SEC Proposes Reg CA to Simplify Digital Asset Fundraising

The Securities and Exchange Commission (SEC) has proposed a purpose-built framework for raising capital with crypto assets, called Regulation Crypto Assets (Reg CA). This proposal is designed to give digital asset issuers more clarity and flexibility in their fundraising efforts. According to the SEC, Reg CA would allow issuers to raise up to $5 million over four years through a new exemption from Securities Act registration.

The proposed rule defines a 'covered investment contract' as an investment contract where a crypto asset is subject to the contract, but not itself a security. This definition targets initial coin offerings (ICOs) and other types of digital assets that have posed difficulties under existing securities laws. Reg CA would give these issuers tailored capital-raising exemptions and a pathway for the underlying assets to cease being subject to an investment contract.

The proposal includes two new exemptions from Securities Act registration: a 'startup exemption' (Rule 200) for offerings up to $5 million over four years, and a 'fundraising exemption' (Rules 300-307) modeled on Regulation A. The fundraising exemption would permit sales to retail investors, including non-accredited investors, but with certain limits.

The SEC has also proposed an investment contract safe harbor (Rule 400), which would allow issuers to exit securities status with regulatory certainty once they have completed or permanently ceased their essential managerial efforts and filed a transition report. This safe harbor would codify part of the 2026 Interpretation, but would not preclude the SEC from challenging an inaccurate certification.