SEC Proposes New Rules for Crypto Asset Investment Contracts

The U.S. Securities and Exchange Commission (SEC) has put forward new rules, termed "Regulation Crypto Assets." This proposal seeks to create a "tailored offering regime for certain investment contracts involving crypto assets." It follows the SEC's March 2026 interpretation, which had already clarified the application of federal securities laws to crypto assets and related transactions.

The existing SEC disclosure rules were designed for traditional securities like stocks and bonds and are not optimally suited for crypto offerings. This often leads issuers to disclose information irrelevant to token buyers while omitting crucial details such as network security, token supply, and governance.

The proposal defines a "covered investment contract" as a contract, transaction, or scheme meeting three conditions: a crypto asset is subject to the contract, the crypto asset itself is not a security, and no other asset is bundled into the deal. Two exemptions allow issuers to raise funds without full registration. A smaller, one-time exemption permits raising up to $5 million over four years, and a larger, recurring exemption allows for up to $75 million annually.

These exemptions mandate "principles-based narrative disclosures" rather than a rigid checklist. Issuers must describe material information in their own words, tailored to their specific project. The SEC expects this information to be "clear, concise, and understandable." The proposal also includes a "bad actor" provision disqualifying issuers with a history of fraud from using these exemptions. Furthermore, a conditional safe harbor is offered, allowing a token to cease being treated as a security once specific conditions are met, such as the completion of the issuer's managerial efforts and the filing of a public "transition report."