Crypto Assets and the Securities Laws

The U.S. Securities and Exchange Commission (SEC) on August 18, 2026, proposed Regulation Crypto Assets – a comprehensive rulemaking that would, for the first time, establish tailored registration exemptions, disclosure requirements and a transition pathway for crypto asset offerings conducted as part of investment contracts.

The proposal builds on the interpretive release issued jointly by the SEC and the Commodity Futures Trading Commission (CFTC) earlier this year, which became effective on March 23, 2026. The release classified crypto assets into five categories and clarified when investment contracts involving non-security crypto assets come into existence and when they cease. SEC Chairman Paul Atkins described the proposed rule as "common-sense regulation: minimum effective dose, maximum freedom to build, and durable clarity under existing law."¹

This Holland & Knight alert analyzes the proposed rule's key provisions, compares the two exemption tiers and discusses the practical implications for crypto asset issuers, including the relationship to the March 2026 interpretive guidance and pending legislation such as the CLARITY Act.

Background: The 2026 Interpretive Release

The proposed Regulation Crypto Assets does not exist in a vacuum. It is the second major piece of the SEC's 2026 crypto regulatory initiative following the March 2026 joint SEC/CFTC interpretive release, which established a foundational classification framework for crypto assets. Under that interpretive release, crypto assets are divided into the following five categories:

• Digital Commodities. Crypto assets linked to established and functional crypto networks, such as bitcoin (BTC), Ether (ETH), Solana (SOL), XRP, Cardano (ADA), Polkadot (DOT), Chainlink (LINK) and Dogecoin (DOGE), among others
• Digital Collectibles. Crypto assets representing digital ownership of artwork, music, in-game items and other collectibles, such as non-fungible tokens (NFTs)
• Digital Tools. Crypto assets, commonly referred to as utility tokens, that perform practical functions on a blockchain network, such as representing memberships, acting as tickets for events or identification credentials, or triggering smart contract functionality
• Stablecoins. Crypto assets with a value tied to an asset or a class of assets (such as the U.S. dollar), including stablecoins that qualify under the GENIUS Act as "permitted payment stablecoins" (see Holland & Knight's webinar and alert on stablecoins)
• Digital Securities. Tokenized securities that are securities (e.g., tokenized equity or debt instruments)

The interpretive release provides that digital commodities, digital collectibles, digital tools and GENIUS-Act qualifying stablecoins are generally not securities because they 1) are intrinsically linked to a functional decentralized blockchain network, 2) are not necessarily acquired with the expectation of profit, 3) derive their value from the programmatic operation of that blockchain network and not from the managerial efforts of others, and 4) do not represent ownership or other interest in a common enterprise or investment.

Critically, the interpretive release also clarified that protocol mining, staking, wrapping and airdrops generally are not securities transactions, absent other circumstances that would override the general rule, such as wrapping a traditional security in a digital token and offering that wrapped token. The interpretive release also addressed the circumstances under which non-security crypto assets become – and cease to be – subject to investment contracts under the Howey framework. It is this last category, non-security crypto assets subject to investment contracts, that Regulation Crypto Assets is designed to address.

Under the proposed rule, a "covered investment contract" is defined as a contract, transaction or scheme that constitutes an investment contract where 1) a crypto asset is subject to the investment contract, 2) the crypto asset is not itself a security and 3) no asset other than such crypto asset is subject to the investment contract. A "crypto asset" is defined as any digital representation of value recorded on a cryptographically secured distributed ledger (i.e., a "blockchain").

The Startup Exemption: A Simplified On-Ramp for Early-Stage Projects

Subpart B of the proposed rule (Rule 200) establishes a one-time, nonexclusive exemption from Section 5 registration for offerings of crypto assets subject to covered investment contracts, provided that the following conditions are met:

• Offering Limit. Offerings may not exceed $5 million over a four-year period
• Issuer. The issuer can be an entity, individual or group of individuals/entities
• One-Time Use. The issuer and its affiliates cannot reuse the exemption for the same or a substantially similar crypto asset
• Filing Requirement. The issuer must file a Notice of Reliance (Form NOR) on the SEC's EDGAR system before commencement of the offering
• Disclosure. The issuer must make the Rule 103 disclosures (discussed below) publicly accessible and free of charge at the website specified in the Form NOR, with annual updates if there are material changes
• Transition Report. The issuer must file a Transition Report (Form TR) no later than four years after the Form NOR filing
• No Financial Statements. No audited or unaudited financial statements are required
• General Solicitation. General solicitation is permitted
• Non-Accredited Investors. There are no restrictions on sales to non-accredited investors
• No Resale Restrictions. Securities sold under this exemption are not restricted securities

The SEC anticipates that the Startup Exemption will be used by approximately 99 issuers annually,² with an estimated compliance cost of approximately $48,641 per issuer. Importantly, the anti-fraud and anti-manipulation provisions of the federal securities laws continue to apply to offerings conducted under this exemption.

The Fundraising Exemption: Scaled Access to Larger Capital Raises

Subpart C of the proposed rule (Rules 300–307) establishes a nonexclusive, two-tiered exemption modeled on Regulation A designed for more established crypto projects seeking larger capital raises:

Tier 1: Up to $20 Million

• maximum offering of $20 million per 12-month period (including a maximum of $6 million by affiliate selling securityholders)
• no audited financial statement requirement
• additional 30 percent limitation on secondary sales in the first year

Tier 2: Up to $75 Million

• maximum offering of $75 million per 12-month period (including a maximum of $22.5 million by affiliate selling securityholders)
• audited financial statements are required
• non-accredited investor investment limitation of 10 percent of the greater of annual income or net worth
• additional 30 percent limitation on secondary sales in the first year

Common features of both tiers include:

• Issuer Requirements. The issuer must be a U.S.-organized entity with a majority of U.S. officers and directors, more than 50 percent of assets in the U.S. and U.S.-administered business operations.
• Exclusions. Development-stage blank check companies, investment and business development companies (BDCs), and issuers subject to Section 12(j) orders are not eligible.
• SEC Review. An offering statement must be filed on EDGAR (Form 1-CRYPTO) and qualified by the Division of Corporation Finance before sales may commence.
• Testing the Waters. This process is permitted before and after filing.
• No Resale Restrictions. Securities are not restricted securities.
• Continuous Offerings. Continuous and delayed offerings are permitted.
• Confidential Submission. Nonpublic submission of offering statements is permitted.
• Ongoing Reporting. Annual reports (Form 1-KC), semiannual reports (Form 1-SC), current reports (Form 1-UC) and transition reports (Form TR) are required.

The SEC estimates approximately 31 issuers will use the Fundraising Exemption annually.

Tailored Disclosure Requirements: A Principles-Based Approach

Rule 103 of the proposed regulation establishes a principles-based disclosure framework specifically tailored to crypto assets. Rather than importing the existing disclosure requirements for traditional securities, the SEC designed a new framework that reflects the unique characteristics of crypto assets and the information needs of crypto investors. Disclosures must be clear, concise, understandable and not overly technical.

The 10 categories of required disclosure are the following:

• Covered Investment Contract. Material terms, the issuer's essential managerial effort promises and progress toward completion
• Offering. Units, price, duration, restrictions, agreements and use of proceeds
• Subject Crypto Asset. All material aspects of the crypto asset itself
• Management, Related Persons and Conflicts of Interest. Key personnel, ownership and potential conflicts
• Associated Crypto Network/Application; Plan of Development. The underlying technology and development road map
• Security; Source Code. Security measures, audit history and code accessibility
• Subject Crypto Asset Economics and Allocations. Supply mechanics, pricing, lockup periods, distributions and insider holdings
• Governance. Smart contract governance, permissioning and upgrade mechanisms
• Subject Crypto Asset Ecosystem. The broader ecosystem of participants, exchanges and applications
• Risk Factors. Material risks specific to the crypto asset, network and investment contract

This disclosure framework applies to both exemptions, though the Startup Exemption does not require financial statements. The principles-based approach gives issuers flexibility in presentation while ensuring that investors receive the information most material to crypto asset investments.

The Investment Contract Safe Harbor: A Path to "Cessation"

Perhaps the most innovative feature of the proposed rule is Subpart D (Rule 400), which establishes a conditional safe harbor under which a covered investment contract can be deemed to have "ceased to exist." This means that the crypto asset subject to that contract is no longer subject to an investment contract and, therefore, no longer triggers Securities Act registration requirements or ongoing reporting obligations.

The safe harbor is available if the following two conditions are satisfied:

• Completion of Essential Managerial Efforts. The issuer has completed or permanently ceased all essential managerial efforts it represented or promised in connection with the covered investment contract and is not making new representations or promises of essential managerial efforts
• Transition Report Filing. The issuer files a Form TR with the SEC containing 1) the identification of the issuer, 2) a description of the covered investment contract and crypto asset, 3) a certification that the conditions have been satisfied and 4) an analysis supporting the certification

Importantly, the safe harbor is:

• Nonexclusive. A crypto asset may also not be subject to an investment contract under the Howey test independent of the safe harbor (i.e., the safe harbor is not the only path to cessation)
• Universally Available. The safe harbor is available regardless of whether the issuer relied on the startup or Fundraising Exemptions or conducted a registered offering

The SEC estimates that approximately 475 issuers will rely on the safe harbor annually. This provision represents a critical offramp for crypto projects, providing a clear, measurable path from regulated investment contract status to a fully decentralized, non-security crypto asset.

Preemption of State Registration and Qualification Requirements

Subpart E (Rule 500) of the proposed rule defines "qualified purchaser" under Section 18(b)(3) of the Securities Act to include purchasers in offerings conducted under Regulation Crypto Assets, effectively preempting state securities law registration and qualification requirements for the following activities:

• Offerings conducted under either the Startup Exemption or the Fundraising Exemption
• Secondary market transactions by non-issuers, non-underwriters and non-dealers, provided that the issuer 1) satisfied the requirements of an exemption under Regulation Crypto Assets and 2) remains subject to, and current with, its disclosure, filing and reporting obligations

This preemption eliminates a significant compliance burden for crypto asset offerings, which previously faced an unwieldy patchwork of state-by-state registration and qualification requirements. For secondary market participants, the preemption provides critical legal certainty for trading in crypto assets that were initially offered under the regulation.

Putting It All Together: Comparing the Exemptions

The following table summarizes the key features of the two proposed exemptions:

Looking Ahead

Regulation Crypto Assets represents a fundamental shift in the SEC's approach to digital asset regulation, from enforcement-driven ambiguity to rulemaking-driven clarity. For the first time, crypto asset issuers conducting offerings involving investment contracts have a defined regulatory pathway with clear thresholds, specific disclosure obligations and a measurable transition mechanism.

Comments on the proposed rule are due 60 days after publication in the Federal Register. Market participants should consider the following in preparing comment letters and strategic planning:

• Relationship to Pending Legislation. The CLARITY Act, which would establish a comprehensive statutory framework for digital assets, remains pending in the U.S. Congress. Chairman Atkins has emphasized that legislation is "indispensable" and that the proposed rule is designed to work within existing Securities Act authority. If the CLARITY Act is enacted, aspects of Regulation Crypto Assets may be superseded or modified. However, Commissioner Mark Uyeda noted that "nothing precludes the Commission from taking legislative developments into account" in finalizing the rule
• The $5 Million Threshold. For many crypto projects, the $5 million Startup Exemption cap may be insufficient for the capital requirements of launching a crypto network or protocol. Projects with larger capital needs will need to evaluate whether the more burdensome Fundraising Exemption (with SEC qualification review) is the appropriate path
• The Safe Harbor as an Off-Ramp. The investment contract safe harbor provides a compelling incentive for projects to achieve genuine decentralization. Issuers should carefully plan their development road map with the safe harbor conditions in mind, documenting their progress toward completing essential managerial efforts
• State Law Considerations. While the proposed rule preempts state registration and qualification requirements, it does not preempt state anti-fraud provisions. Issuers must still comply with state anti-fraud laws, and state securities regulators retain enforcement authority over fraudulent conduct
• Existing Projects. The proposed rule does not include a retroactive amnesty or safe harbor for crypto assets that were previously sold without registration or an available exemption. Projects that sold tokens prior to the effective date of any final rule will need to evaluate their options separately

For crypto asset projects, token issuers, exchanges, investors and their advisors, the proposed Regulation Crypto Assets represents a potential inflection point: the first time the SEC has offered a constructive, rather than punitive, regulatory framework for the crypto industry. There remains time to submit public comments to help guide the development of this proposed rule.

For more information on the proposed rule, how Holland & Knight can assist in submitting your organization's views to the SEC or to discuss how it may affect your crypto asset strategy, please contact the authors or another member of the Digital Assets, Securities Enforcement Defense, Public Companies and Securities or Broker-Dealer and Investment Adviser Regulation teams.

Notes

¹ Statement of Chairman Paul S. Atkins on Regulation Crypto Assets (Aug. 18, 2026).

² The SEC estimates 130 total offerings annually under Regulation Crypto Assets (99 under the Startup Exemption and 31 under the Fundraising Exemption) and 475 issuers relying on the safe harbor annually.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.