SEC Proposal Could Make It Easier for Crypto Startups to Raise Capital

On August 18, 2026, the United States Securities and Exchange Commission (SEC) released a new set of proposed rules known as Regulation Crypto Assets. The proposal provides a framework for digital assets offered as part of an investment contract and therefore subject to federal securities laws. 

SEC Chairman Paul S. Atkins said: 

“Regulation Crypto Assets seeks to provide crypto asset entrepreneurs and market participants with clear pathways to raise capital under the federal securities laws”

The proposed rules would establish general rules; an exemption to the Securities Act of 1933 for startups allowing up to $5 million in offerings over a period of up to four years; a two-tier exemption to the Securities Act of 1933 for fundraising, allowing offerings of up to $20 million under Tier 1 or $75 million under Tier 2 in a 12-month period; a conditional safe harbor from the term “investment contract”; and a definition of “qualified purchaser.” Additionally, issuers relying on the exemptions or safe harbor would be required to file certain forms with the SEC.

Among the proposed rules, the startup exemption would provide early-stage crypto projects with a new pathway to launch and distribute tokens without registering the offering under the Securities Act. The exemption is designed for projects where tokens are initially offered as part of an investment contract while the issuer is still responsible for developing and launching the project.

Under the proposal, qualifying issuers would have a period of up to four years and could offer up to $5 million without registering the offering with the SEC. The exemption could only be used once, and issuers would remain subject to federal antifraud and antimanipulation laws. 

The SEC argues that traditional securities disclosure requirements can be expensive for crypto projects without necessarily providing investors with the information most relevant to evaluating them. The proposal also recognizes that an investment contract involving a crypto asset may eventually cease to exist as a project develops. An asset initially sold while investors are depending on a development team may eventually operate independently of the promises that originally made its sale part of an investment contract.

Crypto projects often need to distribute tokens while they are still building their networks. Those distributions can potentially involve covered investment contracts and therefore create Securities Act requirements. The SEC says this can impose “prohibitive costs or burdens” on developers trying to complete a project.

Developing and launching a crypto network can require tokens to be distributed for reasons beyond simply raising capital. Under the proposed exemption, covered transactions could include:

• airdrops;

• staking and governance distributions;

• gas fees;

• fees or assets distributed for testing; and

• incentives or rewards for activities related to operating, governing or securing the network or application.
  

Importantly, the startup exemption would not be limited to accredited investors, meaning retail investors could participate. General solicitation would also be permitted, and covered investment contracts issued under the exemption would not be restricted securities or otherwise subject to rule-based resale restrictions. The SEC says these features are intended to “avoid impediments to the development of network effects.”

The SEC describes the exemption as providing projects with a temporary period to develop toward the point where the investment contract may cease to exist:

“the startup exemption is intended to provide issuers with a regulatory runway during which they could attempt to fulfill their representations or promises to engage in essential managerial efforts under covered investment contracts.”

Atkins framed the broader proposal as part of a shift toward rules designed to accommodate innovation within existing investor protections:

“Congress designed our securities laws to amplify – within specific guardrails – opportunities for entrepreneurs to innovate and build new products. Advancing this regulatory framework is a key element in our strategy to advance the rule books for the modern era and another step by the Commission to onshore innovation in crypto asset markets for generations to come.”

For the crypto industry, the proposal is significant because it would create a regulatory framework specifically designed around how early-stage crypto networks are developed and launched. Rather than requiring qualifying projects to register these offerings under the existing securities framework, the startup exemption would provide a limited period for developers to raise capital, distribute tokens and build their networks while remaining subject to disclosure and investor protection requirements. 

Regulation Crypto Assets remains a proposal and has not yet taken effect. The public has 60 days to submit comments to the SEC.

Press Release: SEC Post: https://www.sec.gov/newsroom/press-releases/2026-76-sec-proposes-new-regulation-crypto-assets 

Full rules: https://www.sec.gov/files/rules/proposed/2026/33-11434.pdf