "legislation remains indispensable to enacting future-proofed rules of the road" on crypto.

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