$75M Crypto Exemption Proposal Sparks Debate Over Investor Protection

The US Securities and Exchange Commission (SEC) has proposed new regulatory guidelines for token issuers. The proposal, unveiled on August 18, would create exemptions for certain 'investment contract' offerings involving crypto assets. These exemptions aim to make public token fundraising in the United States more practical.

The larger exemption would allow qualifying issuers to raise up to $75 million during each 12-month period. A smaller one-time exemption for startups would permit raising up to $5 million over four years. The structure is modeled after Regulation A, including disclosure and ongoing reporting obligations for issuers that rely on the safe harbor.

The proposal also introduces limits for non-accredited investors, who could buy no more than 10% of the greater of their income or net worth for the relevant exemption framework.

Drew Hinkes, a partner at Winston & Strawn, noted that the 12-month limitation could support 'serial raises' of $75 million every 12 months. However, Lilya Tessler, partner and leader of Sidley's Global FinTech and Blockchain group, emphasized that any additional fundraising would require a new offering statement and an SEC staff review.

The proposal aims to reduce uncertainty for token issuers but may not recreate the unchecked ICO environment of 2017. Experts caution that even with formal exemptions, investor protection concerns could persist under a 'form over substance' scenario.