Two new offering pathways
A lightly regulated startup exemption and a repeatable, qualified public-fundraising exemption with $20 million and $75 million tiers.
00
Executive take
The proposal creates a bespoke issuance-and-exit regime, but leaves most market infrastructure questions untouched.
$5M
One-time startup pathway
4Y
Maximum startup runway
$75M
Top public-fundraising tier
60D
Comment period after publication
Asset ≠ investment contract
The crypto asset must not itself be a security. Securities regulation attaches to the surrounding contract, transaction, or scheme.
Documentable separation
Rule 400 would provide a safe harbor once represented or promised essential efforts are complete or permanently ceased and no new promises are made.
Issuance relief, not full-stack relief
No comprehensive answer for exchanges, ATSs, broker-dealers, custody, commodities, money transmission, tax, or investment-company status.
Do not treat this as live law. None of the proposed exemptions, safe harbors, forms, or preemption rules is currently available.
01
The architecture
The proposal regulates the fundraising arrangement while formally preserving the token’s status as a nonsecurity asset.
Figure 1 // Formation and separation
- Covered investment contract
- A contract, transaction, or scheme that is an investment contract.
- A crypto asset is subject to the arrangement, but the asset itself is not a security.
- No other asset is subject to the same investment contract.
- Practical effect
- During the undertaking, the SEC treats the investment contract as remaining associated with the token through secondary transfers.
- After separation, token-only transfers fall outside investment-contract regulation unless a new undertaking arises or the asset independently fits another statutory security category.
02
Scope + disclosure
A broad range of crypto-native distributions may fit, but traditional tokenized securities and mixed-asset arrangements do not.
Potentially covered
Public or private fundraising, consideration-bearing airdrops, and reward distributions linked to operating, using, securing, or governing a network.
Outside the bespoke regime
Tokenized stock or debt, a token independently constituting another security, and arrangements involving another asset in addition to the crypto asset.
Required disclosure stack
What is being promised
Investment-contract terms, essential managerial efforts, offering terms, use of proceeds, and the development plan.
What is being built
Asset, network, application, source code, security, smart-contract permissions, governance, and ecosystem participants.
Who owns and controls it
Supply, allocations, minting, burning, unlocks, management, related persons, conflicts, insider holdings, and nonboilerplate risks.
Consistency rule: prescribed disclosures must remain consistent with public whitepapers, websites, and official social-media communications.
Related persons: exact scope and consequences
“Related person” means, with respect to an issuer: founders, promoters, employees, affiliates, and any person that is a director, officer, trustee, consultant, contractor, or advisor to the issuer, in each case together with any immediate family members.Proposed Rule 100 // Release No. 33-11434, PDF p. 322
Taxonomy, not automatic prohibition. “Related person” is broader than “affiliate,” “control person,” or the bad-actor list. Status alone creates disclosure consequences; it does not itself impose a lockup, Rule 144, an affiliate selling-holder cap, or disqualification.
Map // Consequences of related-person status
| Status | What follows | What must still be proved separately |
|---|---|---|
| Related person | Material role and relationship; conflicts and related-person transactions; any transfer/resale restrictions; token holdings, lockups, allocations, and release schedules must be described where material. | No separate showing for these disclosure duties. |
| Affiliate selling holder | Sales count toward the tier’s affiliate selling-holder cap and, during the initial offering and first year, the offering-wide 30% secondary-sales cap. | The person must actually be an affiliate and a selling securityholder; being an employee, contractor, adviser, or family member is not enough by itself. |
| Control person / affiliate reseller | Routine public resale generally requires Rule 144 or another valid registration/exemption pathway. | Actual control or affiliate status under the relevant securities-law test. |
| Rule 262(a) covered person | A specified disqualifying event can make the Regulation Crypto Assets exemption unavailable, subject to the proposal’s timing, reasonable-care, and waiver rules. | The person must fall within Rule 262(a)’s enumerated population and have a covered event; the “related person” label alone is insufficient. |
- The operative disclosure is exacting but principles-based.
- Rule 103(b)(4) requires the material aspects of management and related persons, conflicts or related-person transactions, and the existence and material terms of transfer or resale restrictions.
- Rule 103(b)(7) separately requires token economics and allocations, including “holdings by related persons” alongside supply, pricing, lockups, distribution methods, and release schedules.
- The SEC deliberately proposed disclosure instead of a mandatory related-person holding period.
- Issuers may adopt contractual lockups or policies, but the proposed exemptions do not create one merely because a holder is a related person.
03
Startup exemption
Proposed Rule 200 offers a one-time, four-year runway for up to $5 million of aggregate value.
Figure 2 // Rule 200 lifecycle
Broad issuer and investor access
Entity, individual, or group issuers; no proposed U.S. nexus; retail participation; general solicitation; no purchaser wealth or investment limit.
Not restricted securities
No rule-based holding period merely because the covered investment contract was sold under Rule 200. Ordinary resale and underwriter analysis still applies.
- Cap and uniqueness
- $5 million maximum, including cash and noncash consideration; some grants, rewards, and conditional airdrops may count.
- The issuer and affiliates may not reuse the exemption for the same or a substantially similar crypto asset.
- Each member of an issuer group must sign, certify, and comply individually and collectively.
- Entry and maintenance
- File public Form NOR before the first covered transaction; that filing starts the four-year clock.
- Certify an intention to complete the represented or promised essential managerial efforts within four years.
- Keep prescribed website disclosures freely available; correct material errors or changes as soon as practicable.
- Publish annual material-change updates within 30 days after calendar year-end. No financial statements or audit are required by Rule 200 itself.
- Exit is not automatic
- File Form TR by the fourth anniversary.
- If Rule 400 is satisfied, the same filing can establish separation.
- If not, the offering exemption expires but the investment contract may remain a security; another exemption, registration, or supportable existing-law conclusion is required.
Future-token contracts + stacking exemptions
Future delivery can fit
The proposal expressly describes ICO consideration exchanged for tokens “or the promise of a future issuance” and Form 1-CRYPTO treats a SAFT as a possible subscription exhibit. Rule 200 can therefore reach a future-token arrangement if it is a covered investment contract: a nonsecurity crypto asset—and no other asset—is the sole asset subject to the undertaking.
Other exemptions may be used
Rule 101(a) permits one or more Regulation Crypto Assets provisions alongside other exemptions. Rule 101(b) sends integration questions to Securities Act Rule 152. If both rounds rely on Rule 200, however, the startup cap remains $5 million in total.
| Worked sequence | Likely treatment under the proposal | Critical condition |
|---|---|---|
| 1. $5M VC SAFT round | Use a separate exemption—often Regulation D—not Rule 200. If validly separate, those proceeds do not consume Rule 200’s $5M startup limit because “covered transaction” is defined as a transaction in reliance on the startup exemption. | The SAFT offer and sale must independently satisfy its exemption. A SAFT involving equity, another security, or another asset cannot be shoehorned into the crypto-specific definition. |
| 2. End the private round | A later Rule 200 offering permits general solicitation. Rule 152(b)(4) can supply a nonintegration safe harbor for a general-solicitation offering made after a prior offering has terminated or completed. | Actually terminate the VC offering before public token marketing. If the rounds overlap, public roadmap or sale materials can become impermissible solicitation for a Rule 506(b) round; the facts-and-circumstances rules govern. |
| 3. Publish roadmap + open retail sale | File Form NOR and place all Rule 103 disclosure on the public website before the first public offer or other covered transaction. Then sell up to $5M under Rule 200 to accredited and nonaccredited purchasers. | The roadmap and official channels must be consistent with the filed/website disclosure, and the project must intend to complete the represented or promised essential efforts within four years. |
| 4. Deliver tokens to VCs | The SAFT conversion or token delivery must remain covered by the private-round exemption or another valid path; Rule 200 should not be assumed to cleanse it. | Regulation D securities and the covered investment contracts delivered for them can remain restricted, even when technologically identical Rule 200 units are unrestricted. |
| 5. Secondary trading | Retail Rule 200 units are not rule-based restricted securities, but sales remain securities transactions while the undertaking persists. VC units may carry separate federal restrictions. | Maintain provenance and transfer controls: fungible token units may have different federal resale histories. |
Practical answer to the $5M + $5M example: potentially yes as two independently exempt offerings—not as two uses of the startup exemption. The highest-risk points are termination/integration of the VC round, the exemption for SAFT conversion and token delivery, and preserving the restricted status of VC units after they become fungible with public tokens.
Capital-formation runway, not maturation by decree. Four years of compliance does not itself convert the arrangement into a nonsecurity.
04
Public fundraising + Form 1-CRYPTO
Proposed Rules 300–307 use one offering statement for both tiers. Most of the form is a common core; offering limits and financial-statement preparation and assurance create the principal tier-specific overlay.
First distinction: Form 1-CRYPTO is the offering statement for the fundraising exemption only. A Rule 200 startup issuer files Form NOR and publishes Rule 103 disclosure on its website instead.
Common filing core
Tier 1 overlay
Tier 2 overlay
Map // One form, one principal tier fork
Tier-dependency matrix
Read across each row: green identifies the shared completion requirement; cyan and violet isolate the true tier forks.
| Dimension | Common core | Tier 1 | Tier 2 |
|---|---|---|---|
| Form architecture | Parts I, II, and III; Part F/S; signatures; EDGAR; SEC qualification. | Same form. | Same form. |
| 12-month capacity | Issuer and affiliate amounts aggregate under Rule 300; first-year selling-holder sales face the 30% offering cap. | $20M total; no more than $6M by affiliate selling holders. | $75M total; no more than $22.5M by affiliate selling holders. |
| Part I notification | Same issuer identity, contact, unit, price, outstanding-unit, prior/concurrent-sale, selling-holder, proceeds, and total fields. | Complete all items. | Complete all items. |
| Part II narrative | Same Items 1–13 and Rule 103 project/token disclosure. | No abbreviated narrative. | No expanded narrative solely because of tier. |
| Financial-statement base | U.S. GAAP; consolidated balance sheets, comprehensive income, cash flows, and equity statements; same age and interim-period rules. | Same statement set. | Same statement set. |
| Preparation framework | Part F/S governs both; special rules can require information about guarantors, collateral affiliates, acquired businesses, pro formas, or real estate operations. | Generally need not comply with Regulation S-X, subject to specified other-entity cases. | Article 8 of Regulation S-X as if a smaller reporting company filing Form S-1, with Part F/S age rules. |
| Assurance | Interim statements may be unaudited; a PCAOB-registered firm is not mandated. | No audit required. Unaudited statements must be labeled. If a qualifying audit was obtained for another purpose, the audited statements and Rule 2-02 opinion must be filed. | Issuer and applicable other-entity annual historical statements must be audited under U.S. GAAS or PCAOB standards; Rule 2-01 independence and Article 2 report requirements apply. |
| Retail limit | Nonaccredited investor: 10% of the greater applicable income/net-worth or revenue/net-assets measure; accredited investors have no specified cap. | Applies. | Applies. |
| Ongoing reporting | Forms 1-KC, 1-SC, and 1-UC apply to both tiers—unlike Regulation A Tier 1. | Annual statements need not be audited unless a qualifying audit is obtained; semiannual statements need no assurance. | Annual statements retain the Tier 2 audit requirement; semiannual statements need no assurance. |
| State registration | Proposed federal preemption applies to primary offerings in both tiers, while state antifraud and specified retained powers remain. | Preempted. | Preempted. |
| Changing tier | A supplement cannot increase offered volume. | A supplement may not turn a Tier 1 offering into Tier 2. | Moving into Tier 2 requires a new offering statement or a post-qualification amendment qualified by the SEC, with Tier 2 financials. |
Substantial U.S. connection required
U.S. organization; majority-U.S. officer/director citizenship or residency; more than half of assets in the U.S.; principal administration in the U.S.
Excluded issuer classes
Blank-check companies, certain acquisition vehicles, investment companies, delinquent filers, and bad actors.
Part I — XML notification
Structured cover sheet // public on EDGAR- How it is completed
- Use an SEC fillable web form that EDGAR converts to Form 1-CRYPTO-specific XML, or submit compliant XML from the issuer’s own software.
- Complete or update Part I before uploading each offering statement or amendment. All items must be addressed unless the form says otherwise.
- Part I is publicly visible as an online EDGAR cover sheet, but it is not otherwise required to be delivered to investors.
- Incorporation by reference and cross-referencing are prohibited in Part I.
- Item 1 — issuer information
- Exact charter name; jurisdiction and year of organization; CIK; primary SIC code; principal executive office address, if any; telephone; SEC staff contact; and up to two comment-letter email addresses.
- Item 2 — offering and aggregation data
- Units offered and already outstanding; price per covered investment contract; issuer-offered and selling-holder portions; aggregate sales under other qualified Regulation Crypto Assets offering statements during the prior 12 months; estimated concurrent sales; total; and estimated net proceeds.
- If terms are undetermined, specified fields may be left blank; if a price range appears, use its midpoint. Use zero—not blank—where a field is inapplicable.
- Rule 101(e) treats one subject-token unit as one covered-investment-contract unit and uses the token price to determine the contract’s per-unit price.
Part II — offering circular
Investor document // HTML attachmentItems 3–12 incorporate Rule 103 rather than restating it. The issuer may reorder the narrative, but cannot obscure required information. Required tables must remain substantially in the prescribed format.
| Item | Required subject | Completion focus |
|---|---|---|
| 01 Cover | One-page cover with issuer name and contact, offering-circular date, title, and amount. | Include the no-SEC-merits legend, the 10% retail-investment legend, and—if preliminary—the prescribed preliminary legend. |
| 02 Contents | Reasonably detailed table of contents on the page immediately following the cover. | Show page numbers for sections and subdivisions. |
| 03 Covered contract | Rule 103(b)(1). | Material terms; represented or promised essential managerial efforts; progress; purchaser obligations; conditions; and other material terms. |
| 04 Offering | Rule 103(b)(2). | Units, price or pricing method, duration, purchaser rules, distribution agreements, expenses, net proceeds, use of proceeds, and free public URL for whitepapers or offering materials. |
| 05 Token | Rule 103(b)(3). | Material aspects of the subject crypto asset—not merely its ticker or technical standard. |
| 06 People + conflicts | Rule 103(b)(4). | Management and related persons; conflicts and related-person transactions; and existence and material terms of related-person transfer or resale restrictions. |
| 07 Network / application | Rule 103(b)(5). | Material system characteristics, plan of development, milestones, and progress. |
| 08 Security + code | Rule 103(b)(6). | Material security architecture and risks; URL for source code if the issuer has made it public. |
| 09 Economics + allocations | Rule 103(b)(7). | Supply, pricing, lockups, distribution, related-person holdings, releases, mint/burn mechanisms, and transaction-history verification. |
| 10 Governance | Rule 103(b)(8). | Token, network/application, smart-contract governance, permissions, and who can change what. |
| 11 Ecosystem | Rule 103(b)(9). | Current and anticipated onchain and offchain participants, infrastructure, parties, systems, and uses. |
| 12 Risk | Rule 103(b)(10). | Short, concise, issuer- and project-specific material risks; generalized boilerplate is excluded. |
| 13 Financial condition | Changes in financial condition, liquidity, capital resources, and results of operations. | Cover each financial-statement period and subsequent material trends. No-history issuers focus on milestones, cash runway, viability, and challenges; operating issuers address representativeness of history and known capital sources. |
Drafting standard: clear, concise, understandable, stage-appropriate disclosure; future plans must be delineated; filing disclosure must remain consistent with official websites, social channels, and whitepapers. Unknown or inapplicable information need not be invented.
Part F/S — financial statements
Common statement set // tier-specific preparation + assuranceStatement package
U.S. GAAP financials for the issuer, predecessors, and successor businesses: consolidated balance sheets plus statements of comprehensive income, cash flows, and changes in stockholders’ equity for two fiscal years—or the issuer’s shorter life.
Other-entity information
Guarantors, collateral affiliates, acquired or to-be-acquired businesses, pro forma information, and acquired real-estate operations can trigger additional Regulation S-X-based statements or disclosures.
| Timing at filing / qualification | Balance-sheet requirement | Related statements |
|---|---|---|
| From inception through three months after first annual balance-sheet date | Balance sheet dated within nine months of filing or qualification. | Operating statements for the issuer’s shorter life. |
| Within three months after latest fiscal year-end | Two fiscal year-end balance sheets preceding that latest year-end, plus an interim balance sheet no earlier than six months after the more recent required year-end. | Corresponding annual and interim periods. |
| More than three but no more than nine months after fiscal year-end | Two most recently completed fiscal year-end balance sheets. | Two fiscal years, or shorter life. |
| More than nine months after fiscal year-end | Two most recent year-end balance sheets plus an interim balance sheet dated no earlier than six months after the latest year-end. | Interim comprehensive-income and cash-flow statements for at least the first six months and the comparable prior-year period; equity reconciliation. |
Unaudited is permitted
Regulation S-X generally does not govern preparation. Label unaudited statements. If the issuer already obtained a U.S. GAAS or PCAOB-standards audit by an accountant independent under AICPA standards or Rule 2-01, it must file the audited statements and a Rule 2-02-compliant opinion.
Audit is mandatory
Apply Article 8 of Regulation S-X as a smaller reporting company, subject to Part F/S age rules. Annual historical issuer and applicable other-entity statements must be audited under U.S. GAAS or PCAOB standards by a Rule 2-01-independent auditor; interim statements may remain unaudited.
For either tier, the accounting firm may—but need not—be registered with the PCAOB. A Tier 1 issuer may voluntarily elect to comply with the Tier 2 financial-statement path.
Part III — exhibits + signatures
File as applicable // HTML-compatible attachmentsConstitutive record
Charter and bylaws; instruments defining holder rights—including issuer whitepapers; subscription agreements, token purchase agreements, or SAFTs; and voting-trust agreements.
Deal record
Underwriting agreement; material contracts; acquisition or reorganization plans; escrow agreements; and required testing-the-waters communications or scripts.
Reliance record
Accountant-change letter, powers of attorney, expert consents, legality opinion that the contracts are binding obligations, guarantor/collateral-affiliate lists, and optional additional exhibits.
- Exhibit index and tailored redaction
- Begin Part III with a numbered index. Personal identifiers—including wallet addresses—may be redacted; immaterial confidential terms in specified material contracts or plans may be omitted if marked and supported, subject to SEC staff review.
- Signatures
- The issuer, principal executive officer, principal financial officer, principal accounting officer, and a majority of the board or other governing body must sign. Authority evidence is required when one person signs for another, except an executive officer signing for the issuer.
- Incorporation by reference
- Permitted only to EDGAR documents with precise location descriptions and hyperlinks; no chained incorporation, no incorporation into financial statements, and no incorporation for Part I or Part II Item 1.
Filing, qualification + maintenance lifecycle
Fix eligibility, tier + offering perimeter
Confirm the issuer is eligible, the security is only a covered investment contract, the U.S. nexus tests are met, and prior, concurrent, issuer, affiliate, and selling-holder amounts fit Rule 300.
Build all three form parts
Part I XML, Part II HTML offering circular with Part F/S, Part III exhibits, and signatures. No filing fee is payable to the SEC.
Optional nonpublic review
Submit drafts to SEC staff. The initial draft and all draft amendments must become public at least 15 calendar days before qualification.
Test the waters carefully
Oral or written interest solicitation may occur before filing or qualification, subject to legends and antifraud rules. No money, consideration, or binding commitment may be accepted before qualification.
Public filing + staff process
File signed amendments under Form 1-CRYPTO, numbered consecutively. Audited amendments require the accountant’s consent. Qualification occurs only at the date and time the SEC determines.
Price, deliver + sell
At-the-market offerings are prohibited. Preliminary and final offering-circular delivery rules apply; specified final terms omitted at qualification must be filed on time.
Maintain an ongoing offering
File a post-qualification amendment at least every 12 months with current Form 1-CRYPTO financials and whenever post-qualification facts or events create a fundamental change.
No at-the-market offering
A supplement can complete omitted pricing information and accommodate a qualifying price/volume change within the rule’s limits, but cannot increase volume or cause Tier 1 to become Tier 2. Additional securities require a new or qualified post-qualification filing.
Potential three-year shelf life
Specified continuous offerings must begin within two business days, cover amounts reasonably expected to sell within two years, and stop by year three absent the rule’s transition to a new offering statement. The issuer must be current in annual and semiannual reports when selling.
What qualification triggers afterward
| Filing / consequence | Both tiers | Tier 1 assurance | Tier 2 assurance |
|---|---|---|---|
| Form 1-KC | Annual report within 120 days after fiscal year-end; updates project and Rule 103 information and includes annual financials. | Audit not required unless a qualifying audit was obtained. | Annual financials audited on the Tier 2 basis. |
| Form 1-SC | Semiannual report within 90 days after the first six months; includes progress and interim financial information. | No assurance required. | No assurance required. |
| Form 1-UC | Current report generally within four business days after a specified event, unless substantially the same information was already reported. | Same events and timing. | Same events and timing. |
| Special financial report | May be due within 120 days on Form 1-KC or 90 days on Form 1-SC if the qualified statement lacked the specified latest annual or six-month statements. | Annual-period assurance follows Tier 1. | Annual-period statements audited; six-month statements may be unaudited. |
| Potential suspension | After the offering, reporting may generally be suspended if the issuer is current and has fewer than 300 holders of record, subject to the proposed rule’s conditions. | Available. | Available. |
Qualification is not approval. The prescribed cover legend states that the SEC does not pass on the merits, terms, accuracy, completeness, or exempt status of the offering.
05
Termination safe harbor
Proposed Rule 400 turns “separation” into a representation-specific factual test rather than a freestanding decentralization test.
Figure 3 // Rule 400 logic
- Availability
- Rule 400 can be used even if the issuer never relied on either new offering exemption.
- Decentralization is not an abstract condition; it matters only insofar as the issuer represented or promised it as part of the essential efforts.
- Form TR content
- Describe the relevant efforts, certify completion or permanent cessation and no new promises, and supply a detailed, understandable legal and factual analysis.
- Boundaries
- Safe harbor only from “investment contract” status under the Securities Act and Exchange Act.
- No determination that the asset is not a note, profit-sharing interest, or other security.
- No express extension to the Investment Company Act or Investment Advisers Act.
- No binding effect on courts or private litigants; no retroactive amnesty for past violations.
Form over substance will fail. A conclusory or inaccurate Form TR does not satisfy the safe harbor, and previous unregistered-offering or antifraud exposure remains.
06
Secondary markets + preemption
“Unrestricted” does not mean unregulated: secondary sellers still need a federal exemption, venues remain exposed, and state preemption is conditional.
Figure 4 // Secondary-transfer stack
Transactional exemption still required
Ordinary holders generally look to §4(a)(1), assuming they are not issuers, underwriters, or dealers. Affiliates may need Rule 144, an issuer-qualified selling-holder offering, registration, or a private resale.
Proposed Rule 500 is separate
Rule 500 can preempt state registration and qualification where the same covered investment contract used the new regime and the issuer remains current. It is not a federal resale exemption.
- Primary offerings
- Purchasers under either exemption are “qualified purchasers” solely for Securities Act §18 preemption.
- Nonissuer secondary sales
- Preemption may extend where the issuer used Regulation Crypto Assets for the same covered investment contract and remains subject to and current in applicable disclosures or reports.
- Fungible units first issued under another exemption may gain state preemption once the same investment contract qualifies, but their distinct federal resale histories remain.
- State powers retained
- Antifraud and deceit enforcement, broker-dealer regulation, notice filings, fees, and service-of-process requirements.
- Operational weakness
- Market participants may struggle to verify issuer currency in real time. Startup-related preemption can vanish at year four even while the investment contract remains outstanding.
07
The unsolved perimeter
The proposal addresses issuance and investment-contract status. It does not deliver a complete legal operating system for the market around the asset.
Venues + intermediaries
Exchanges, ATSs, broker-dealers, dealers, custodians, transfer agents, clearance, and settlement.
Entity + asset regulation
Investment-company and investment-adviser status, commodities and derivatives regulation, and banking rules.
Money + compliance
Bank Secrecy Act, sanctions, money transmission, tax, and other jurisdiction-specific requirements.
Core market-structure contradiction: the proposal can create securities that are not rule-based restricted securities without simultaneously ensuring there is a lawful permissionless venue on which they can trade.
- No token lockup ≠ lawful universal trading.
- Every seller, venue, and intermediary still needs its own valid regulatory analysis.
- Exchange Act §12(g)
- The SEC states that covered investment contracts are not “equity securities” for §12(g), but the proposal does not clearly codify the conclusion.
08
Commissioner perspectives
Both supportive statements frame the proposal as a course correction, while acknowledging that the architecture is incomplete.
From safe-harbor concept to proposed regime
Peirce emphasizes clear, administrable rules over case-by-case enforcement; invites feedback for networks that do not fit; and asks how tokens might support equity-like participation in a network builder’s growth.
Reversal of regulation by enforcement
Atkins connects the proposal to the March 2026 interpretation and argues that congressional market-structure legislation remains necessary to make reform durable against future reversal.
09
Most consequential comment issues
The proposal’s usefulness will turn on edge conditions, secondary-market operability, and how strictly the SEC ties the undertaking to affirmative communications.
Whether “covered investment contract” is too narrow for mixed arrangements or assets that may fit another security category.
Whether non-U.S. issuers should qualify for the lightly regulated startup exemption.
Whether annual startup updates are sufficiently frequent for fast-changing projects.
How to value token rewards, conditional airdrops, and other noncash distributions against the $5 million cap.
Whether “same or substantially similar” crypto asset is sufficiently objective.
Whether termination should account for reasonable purchaser expectations beyond completed or permanently ceased efforts.
Whether Rule 400 should extend to the Investment Company and Investment Advisers Acts.
Whether Form TR could be treated as an admission concerning earlier securities status.
How secondary-market participants can verify issuer compliance for state preemption in real time.
Whether exchange, broker-dealer, custody, and intermediary relief must be adopted concurrently.
10
Technical annex
Three interpretive pressure points: silent issuers, control-person liquidity, and the legal fiction of an investment contract “traveling” with a bearer asset.
A. Must the issuer make an explicit promise?
- No formal or enforceable promise is necessary.
- The interpretation uses “representations or promises,” potentially capturing roadmaps, development plans, official updates, oral statements, and authorized third-party communications.
- The Commission’s stated theory nevertheless appears communication-centered.
- If the issuer genuinely makes no attributable communication about future essential managerial efforts, economic indispensability alone probably does not create an investment contract under the SEC’s interpretation.
- Prior communications continue to matter after the issuer goes silent.
- Courts retain room to infer an undertaking.
- Transaction structure, retained control, use of proceeds, team allocations, prefunctionality, and visible development activity can support an implied undertaking under the economic-reality approach reflected in Joiner.
“Absent such representations or promises being conveyed to purchasers,” a profit expectation would not be reasonable.SEC 2026 Interpretation // pp. 24–26
The offering circumstances “might be taken to embody an implied agreement to complete the wells.”SEC v. C.M. Joiner Leasing Corp., 320 U.S. 344, 349
B. How can control persons sell?
| Path | How it works | Principal constraint |
|---|---|---|
| Rule 144 → §4(a)(1) | Rule 144 deems a compliant affiliate not to be an underwriter, enabling the §4(a)(1) transaction. | Current public information, volume limits, Form 144, shell-company rules, and crypto-native drafting mismatches. |
| Form 1-CRYPTO resale | Affiliate participates as a selling securityholder in an issuer-qualified offering. | Issuer cooperation, SEC qualification, dollar caps, and the 30% first-year limit. |
| Registered resale | Issuer registers the secondary or resale-shelf transaction. | Full registration mechanics and issuer cooperation. |
| Private resale | §4(a)(7), §4(a)(1½), or another private pathway. | No permissionless retail liquidity; downstream restricted-security consequences may follow. |
| End affiliate status | After control ends and Rule 144’s 90-day lookback expires, ordinary §4(a)(1) becomes easier. | Must actually relinquish control of the issuer; network decentralization is not inherently required. |
| Separate the contract | Complete or permanently cease the undertaking and satisfy Rule 400 or existing law. | Must terminate the investment contract; no cure for earlier violations. |
Rule 200 mismatch: startup-exemption disclosure omits the financial statements Rule 144(c)(2) incorporates from Rule 15c2-11. Startup insiders may need to publish additional information before relying on Rule 144.
C. The conceptual fault line
- The SEC denies that the token embodies a security, yet treats the investment contract as moving with it.
- The proposal does not fully explain the private-law mechanism of assignment, why privity is unnecessary, or how an intangible scheme attaches to a bearer asset.
- Fungibility and provenance can diverge.
- Identical units may carry different federal resale histories depending on whether they were issued under Regulation D or Regulation Crypto Assets, even where Rule 500 supplies the same state-law preemption.
- Operationally, the regime often recreates “token as security” until separation.
- The formal taxonomy changes; many transactional consequences do not.
11
Primary sources
The proposal is the authoritative source for operative language; the fact sheet and statements are useful summaries and framing documents.
| Source | Role | Link |
|---|---|---|
| Release No. 33-11434 | 402-page proposing release and proposed rules | Open PDF ↗ |
| SEC fact sheet | High-level summary of exemptions, safe harbor, and preemption | Open PDF ↗ |
| SEC press release | Announcement, headline structure, and comment process | Open page ↗ |
| Peirce statement | Commissioner framing and requests for feedback | Open page ↗ |
| Atkins statement | Chairman framing and legislative context | Open page ↗ |
| March 2026 interpretation | Underlying “asset versus investment contract” and secondary-transfer theory | Open PDF ↗ |
| Comment portal | Public comment submission for File No. S7-2026-27 | Open portal ↗ |
Prepared 22 August 2026. This brief distinguishes the proposed rules from Commissioner statements and incorporates focused analysis of secondary transfers, affiliate liquidity, and issuer communications.