SEC Proposes Crypto Safe Harbor to Clarify When Tokens Stop Being Securities

The U.S. Securities and Exchange Commission has proposed a new regulatory framework that could give cryptocurrency issuers clearer rules for raising capital and potentially allow certain crypto assets to move beyond the legal definition of a security.

Announced on August 18, the SEC’s “Regulation Crypto Assets” proposal includes two new registration exemptions and a conditional safe harbor for certain crypto investment contracts.

The proposal represents a significant attempt by the SEC to establish a more tailored regulatory framework for digital assets while maintaining investor protections under federal securities laws.

What the SEC Crypto Proposal Would Change

According to the SEC, the proposed framework builds on interpretive guidance released by the agency in March 2026 concerning the application of federal securities laws to crypto assets and related transactions.

Together, the initiatives are intended to create a more specific securities offering regime for the cryptocurrency industry.

The proposal includes two new exemptions from registration requirements under the Securities Act of 1933. It also introduces a conditional safe harbor that could prevent certain crypto assets from continuing to be treated as investment contracts, and therefore securities, once specific requirements are satisfied.

The framework would also preempt certain state securities laws for qualifying offerings and some secondary-market transactions.

Following formal publication in the Federal Register, the proposal would enter a 60-day public comment period.

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SEC Chairman Paul S. Atkins said the initiative is designed to provide digital asset entrepreneurs and market participants with clearer pathways to raise capital under federal securities laws.

Two New Crypto Fundraising Exemptions

The proposed exemptions would give crypto companies two potential routes for raising capital, with different limits and disclosure requirements.

Exemption 1 would allow a company to raise up to $5 million. It could be used once during any 4-year period and would require principles-based narrative disclosures. However, financial statements and ongoing reporting would not be required.

Exemption 2 would permit a larger raise of up to $75 million. It could be used once during each 12-month period and would require the same narrative disclosures, along with financial statements and ongoing reporting.

The structure resembles existing securities exemptions such as Regulation Crowdfunding and Regulation A, where larger capital raises generally involve greater disclosure requirements.

For crypto businesses, the proposed system could provide a clearer middle ground between operating under a full securities registration and relying on existing exemptions that were not specifically designed around digital assets.

When Could a Token Stop Being a Security?

The proposal's safe harbor addresses one of the most persistent questions in U.S. crypto regulation: when can a token originally sold through an investment contract cease to be treated as a security?

Under the SEC proposal, a crypto asset could eventually fall outside the investment-contract definition once specified conditions are met.

The concept is particularly relevant to projects that originally sold tokens alongside promises of managerial or development efforts.

If those promised efforts have been completed or permanently discontinued and other requirements are satisfied, the asset could potentially receive different regulatory treatment.

The proposal specifically addresses treatment under both the Securities Act of 1933 and the Securities Exchange Act of 1934.

The approach could therefore provide a potential pathway for mature blockchain networks whose circumstances have changed substantially since their initial token offerings.

Why the SEC Is Moving Now

The proposal arrives as broader cryptocurrency legislation remains stalled in the U.S. Senate.

Congress has been working toward comprehensive crypto market-structure legislation, but the lack of a finalized statutory framework has left regulators with significant responsibility for determining how existing securities laws apply to digital assets.

The SEC's latest initiative is part of a broader change in the agency's approach to cryptocurrency under its current leadership.

The commission has already rescinded previous crypto-related accounting guidance, dismissed several enforcement actions involving major cryptocurrency exchanges and issued its March 2026 interpretive guidance.

The latest proposal builds on that regulatory direction by attempting to establish clearer rules for crypto fundraising and token classification.

Crypto Industry Welcomes the Proposal

The proposal received positive reactions from major cryptocurrency industry organizations.

The Blockchain Association described the initiative as an important move toward clearer and more practical rules for digital asset markets in the United States.

The Digital Chamber also welcomed the development and said it would work with the SEC as the regulatory process moves forward.

The support reflects the industry's longstanding demand for greater regulatory certainty.

Crypto companies have argued that uncertainty over whether tokens and related transactions fall under securities laws can make it difficult to plan fundraising, launch networks and develop long-term businesses in the United States.

CFTC Also Advances Digital Asset Policy

The SEC's announcement came as another major U.S. financial regulator moved forward with digital asset policy discussions.

On the same day, the chairman of the Commodity Futures Trading Commission confirmed that the agency's Innovation Advisory Committee would hold its first meeting.

The committee is expected to bring industry participants together to discuss digital asset policy and related financial innovation.

The simultaneous activity at the SEC and CFTC suggests that U.S. regulators are increasingly focused on developing frameworks for the rapidly changing digital asset industry.

What Happens Next?

The SEC proposal is not yet a final rule.

The next major step will be publication in the Federal Register, which will officially begin the 60-day public comment period.

After reviewing comments, the SEC could modify the proposal before deciding whether to adopt a final rule.

That process could take additional months.

There is also a broader political consideration. Rules created through SEC rulemaking could potentially be changed or reversed by a future administration. By contrast, legislation passed by Congress would generally provide a more durable statutory framework.

For that reason, industry participants are likely to continue pushing for comprehensive crypto legislation even as the SEC moves forward with its proposed rules.

Conclusion

The SEC's August 18 proposal could reshape how cryptocurrency companies raise capital and how certain tokens are treated under U.S. securities law.

The framework proposes two exemptions allowing raises of up to $5 million and $75 million, respectively, while introducing a conditional safe harbor that could allow some crypto assets to move beyond investment-contract status after specific conditions are fulfilled.

The proposal still faces a 60-day public comment period and possible revisions before any final rule is adopted.

For crypto companies and investors, the initiative could mark an important step toward clearer U.S. rules for token offerings and mature blockchain networks.

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