SEC Proposes Token Offering Rules with $75 Million Exemption

The Securities and Exchange Commission (SEC) has proposed new rules for token offerings, including two exemptions that would allow issuers to raise up to $75 million per year without registering their offering. The proposal also includes a safe harbor that would remove some tokens from the definition of a security altogether.

The startup exemption would allow issuers to raise up to $5 million over four years, while the fundraising exemption has two tiers: up to $20 million in a 12-month period under Tier 1, and up to $75 million under Tier 2. Both exemptions require financial statements, which for Tier 2 would be required to be audited.

Commissioner Hester Peirce said that the proposal 'will not fit every model,' and encouraged commenters to provide feedback on how to improve it. She also asked for thoughts on facilitating the ability of crypto assets to serve a role akin to equity, enabling token holders to share in the growth and value of the enterprise.

The safe harbor would apply once an issuer has completed or permanently ceased all essential managerial efforts represented or promised under the covered investment contract, makes no new representations about such efforts, and files a public certification with supporting analysis. This would 'deem by the Commission not to constitute or represent or to be subject to such investment contract' the crypto asset.

Preemption extends to secondary market transactions by non-issuers, and it would continue for the period during which the issuer continues to satisfy the information and filing and/or periodic reporting requirements of an exemption under Regulation Crypto Assets.