The SEC Proposes Crypto Rules — Here’s What RIAs Need to Know

The SEC has proposed Regulation Crypto Assets (Release No. 33-11434, August 18, 2026), a first-of-its-kind framework for offering crypto assets subject to investment contracts. The proposed rule would create two new registration exemptions, a principles-based disclosure regime, a safe harbor that ends an asset’s status as a security, and broad preemption of state Blue Sky review. Let’s dig into what the SEC proposed.

Summary of Proposed Rule

What the rule addresses:

Under the proposed rule, investment contracts involving a non-security crypto asset — where no other asset (whether a security or non-security asset) is subject to the same contract — will be regulated as “covered investment contracts.” Think token offerings where the issuer promises to build a network or application and investors expect to profit from those efforts.

Core components of the proposed rule:

1. Startup Exemption
   The proposed rule calls for a one-time, non-exclusive registration exemption for offerings of up to $5 million for four years. The issuer must file a Form NOR (Notice of Reliance) on EDGAR, publicly post principles-based disclosures on a website, annually update those disclosures for material changes, and file a Form TR (Transition Report) at the end of the four years. No financial statements are required and general solicitation is permitted. Securities are unrestricted (not “restricted securities”).
2. Fundraising Exemption
   The proposed rule creates a two-tier exemption from registration, using Regulation A as a model. Tier 1 includes offerings up to $20 million and does not require audited financials. Tier 2 includes offerings up to $75 million and requires the issuer to provide audited financials. In addition, issuers operating under Tier 2 must file on Forms 1-CRYPTO, 1-KC, 1-SC, and 1-UC. Tier 2 will be subject to SEC qualification before sales. Investment limits of 10 percent of the greater of the purchaser’s annual income or net worth will apply to non-accredited investors. General solicitation and “testing the waters” will be permitted.
3. Investment Contract Safe Harbor
   Once an issuer completes or permanently ceases all essential managerial efforts it promised and files a Form TR certifying to this fact, the covered investment contract is deemed to have ceased to exist. The crypto asset is no longer subject to federal securities laws. This process is the critical “off-ramp” from securities regulation into commodity/utility status.
4. State Law Preemption
   A new “qualified purchaser” definition under Securities Act §18(b)(3) preempts state Blue Sky registration and qualification requirements for both primary offerings under Regulation Crypto Assets and secondary market transactions as long as the issuer remains current in its disclosure obligations. This preemption is broader than the existing Regulation D preemption, which doesn’t cover secondary trading.

Disclosure framework:
Both exemptions require principles-based disclosure on ten topics: (1) covered investment contract terms, (2) offering details, (3) subject crypto asset description, (4) management/related persons/conflicts, (5) associated network or application and plan of development, (6) security and source code, (7) crypto asset economics and allocations, (8) governance, (9) crypto asset ecosystem, and (10) risk factors.

Bad actor disqualification applies (cross-referencing Regulation A’s Rule 262), including a lookback for pre-effective date events that must be disclosed even if the event is not disqualifying.

Key Takeaways for Registered Investment Advisers

This rule has only just been proposed; no compliance obligations arise today. The public comment period will run for 60 days after publication in the Federal Register, after which the Commission must weigh the record and decide whether and how to proceed.

Expect sustained Congressional attention and meaningful revision before the rule is adopted. The November mid-term elections could shift both Congressional oversight and Commission priorities before the comment file even closes.

Our guidance: read the proposal, follow the comment file, and wait. We’ll report when the comment period closes and again if the Commission moves toward adoption.