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# The SEC's Crypto Proposal Borrows Reg A+'s $75 Million Playbook
- URL: https://www.freemarketsreport.com/the-secs-crypto-proposal-borrows-reg-a-s-75-million-playbook/
- Published: 2026-08-23T04:03:27.000Z
- Updated: 2026-08-24T06:20:04.000Z
- Description: A proposed $5 million startup tier, $75 million fundraising tier and safe harbor could recast crypto capital formation, but nothing is effective yet.
- Author: Michael A. Gayed, CFA
- Tags: digital-assets-crypto

A proposed $5 million startup tier, $75 million fundraising tier and safe harbor could recast crypto capital formation, but nothing is effective yet.

### Key Highlights

- The SEC proposed, not adopted, Regulation Crypto Assets on August 18, 2026\. The proposing release appeared in the Federal Register on August 21, and comments are due October 20\. [1](#fn-1)
- The proposal pairs a one-time $5 million startup exemption over four years with a two-tier fundraising exemption, up to $20 million in Tier 1 and up to $75 million in Tier 2, each per 12-month period. [2](#fn-2)
- Tier 2 of the fundraising exemption would require audited financial statements and ongoing reporting, while all tiers use principles-based narrative disclosures. [2](#fn-2)
- A conditional safe harbor could apply only after an issuer completes or permanently stops all promised essential managerial efforts. [3](#fn-3)

**The SEC has proposed a new on-ramp for crypto projects that looks less like a special exemption from securities law and more like a crypto-specific version of the capital-formation ladder regulators already know. It could create a clearer path from fundraising to a post-development asset, but it remains only a proposal.** [1](#fn-1)

## The proposal: a crypto wrapper for familiar capital formation

Regulation Crypto Assets, File S7-2026-27, is a proposed rulemaking, not an operative exemption. The SEC issued it on August 18 as Release Nos. 33-11434 and 34-106150, and the Federal Register published it on August 21\. Its comment deadline is October 20\. Until the Commission completes this process and adopts any final text, issuers cannot rely on these pathways. [1](#fn-1)

The first proposed route is a startup exemption: a one-time pathway for up to $5 million during a four-year period. The second is a two-tier fundraising exemption modeled on Regulation A: Tier 1 permits up to $20 million and Tier 2 up to $75 million, both per 12-month period. All tiers would require principles-based narrative disclosures. Tier 2 would also require audited financial statements and ongoing reporting. [2](#fn-2)

The unusual feature is the proposed investment-contract safe harbor. If an issuer completes or permanently ceases every essential managerial effort it represented or promised under the contract, and meets the other conditions, the crypto asset would be deemed no longer subject to that investment contract for purposes of the Securities Act and Exchange Act definitions of security. The proposal would require a transition report, certification and supporting analysis, so this is not a self-executing label an issuer can simply attach to a token. [3](#fn-3)

![Crypto capital formation timeline](https://storage.ghost.io/c/be/1b/be1bb8f3-f534-4eb9-b00d-09ff49598e5f/content/images/2026/08/upload-71.png)

*Thesis implication: The proposal would extend a familiar exempt-offering architecture to crypto, with a distinct off-ramp tied to the issuer's promised work. Source: SEC Regulation A history, Regulation Crowdfunding rule page, SEC-CFTC interpretation, and proposed Regulation Crypto Assets release.* [*10*](#fn-10)[*11*](#fn-11)[*4*](#fn-4)[*1*](#fn-1)

The proposal also would preempt state registration and qualification requirements for qualifying offers and transactions, as well as specified secondary-market transactions. That is a potentially material change in workflow, especially where a network's participants are dispersed across states. But the federal antifraud and antimanipulation provisions would still apply. [2](#fn-2)

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## How the proposed ladders compare with Reg CF and Reg A+

The analogy is useful. Regulation Crowdfunding currently lets an eligible issuer raise up to $5 million in a 12-month period and requires an online SEC and FINRA-registered broker-dealer or funding portal. It requires an annual Form C-AR within 120 days of fiscal year-end, posted on the issuer's website. [5](#fn-5)

The proposed startup exemption shares Reg CF's current $5 million ceiling but takes a different shape. It would spread that amount across four years, be one-time, and use crypto-tailored narrative disclosure rather than the Reg CF intermediary model. That could matter for a protocol that needs a longer development runway, but it is not a substitute for an active marketplace, investor diligence or a functioning custody stack. [2](#fn-2) [6](#fn-6)

At the other end, the proposed fundraising exemption's two-tier structure, $20 million in Tier 1 and $75 million in Tier 2 per 12-month period, directly mirrors Regulation A's own Tier 1 ($20 million) and Tier 2 ($75 million) ceilings. Reg A Tier 2 already requires an SEC-qualified Form 1-A, audited financial statements and ongoing annual, semiannual and current reports. It also avoids state registration or qualification, while preserving state enforcement and antifraud authority. The proposed crypto tier looks like a sector-specific cousin, not a blank slate. [6](#fn-6)

![Startup vs fundraising exemption comparison](https://storage.ghost.io/c/be/1b/be1bb8f3-f534-4eb9-b00d-09ff49598e5f/content/images/2026/08/upload-72.png)

*Thesis implication: The proposed tiers separate early experimentation from larger, disclosure-heavy capital raises, much as existing exempt-offering rules scale requirements with size. Source: SEC proposed Regulation Crypto Assets release.* [*2*](#fn-2)

## Who benefits if the proposal survives intact

The immediate beneficiaries would not necessarily be a single listed company. The opportunity is broader: domestic issuers, compliant distribution and secondary-market infrastructure, custody providers, and disclosure and compliance vendors that turn principles-based requirements into repeatable controls.

For market infrastructure, the financial mechanics are straightforward. A more legible offering route can shift spending from bespoke legal triage toward standardized onboarding, disclosures, reporting, transfer controls and monitoring. The safe harbor could also create demand for governance records and evidence that promised managerial work has actually ended. Those are structural tailwinds for the firms that make compliance auditable, not a guarantee that issuance volume arrives.

This is where the March 17 SEC-CFTC interpretation matters. It described how a non-security crypto asset may become subject to, and later cease to be subject to, an investment contract, while also addressing categories such as digital commodities, collectibles, tools and stablecoins. August's proposal attempts to operationalize that boundary for capital raising. [4](#fn-4)

## What is not true yet

No new exemption is available today. No safe harbor has taken effect. No issuer has received a regulatory certificate of decentralization. The Commission is requesting comment on thresholds, conditions and other provisions, and Commissioner Hester Peirce cautioned that the exemptions and safe harbor will not fit every model. The October 20 deadline is a comment deadline, not an effective date. [1](#fn-1) [8](#fn-8)

Nor is this a universal escape from enforcement. The proposal says issuers relying on its exemptions remain subject to federal antifraud and antimanipulation provisions. Its safe harbor is conditional, and the release says the Commission would not be precluded from challenging an issuer's attempted reliance if conditions were not met. [2](#fn-2) [3](#fn-3)

## Bear Case

The bear case is not that the proposal has no logic. It is that the economic benefit could be thinner than the headline caps imply. The SEC estimates compliance costs per issuer of about $48,641 for the startup exemption and $973,145.12 for the fundraising exemption. Those are agency estimates for a proposal, not invoices, but they show why a $75 million ceiling does not automatically mean cheaper capital. Financial statements, recurring reports and audit work can absorb much of the advantage for smaller issuers. [3](#fn-3)

Investor protection is also not a side issue. The Commission's own Reg A investor bulletin warns that startup and early-stage investments are speculative, businesses can fail, and securities can be illiquid even without a resale restriction. A crypto-specific disclosure regime may be more relevant than a generic form, but relevance is not the same as comparability, and the proposed release is still asking how to calibrate conditions. [9](#fn-9) [8](#fn-8)

Finally, preemption would remove state registration and qualification requirements, not state authority altogether. The proposal describes states as retaining jurisdiction to investigate and bring enforcement actions involving fraud or deceit, along with notice-filing and fee powers. In other words, state-law enforcement and litigation exposure would not disappear, and the safe harbor itself would remain vulnerable to a challenge over whether promised efforts truly ended. [3](#fn-3)

## The Principle

Capital-formation rules work best when the obligations rise with the amount of public risk being transferred. Regulation Crypto Assets follows that old regulatory logic: lighter disclosure for a limited startup path, financial statements and continuing reports for the larger route, and a defined test for when the investment contract may end. Its lasting investment significance, if adopted, would be less about a particular token and more about whether crypto fundraising begins to resemble a repeatable, domestic market-infrastructure business.

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## Footnotes

1. [SEC, Regulation Crypto Assets, File S7-2026-27](https://www.sec.gov/rules-regulations/2026/08/s7-2026-27?ref=freemarketsreport.com); [Federal Register, Regulation Crypto Assets, Document 2026-17183](https://www.federalregister.gov/documents/2026/08/21/2026-17183/regulation-crypto-assets?ref=freemarketsreport.com).
2. [SEC, "SEC Proposes New Regulation Crypto Assets," Release 2026-76](https://www.sec.gov/newsroom/press-releases/2026-76-sec-proposes-new-regulation-crypto-assets?ref=freemarketsreport.com).
3. [SEC, Proposed Rule, Regulation Crypto Assets, Release Nos. 33-11434 and 34-106150](https://www.sec.gov/files/rules/proposed/2026/33-11434.pdf?ref=freemarketsreport.com).
4. [SEC, "SEC Clarifies the Application of Federal Securities Laws to Crypto Assets," Release 2026-30](https://www.sec.gov/newsroom/press-releases/2026-30-sec-clarifies-application-federal-securities-laws-crypto-assets?ref=freemarketsreport.com).
5. [SEC, Regulation Crowdfunding: Guidance for Issuers](https://www.sec.gov/resources-small-businesses/regulation-crowdfunding-guidance-issuers?ref=freemarketsreport.com).
6. [SEC, Regulation A: Guidance for Issuers](https://www.sec.gov/resources-small-businesses/regulation-guidance-issuers?ref=freemarketsreport.com).
7. [SEC Office of Investor Education and Advocacy, Regulation A Investor Bulletin](https://www.sec.gov/oiea/investor-alerts-bulletins/ib%5Fregulationa.html?ref=freemarketsreport.com).
8. [Commissioner Hester M. Peirce, "Filling the Regulatory Tank: Regulation Crypto Assets Proposing Release"](https://www.sec.gov/newsroom/speeches-statements/peirce-statement-regulation-crypto-assets-081826?ref=freemarketsreport.com).
9. [SEC Office of Investor Education and Advocacy, Regulation A Investor Bulletin](https://www.sec.gov/oiea/investor-alerts-bulletins/ib%5Fregulationa.html?ref=freemarketsreport.com).
10. [SEC, Final Rule: Amendments to Regulation A](https://www.sec.gov/files/rules/final/2015/33-9741.pdf?ref=freemarketsreport.com).
11. [SEC, Crowdfunding, Release Nos. 33-9974 and 34-76324](https://www.sec.gov/rules-regulations/2015/10/crowdfunding?ref=freemarketsreport.com).

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