SEC Proposes Crypto Offering Rules with $5M Startup Exemption and $75M Fundraising Route

The Securities and Exchange Commission (SEC) has proposed new rules for cryptocurrency offerings, which will determine how firms should file comments before the window closes on October 20. The proposed rulemaking regime was published in the Federal Register on August 21, starting a comment period that closes on October 20.

There are two exemptions being considered: one for startups and another for fundraising. Proposed Rule 200 would permit offerings of up to $5 million during a four-year period, with a condition preventing the issuer and its affiliates from restarting the exemption for the same or a substantially similar crypto asset. This route does not require financial statements, an intermediary, or a rule-based resale holding period.

Proposed Rule 300 is modeled partly on Regulation A and would allow up to $20 million in a 12-month period (Tier 1) or up to $75 million (Tier 2). Issuers would submit an offering statement on new Form 1-CRYPTO, with ongoing reporting required for both tiers.

Proposed Rule 400 provides a conditional safe harbour from the investment-contract prong of the Securities Act and Exchange Act definitions of a security. An issuer would need to have completed or permanently ceased the essential managerial efforts it promised, make no new promises of such efforts, and file Form TR through EDGAR with a certification and supporting analysis.

Comments filed by October 20 will determine which arguments the Commission must answer in any final rule. Securities lawyer M. Tilden Moschetti opposed Rule 200 as drafted, arguing that a public retail offering should not proceed without financial statements, investor limits, intermediaries, resale restrictions, and a permanent EDGAR disclosure record.