On August 18, 2026, the Securities and Exchange Commission proposed a set of rules titled Regulation Crypto Assets, which would create a tailored offering regime for what the proposal calls covered investment contracts — investment contracts involving crypto assets. Securities Act Release No. 33-11434 (Aug. 18, 2026), File No. S7-2026-27. The proposal would add two exemptions from the registration requirements of Section 5 of the Securities Act of 1933, 15 U.S.C. § 77e (2018), a conditional safe harbor from the term “investment contract,” and a definition that would preempt state registration and qualification requirements. The comment period runs for 60 days after publication in the Federal Register.
The proposal builds on the Commission’s March interpretation
The Commission issued an interpretive release in March 2026 addressing how the federal securities laws apply to certain crypto assets and transactions in them. Regulation Crypto Assets is the operational sequel. The March release explained when an arrangement is an investment contract under the test of SEC v. W.J. Howey Co., 328 U.S. 293 (1946); this proposal supplies the exemptions an issuer can use once it is, and a mechanism for determining when it has stopped being one.
The Commission’s stated purpose is capital formation and the return of offshore activity to domestic markets. Chairman Paul S. Atkins described the proposal as providing “clear pathways to raise capital under the federal securities laws.”
The startup exemption: $5 million over four years, once
The startup exemption would be a one-time, non-exclusive exemption permitting an issuer to offer covered investment contracts of up to $5 million over a period of up to four years. The issuer must make public filings at the beginning and end of that period and must make certain principles-based narrative disclosures available to investors throughout it.
The four-year window is not arbitrary. It is the period during which the issuer is expected to perform the essential managerial efforts it promised investors — the efforts that make the arrangement an investment contract in the first place. The exemption gives the issuer room to do that work without registering. Issuers relying on it remain subject to the antifraud and antimanipulation provisions of the federal securities laws, which no exemption displaces.
The fundraising exemption: two tiers modeled on Regulation A
The fundraising exemption would be non-exclusive and two-tiered, modeled in part on Regulation A, 17 C.F.R. §§ 230.251–230.263 (2025). Tier 1 would permit offerings of up to $20 million of covered investment contracts in a twelve-month period. Tier 2 would permit up to $75 million in a twelve-month period.
The disclosure obligations are materially heavier than under the startup exemption. An issuer must publicly file offering materials containing the same principles-based narrative disclosures, a discussion of its financial condition, and financial statements. For Tier 2 offerings, those financial statements must be audited. Ongoing reporting obligations modeled on the analogous provisions of Regulation A would follow, tailored to offerings of covered investment contracts. An issuer contemplating Tier 2 should treat the audit requirement as the gating item; it is the condition most likely to determine whether the timetable is realistic.
The safe harbor turns on essential managerial efforts, not on the asset
The most consequential element of the proposal is the investment contract safe harbor. If its conditions are met, the covered investment contract would be deemed to have ceased to exist, and the underlying crypto asset would be deemed not to constitute, represent, or be subject to that investment contract for purposes of the definitions of “security” in the Securities Act and the Securities Exchange Act of 1934.
Two conditions apply. The issuer must have completed or permanently ceased all essential managerial efforts it represented or promised it would undertake under the covered investment contract, and must neither be making nor intending to make new promises of essential managerial efforts as to the underlying asset. The issuer must then make a public filing certifying that it has satisfied those conditions and providing an analysis supporting the certification.
The certification is the exposure. An issuer that files a certification and then resumes managerial efforts, or that supports its certification with an analysis that does not withstand scrutiny, has created a public document of its own making on which enforcement or private litigation can be built. The safe harbor rewards issuers that can document a genuine hand-off and punishes those that treat it as a formality.
Preemption reaches some secondary trading
The proposal would define “qualified purchaser” for Securities Act purposes so that state securities registration and qualification requirements are preempted for offers and sales of covered investment contracts made under a Regulation Crypto Assets exemption.
Preemption would also extend to certain secondary transactions. For transactions by persons other than an issuer, underwriter or dealer, state registration and qualification requirements would be preempted for covered investment contracts initially sold by the issuer under a Regulation Crypto Assets exemption or another federal exemption. That secondary preemption is conditional and continuing: it lasts only while the issuer keeps satisfying the information, filing or periodic reporting requirements of the applicable exemption. An issuer that lapses in its reporting does not merely default on its own obligation — it withdraws a protection its investors were relying on in the resale market.
What this means for broker-dealers and investment advisers
Firms that distribute or hold these assets should read the safe harbor closely, because it changes what a firm is holding. An asset that ceases to be subject to an investment contract is no longer a security for purposes of those statutory definitions, which affects custody, supervision, books and records, and the scope of what a firm is authorized to offer. A firm whose systems classify assets once at onboarding will need a way to record that an asset’s status has changed, and when.
Due diligence should also account for the certification. For an asset an issuer has certified out of investment contract status, the certification and its supporting analysis are public and are the natural first document to review. For advisers, the disclosure question follows: whether a client’s position is a security, and whether that has changed since acquisition, is information a fiduciary should be prepared to explain.
Timing
This is a proposal. Nothing in it is currently effective, and the Commission may adopt it in modified form or not at all. The comment period remains open for 60 days after publication of the proposing release in the Federal Register, and comments may be submitted through the Commission’s website under File No. S7-2026-27. Issuers with an offering in planning should evaluate now whether the proposed exemptions would improve on the path they are currently contemplating, because the comment period is the point at which the terms of those exemptions can still be influenced.
For more information. If you have questions about Regulation Crypto Assets, the proposed exemptions, or what the investment contract safe harbor would mean for an offering you are planning, contact Evans Law, PC.