The US Securities and Exchange Commission wants to give crypto projects a lighter path to raising capital. The proposal is called SEC Regulation Crypto Assets. The comment period closed on 20 October 2026, and critics are now making themselves heard. According to an American Banker report from 26 October, consumer groups, a state regulator and the CFA Institute warn of weaker investor protection, lost state oversight and legal risk.
This article explains plainly what the SEC proposes, what critics object to and what remains open.
Key Takeaways
- The proposal creates two exemptions from the registration requirements of the Securities Act of 1933: offerings of up to $5 million during a four-year period and up to $75 million in each 12-month period.
- It also includes a conditional safe harbor from the term “investment contract” and preemption of state registration requirements.
- Critics including Better Markets, California’s DFPI and Americans for Financial Reform see investor protection weakened. The CFA Institute warns of legal challenges.
- Coinbase and other industry voices support the proposal and ask for higher limits.
- This is a proposal. Nothing has been adopted yet.
What SEC Regulation Crypto Assets Would Do
According to the SEC overview page, the proposal would create a tailored offering regime for certain investment contracts involving crypto assets. The SEC issued it on 18 August 2026 and it appeared in the Federal Register on 21 August. The file number is S7-2026-27. The full proposal has five parts:
- General rules: definitions, principles-based disclosure requirements, inflation adjustment of the limits and “bad actor” disqualification modeled on Regulation A.
- Startup exemption: offerings of up to $5 million during a four-year period.
- Fundraising exemption: offerings of up to $75 million in each 12-month period, largely modeled on Regulation A, with two tiers. Issuers under the second exemption would need to provide financial statements and report on an ongoing basis.
- Safe harbor: if its conditions are met, a crypto asset would be deemed not to be subject to an investment contract under the definitions of “security”.
- State preemption: through the definition of “qualified purchaser”, state securities registration and qualification requirements would not apply to such offerings, nor to certain secondary-market transactions.
The proposal defines a “crypto asset” as any digital representation of value recorded on a cryptographically secured distributed ledger. A “covered investment contract” requires that the crypto asset is not itself a security and that no other asset is subject to the contract.
Why the SEC Wants New Rules at All
The SEC gives two reasons in the proposal. First, the Howey test, which has been used to decide whether a transaction falls under securities law, is hard to apply to crypto assets. Second, existing rules are not fully fit for purpose for such offerings. A crypto asset can be subject to an investment contract at first sale and later cease to be, while current rules barely reflect that. They also require disclosures that may not matter to investors in these offerings and do not elicit other material information.
The SEC also points in the proposal to its interpretation of 17 March 2026 on how the securities laws apply to certain crypto assets. According to the agency, the aim is to facilitate capital formation and accommodate innovation while ensuring investors are protected and informed.
The Criticism: Investor Protection, State Oversight and Legal Risk
According to American Banker, the objections are wide-ranging:
- Americans for Financial Reform Education Fund: The proposal would offer weaker protections and disclosure than public equity markets and leave investors exposed to the fraud and predatory practices it calls endemic in crypto markets.
- Better Markets: The group urges the SEC to withdraw the proposal. The Securities Act of 1933 demands “full and fair disclosure” in initial sales, so crypto offerings should not be exempt from registration. It cites a 2025 FBI report that found crypto-related complaints produced the highest reported losses, more than $11 billion across 181,565 complaints.
- California DFPI: Preempting state law would undermine its authority to review high-risk securities offerings before they reach the market.
- CFA Institute: The institute supports clarity for crypto markets but warns of legal challenges. Since the Supreme Court’s 2024 Loper Bright decision, courts judge the scope of agency authority themselves.
What the Industry Asks For
Crypto companies broadly support the proposal. According to American Banker, Coinbase asks the SEC to raise the startup exemption cap from $5 million to $20 million over four years and to remove the $75 million cap on the second tier for issuers that provide audited financial statements. Without higher limits, large projects would have to register on the ill-suited Form S-1 or, as in the past, raise capital privately or offshore.
The background is that the CLARITY Act is stalled in Congress, according to American Banker. The SEC and the CFTC are therefore pursuing their own regulatory efforts to clarify their responsibilities. Industry insiders warn that such rules lack the permanence of legislation. That is a core point of the debate.
What It Means for Investors and Projects
- Not law yet: The SEC has to review the comments and can change the proposal or not adopt it.
- Less registration does not mean less fraud: According to the SEC, the antifraud provisions of the securities laws would continue to apply under the exemptions.
- For investors: Disclosures would be principles-based rather than strictly prescribed. Anyone investing in such tokens has to check disclosures and issuers carefully.
- For projects: Whether the limits of $5 million and $75 million rise will decide the practical value.
We have covered other US regulatory steps already: the final OCC rule under the GENIUS Act and the final approval of Ripple Trust Bank. Rules are also changing in Germany, as our article on the German crypto tax in 2027 shows.
Conclusion
SEC Regulation Crypto Assets could open a clear path to raising capital for crypto projects in the US, but it also shifts oversight from the states to the federal level. Whether investor protection is sufficient is disputed. Until the SEC decides on a final text, this remains a proposal. We will keep you posted.
