SEC's Regulation Crypto Assets draws pushback as comments close

The public comment window for the SEC's proposed Regulation Crypto Assets closed on Tuesday, 20 October 2026, with more than 100 letters filed. The plan would let token projects raise money without full securities registration. Much of the industry wants it changed first.

Those rules come from a proposal the SEC issued on 18 August 2026 and entered in the Federal Register three days later, as File No. S7-2026-27. Comments ran for 60 days. Paul Atkins, the SEC chairman, cast the plan as part of the Commission's "efforts to provide clarity for crypto markets."

What the proposal would do

At its core the plan creates two ways for a crypto project to sell tokens without registering them the way a firm registers a stock sale. The first is a one-time startup exemption. A project can raise up to $5 million over four years, advertise the sale in the open, and sell to anyone, with no cap on how much a single person puts in. No audited accounts are needed. Before any sale the issuer files a short notice, called Form NOR, on the SEC's EDGAR system, naming itself and the token. This is not deregulation. Full registration gives way to lighter filings, and the federal anti-fraud rules still apply.

A second route runs bigger. Named the fundraising exemption, it borrows its shape from Regulation A, the rulebook smaller public companies already use. Tier 1 allows up to $20 million in a year. Tier 2 reaches $75 million, with audited accounts and regular reports once the money is in. Ordinary investors face a limit here that the startup route lacks, no more than 10% of the greater of their income or net worth in a single deal. Both tiers ask for plain-language disclosure about the token and the team, filed on a form the SEC labels Form 1-CRYPTO, followed by annual, half-year and event-driven updates. One rule sits under all of it. The issuer must be based in the United States.

A safe harbor, and a fight over state law

Beyond the exemptions, the proposal answers a question that has dogged crypto since 2017. When does a token stop being a security? The plan offers a conditional safe harbor built around a phrase it calls "essential managerial efforts." Once a project has finished, or permanently dropped, the core work it promised investors, it files a Form TR with a certification and its reasoning. If the conditions hold, the token is treated as no longer part of an investment contract. The filing does not stop the SEC challenging it later, and it does not block private lawsuits. It builds on interpretive guidance the SEC issued in March 2026 on how old securities law maps onto digital assets.

There is a catch, and the states have noticed. Buyers in these deals would count as "qualified purchasers," a label that stops individual states demanding their own registration. State securities regulators have fought federal preemption before. Their power to chase fraud would stay. Their role as gatekeeper would shrink. That line will be argued hard.

What the industry asked the SEC to change

More than 100 submissions landed before the window shut, and backing the idea did not mean backing the detail. A policy group tied to the Hyperliquid exchange told the SEC to adopt the rules but rework the safe harbor, which it said sets a bar many teams cannot meet. "The proposal's new safe harbor requires a certification that many projects cannot make," the group wrote in a blog post. It also pushed the agency to state plainly in the rule that an airdrop handed out for nothing is not a securities sale. The group laid out a wider set of asks in its earlier list of fixes.

Wall Street wanted changes too. The Securities Industry and Financial Markets Association, which speaks for large banks and brokers, said investor protection needed work now and queried how issuers would opt into the relief. The length of that relief, SIFMA wrote, "heightens the importance of resolving these questions at the outset." The Alternative Investment Management Association, a body for fund managers, pressed for clearer disclosure of the legal rights a buyer actually holds. Issuers, it said, should "distinguish utility or economic exposure from ownership, redemption, cash-flow and contractual rights."

What to watch

Closing the window does not force a decision. SEC staff now read the letters and choose whether to adopt the rules as written, change them, or put them out again for fresh comment. The agency has not said when it will act, or whether a final version will look anything like this one. A proposal is not a law. For now it is one more test in a year crowded with crypto rulemaking.

Two things are worth tracking. First, whether the SEC tightens or loosens the safe harbor after the comments, because that one choice decides how many projects can use it. Second, the courts. Legal analysts have warned that rules drifting far from the statute Congress wrote could invite lawsuits, more so after the Supreme Court cut back agency power in its 2024 Loper Bright decision. For now the proposal sits where it began. On paper, waiting.