The US Securities and Exchange Commission (SEC) has unveiled proposed rules under Regulation Crypto Assets, which would permit qualifying issuers to raise up to $75 million annually through public token sales, accompanied by disclosure and reporting obligations. The framework introduces a one-time exemption allowing startups to raise $5 million over four years, with the SEC estimating 130 offerings annually could utilise the exemptions, alongside 475 issuers potentially benefiting from a broader investment contract safe harbour.
The proposals aim to create clearer pathways for token issuers while addressing investor protection concerns, but experts caution that structural limitations and lingering market caution may prevent a revival of the 2017 initial coin offering (ICO) boom, during which up to 90% of projects failed. Non-accredited investors would be restricted to purchasing no more than 10% of the greater of their income or net worth in any token sale, a measure designed to mitigate risks for retail participants.
Legal analysts have highlighted potential complexities in the new rules. Drew Hinkes of Winston & Strawn noted the $75 million limit could enable “serial raises” of $75 million every 12 months, provided offerings are distinct. However, Lilya Tessler of Sidley said subsequent fundraising rounds would require new filings and SEC staff reviews, adding layers of administrative burden. Jake Chervinsky, a crypto lawyer, called the developments “not one day too soon,” underscoring the industry’s long-standing demand for regulatory clarity.
Uncertainties remain over whether the rules will sufficiently address the classification of tokens as securities or non-securities, with some tokens potentially falling into a grey area. Experts also warn of risks related to regulatory arbitrage and the potential for secondary market transactions to trigger securities regulations, issues the SEC has not fully resolved in its proposal.
Written by Steven Cook
Regulation Desk
