SEC Unveils Proposed "Regulation Crypto Assets" Framework; ICO Revival Still Unlikely

The U.S. Securities and Exchange Commission has proposed "Regulation Crypto Assets," a draft rulemaking that would introduce two exemptions for certain investment contracts involving crypto assets, aiming to provide a clearer route to compliant token fundraising. Under the broader exemption, eligible issuers could raise up to $75 million in any 12-month period. Drew Hinkes said issuers could pursue separate, serial raises of as much as $75 million every 12 months, though each round would require a new offering statement and SEC staff review. Issuers would also be required to file annual and semiannual reports, and disclose amounts raised under the exemption during the prior 12 months to enable verification of the cap. A second exemption would allow startups to raise up to $5 million over four years. Lee Reiners said the $75 million exemption could make public token offerings more workable, but is unlikely to reignite an initial coin offering boom. He added that limited initial allocations could become more appealing if investors anticipate later offerings at higher valuations. Lilya Tessler noted that issuers could rely on the exemption more than once, but subsequent raises would not be automatic. She said nonaccredited investors would be limited to purchasing 10% of the greater of their income or net worth in a token sale. The SEC estimates roughly 130 offerings per year would rely on the two exemptions, and about 475 issuers could use the broader investment contract safe harbor. Reiners said market demand would still be shaped by investor appetite, token economics, liquidity, custody considerations, and lingering reputational damage from the prior ICO cycle. The proposal is designed to create an explicit regulatory pathway, rather than forcing issuers to determine whether an offering fits existing securities-law frameworks. It also states that an investment contract tied to a crypto asset may continue to transfer to subsequent purchasers until the asset separates from the issuer's representations or promises. Hinkes said a secondary-market sale could be treated as a securities transaction if the investment contract transfers alongside a nonsecurity crypto asset. Tessler cautioned that a public-offering exemption could invite regulatory arbitrage. Reiners warned investors could still face opaque disclosures, concentrated insider ownership, and aggressive promotion.