SEC Proposes Rule for Token Issuers to Exit Securities Purgatory

The Securities and Exchange Commission (SEC) has proposed Regulation Crypto Assets, which includes a new framework for tokens to exit securities purgatory. The proposal, published in the Federal Register on August 21, 2026, aims to provide a clear path for token issuers to move out of investment-contract treatment with the SEC.

Rule 400 is the centerpiece of the proposed regulation, creating a safe harbor for covered investment contracts once the issuer has completed or permanently stopped managerial work and files a certified Form TR on EDGAR. This would allow the token to be treated as outside the investment-contract definition of a security for future transactions.

The proposal also introduces two fundraising lanes that don't require full Securities Act registration: a startup exemption allowing up to $5 million raised over four years and a fundraising exemption allowing up to $75 million every 12 months. Both exemptions require issuers to provide principles-based narrative disclosures, with the larger exemption also requiring financial statements and ongoing reports.

Reaction to the proposal has been largely positive from industry leaders, but some have expressed concerns that the caps on fundraising are too small or that the rule doesn't address trading, broker, and exchange rules. The SEC has opened a 60-day comment period for the proposal, which closes on October 20, 2026.