SEC proposes exemptions and a safe harbor for crypto token sales

The SEC proposed Regulation Crypto Assets on Tuesday, the agency's first rulemaking written specifically for crypto offerings. The package creates two exemptions from registration under the Securities Act of 1933 and a conditional safe harbor that can sever a token from the investment contract it was sold under, Unchained reported. The proposal landed days after the commission scrapped a Friday meeting called to consider the same rule, citing a scheduling issue.

The startup exemption covers offerings up to $5 million across a four-year window, conditioned on public filings at the start and end of that period plus narrative disclosures to investors. The fundraising exemption borrows its structure from Regulation A and splits into two tiers: $20 million per 12-month period under Tier 1, and $75 million under Tier 2, which requires audited financial statements and ongoing reporting. Antifraud and antimanipulation rules apply to both exemptions regardless of tier. A new "qualified purchaser" definition would also preempt state registration and qualification requirements, including for some secondary market trades.

The safe harbor works differently from the exemptions. An issuer that has completed or permanently stopped the essential managerial work it promised can file a certification with supporting analysis. Once approved, the investment contract behind the token is deemed to no longer exist, and the token itself exits the statutory definition of a security. Coinbase chief policy officer Faryar Shirzad framed the design as both an entry point and an exit, arguing that securities law needs a way out as much as a way in.

• Startup exemption ceiling: $5 million over a four-year window
• Fundraising exemption, Tier 1: $20 million per 12-month period
• Fundraising exemption, Tier 2: $75 million per 12-month period, with audited financials required
• Comment period after Federal Register publication: 60 days
• Sitting SEC commissioners who voted to propose the rule: all three, all Republican

The proposal builds on a joint SEC and CFTC interpretation issued in March that declared most crypto assets non-securities and introduced a token taxonomy, part of the same regulatory reset that gained momentum after the Clarity Act stalled in Congress. SEC Chair Paul Atkins credited Commissioner Hester Peirce, whose 2020 "Running on Empty" remarks first floated the idea of a token safe harbor, and Peirce said she wants public comment on letting tokens function more like equity in the networks that issue them, a notably different posture than the commission's earlier warnings to DeFi vaults about a painful reckoning. The agency sent the draft to the White House for interagency review back in April, months before Tuesday's vote.

For founders, the practical effect is a menu instead of a single path. A project raising a small amount from friends and early believers can lean on the startup exemption without touching Regulation A's heavier disclosure regime, while a larger raise can size up through Tier 1 or Tier 2 depending on how much audited reporting the team can support. The safe harbor solves a different problem: it gives a network that has already decentralized a formal, certifiable way to stop being treated as a security offering, rather than relying on informal guidance or years of litigation risk to make that case. None of the three provisions eliminates the antifraud rules that already apply to token sales, and the 60-day comment window means the final text can still change before it takes effect.

This article is for informational purposes only and does not constitute investment advice.