SEC's token on-ramp: a $5M starter round, a $75M tier, and the end of state review

The Securities and Exchange Commission on Tuesday proposed "Regulation Crypto Assets," two exemptions that would let certain crypto companies raise capital without full securities registration: a one-time offering of up to $5 million over four years, or up to $75 million in any 12-month period with ongoing reporting attached ^[1][2]. The same proposal would stop states from imposing separate securities registration and qualification requirements on offerings that qualify federally, and that preemption reaches secondary transactions too ^[3][9].

The architecture is borrowed rather than invented. The exemptions are positioned alongside Reg CF and Reg A+, the online capital formation rules created by the JOBS Act of 2012 ^[4]. The smaller one, described as a "startup exemption," is a one-time, non-exclusive exemption from Securities Act registration for a round of covered investment contracts up to $5 million ^[5]. The larger Fundraising Exemption has two tiers: up to $20 million of covered investment contracts in 12 months under Tier 1, and up to $75 million under Tier 2, which requires filed offering documents, audited financial statements and periodic reporting ^[6]. Both exemptions require principles-based disclosure, and federal antifraud and antimanipulation rules would still apply ^[7][8].

The numbers set the incentive. Spread across its four-year window, the startup exemption averages $1.25 million a year, so the $75 million annual ceiling is 60 times that pace ^[11]. The $55 million of headroom between Tier 1 and Tier 2 is, in effect, the price the SEC is putting on audited financials and periodic reporting ^[12]. Counsel will be modelling whether a client can live inside Tier 1 and skip the audit, or needs the full apparatus.

Two provisions matter more than the caps. The first is a conditional safe harbor that would let an issuer "delink" a crypto asset from the investment contract through which it was sold ^[13]. Chair Paul Atkins said that safe harbor becomes available once an issuer has completed or permanently ceased all essential managerial efforts it represented or promised it would take under the contract ^[14]. The second is the preemption mechanism: the rules would define "qualified purchaser," and state registration and qualification requirements would be preempted for offers and sales of covered investment contracts, secondary transactions included ^[9]. States would keep fraud authority ^[10]. They have lost this fight before, having sued the SEC over Reg A+ and lost in court ^[10].

The path here was not smooth. The SEC canceled a meeting on Regulation Crypto Assets last week, citing an "unforeseen scheduling issue" ^[15]. Crypto In America reported on Monday that SIFMA, the Wall Street trade group, had discussed a potential legal challenge to the SEC's authority, and that the White House had asked the agency to postpone the meeting amid CLARITY Act negotiations ^[16]. Atkins said the Commission continues to support congressional work on the CLARITY Act and expects the bill to reach the president's desk, but that "under our current statutory authority, we are acting" ^[17]. A setback in negotiations sank hopes of passage this year ^[18].

Commissioner Hester Peirce said the proposed exemptions would not cover every type of crypto project and asked the industry to weigh in on how the rules should evolve, calling the proposal "one step on a long road" ^[19].

The comment period runs 60 days from publication in the Federal Register ^[20]. Watch whether SIFMA's threatened challenge materialises, and note that Treasury moved on Monday to implement the GENIUS Act, generally requiring stablecoin issuers to hold federal or state licenses from January 2027, with platform restrictions on unapproved issuers' stablecoins from July 2028 ^[21].