SEC Proposes First U.S. Token Offering Rules Under Regulation Crypto Assets

The SEC’s first token rulebook: On Tuesday, the SEC introduced Regulation Crypto Assets, a 402-page proposal that would give token offerings their first dedicated set of rules in the U.S. It lays out how crypto projects can legally raise capital through token sales, including to U.S. retail investors, and when the securities status tied to those sales can end.

• Why it matters: Until now, public token sales in the U.S. had to fit within securities rules designed for conventional companies, with no dedicated framework for crypto firms or decentralized protocols. That uncertainty pushed launches offshore and produced the common split between a foundation abroad that holds the tokens and a labs entity that builds the product. The SEC wants to give those projects a reason to come to the U.S., moving ahead while Congress has yet to pass the Clarity Act.

A decade-old question: For ten years, one question has divided the SEC and the industry: when is a token a security? The proposal's answer is a split. For tokens covered by the framework, the token itself is not a security. What the law regulates is the promise behind it, made when a team takes investors' money to build something it has yet to deliver.

A token’s new lifecycle: That promise has a beginning and an end. A team states upfront what it plans to build. Once that work is finished, or permanently stopped, it files a public report with the SEC, and from that date the token trades free of securities law. Until then, however, the status travels with the token, and even ordinary secondary trades generally remain securities transactions.

How it works: To raise the money, teams can choose between two routes. The more they raise, the more the SEC asks in return.

• For smaller projects, the startup exemption lets projects raise up to $5 million over four years. Issuers file a notice with the SEC, publish information on the project, token, team, and the work they promise to complete, and commit to delivering within those four years. No financial statements are needed, and investors can put in as much as they want.
• Larger projects can raise up to $20 million or $75 million per year. The offering has to be qualified by the SEC before sales can start, financial disclosures and ongoing reporting become mandatory, and the $75 million tier also requires audited financials. Only U.S.-based issuers qualify, and non-accredited individual investors can commit at most 10% of their annual income or net worth, whichever is greater.

A regulated return of the ICO: In practical terms, it amounts to a regulated return of the ICO. Nearly a decade after the SEC effectively shut the first era down, projects could again sell tokens straight to the public, this time within set limits and with filings and fraud rules attached.

Outlook: All of this is still a proposal. A 60-day comment period starts with its publication in the Federal Register, after which the SEC can revise the rules before voting on a final version. And because the framework would rest on SEC rulemaking rather than legislation, a future Commission could reverse it, leaving the industry's need for more durable certainty through the Clarity Act unresolved.

Larry Florio is Deputy General Counsel at Ethena Labs, the company behind one of the industry’s largest U.S. dollar stablecoins.

The SEC’s proposal would give token fundraising its first real path in the U.S. From a project’s perspective, what does it unlock, and what still stands in the way?

The biggest unlock is straightforward: for the first time, projects would have a clear path to raise through tokens in the U.S., including from retail investors. Until now, many projects simply geoblocked U.S. investors and airdrops because the securities-law risk was too high. Greater certainty could also bring in the VCs and funds beyond the crypto-native circle, even if many of them still need to learn how token systems differ from the companies they usually underwrite.

Still, important questions remain around how financial institutions treat an asset whose regulatory status can change over its lifecycle, including whether custody requirements differ while it is subject to an investment contract.

The bigger obstacle, though, may end up being tax. When a company raises through equity, the proceeds get specific tax treatment. Token sales do not, which means an issuer can lose roughly 35% of what it raises straight to taxes. That could remain a major deterrent even if the securities-law framework becomes much clearer.

Balder Bomans is CIO at Maven 11 Capital, one of Europe’s earliest blockchain-focused investment funds.

From an investor’s seat: How are crypto startups structuring their raises today, and will the SEC's proposal change that?

While the market has recently been shifting toward pure equity, the dual equity-plus-token structure remains the default for many crypto startups. Pure token-based raises, meanwhile, have become marginal. That partly reflects a broader change in the market itself: crypto-native projects are increasingly giving way to more mature, revenue-generating businesses that look and operate more like traditional companies.

The dual structure, however, creates a persistent problem for public-market investors. It is often unclear where the economic value is meant to accrue: to the token, to the equity, or to both. Tokenholder rights can also be poorly defined, as the recent Venice controversy highlighted.

The SEC proposal would not solve value accrual directly, but it could create a cleaner separation:

• Protocols where the token is integral to the product and captures the underlying economics would gain a clearer path to raise through it and decentralize, potentially encouraging more crypto-native projects to build in the U.S.
• More centralized businesses, by contrast, would have less reason to add a token to a conventional corporate structure and would likely remain equity-first.