Blog
Beyond Howey: What the SEC’s Crypto Proposal Means for Fund Managers and Advisers
Brian MacKenzie | 18 August 2026
For most of the past decade, the SEC's answer to crypto has been the Howey test and an enforcement docket. That changed this month. The Commission has proposed Regulation Crypto Assets (Release No. 33-11434), a dedicated offering framework for investment contracts involving crypto assets. This represents the first time the SEC has tried to write rules for this market rather than stretch old ones to fit.
The proposal runs over 400 pages, and most of the coverage so far has focused on what it means for token issuers, which is fair as they're the ones who would use it. But if you manage funds or advise clients with digital asset exposure, there's plenty here for you too, and some of it changes day-to-day compliance work in real ways.
At its core, the proposal does three things.
First, it creates two new exemptions from registration. The smaller one, which the SEC calls the startup exemption, lets an issuer raise up to $5 million over a four-year period in exchange for a set of plain-narrative disclosures about the project, what the token does, what network it runs on, and what the issuer has committed to build. No audited financials required. The idea is to give early-stage projects a legal runway during the development phase, which is exactly when most of them have historically either ignored the securities laws or moved offshore.
The larger one, the fundraising exemption, borrows heavily from Regulation A. It comes in two tiers — up to $20 million or up to $75 million in a 12-month period — and requires an offering statement filed on EDGAR (a new Form 1-CRYPTO), financial statements with assurance requirements that scale with the size of the raise, and ongoing periodic reporting after the offering is qualified. Two details here are worth noting. Tokens sold under this exemption would not be restricted securities, and retail investors can participate, subject to investment limits. Both choices are deliberate: the SEC is acknowledging that a token's value depends on broad distribution and liquidity, and it built the exemption to allow for that rather than fight it.
Second (and this is the part I'd argue matters most), the proposal includes a safe harbor, Rule 400, that gives a crypto asset a formal way out of securities status. The logic goes like this: a token might be sold as part of an investment contract while the issuer is still building, but once the issuer has done everything it promised investors, there's nothing left to rely on the issuer for, and the investment contract ceases to exist. The SEC said as much in interpretive guidance earlier this year. Rule 400 would turn that view into an actual process. The issuer files a transition report on a new Form TR, certifies it has completed (or permanently stopped) its promised efforts, lays out its reasoning, and from that point the Commission would treat the token as no longer subject to an investment contract.
The market has never had anything like this. Every debate about whether a given token is "still a security" has been argued in the abstract, with no filing, no date, and no record. Form TR would change that.
Third, offerings under the new regime would be exempt from state registration and qualification requirements, so one federal framework instead of 51.
Start with diligence. Today, evaluating a token project usually means reading a whitepaper and hoping it bears some relationship to reality. Under this proposal, issuers relying on the exemptions would produce SEC-filed disclosure documents and ongoing reports, reviewed against a defined set of requirements. That gives your diligence process something to anchor to, and it gives you a basis for comparing projects against each other that simply doesn't exist right now.
Then there's classification, whether a portfolio holding is a security drives custody analysis, trading venue selection, and a fair amount of regulatory reporting. A public Form TR filing, with a date on it, would give compliance teams something concrete to point to. That said, don't read the safe harbor as ironclad. It only protects issuers that genuinely satisfy its conditions, and the release states plainly that the SEC can take the position that a token remains a security if the filing misrepresents the facts. A Form TR is the start of the analysis, not the end of it.
And keep in mind what doesn't change. Antifraud and antimanipulation provisions apply in full to every offering under these exemptions. Exempt does not mean unregulated, and the diligence and disclosure review you do now remains just as necessary; the inputs get better, that's all.
This is a proposal, not a final rule, and comments are due 60 days after publication in the Federal Register. The SEC is asking open questions about nearly every design choice: whether the offering limits are right, whether the tiers make sense, whether the safe harbor conditions should be tighter or looser. Managers running digital asset strategies have a legitimate stake in those answers, and a comment letter is a more effective way to shape the outcome than most people assume.
Even before anything is final, the direction is hard to miss. Crypto offerings are moving out of the enforcement gray zone and into a disclosure regime, and the firms that come out ahead will be the ones that really thought through the implications for their compliance programs, their diligence checklists, and how they talk to clients about crypto exposure.
We're tracking the rulemaking closely at PINE and working through these questions with firms now. If you'd like to talk about what the proposal could mean for yours, we welcome the conversation. Reach out anytime.
The proposal runs over 400 pages, and most of the coverage so far has focused on what it means for token issuers, which is fair as they're the ones who would use it. But if you manage funds or advise clients with digital asset exposure, there's plenty here for you too, and some of it changes day-to-day compliance work in real ways.
What the SEC is Actually Proposing
At its core, the proposal does three things.
First, it creates two new exemptions from registration. The smaller one, which the SEC calls the startup exemption, lets an issuer raise up to $5 million over a four-year period in exchange for a set of plain-narrative disclosures about the project, what the token does, what network it runs on, and what the issuer has committed to build. No audited financials required. The idea is to give early-stage projects a legal runway during the development phase, which is exactly when most of them have historically either ignored the securities laws or moved offshore.
The larger one, the fundraising exemption, borrows heavily from Regulation A. It comes in two tiers — up to $20 million or up to $75 million in a 12-month period — and requires an offering statement filed on EDGAR (a new Form 1-CRYPTO), financial statements with assurance requirements that scale with the size of the raise, and ongoing periodic reporting after the offering is qualified. Two details here are worth noting. Tokens sold under this exemption would not be restricted securities, and retail investors can participate, subject to investment limits. Both choices are deliberate: the SEC is acknowledging that a token's value depends on broad distribution and liquidity, and it built the exemption to allow for that rather than fight it.
Second (and this is the part I'd argue matters most), the proposal includes a safe harbor, Rule 400, that gives a crypto asset a formal way out of securities status. The logic goes like this: a token might be sold as part of an investment contract while the issuer is still building, but once the issuer has done everything it promised investors, there's nothing left to rely on the issuer for, and the investment contract ceases to exist. The SEC said as much in interpretive guidance earlier this year. Rule 400 would turn that view into an actual process. The issuer files a transition report on a new Form TR, certifies it has completed (or permanently stopped) its promised efforts, lays out its reasoning, and from that point the Commission would treat the token as no longer subject to an investment contract.
The market has never had anything like this. Every debate about whether a given token is "still a security" has been argued in the abstract, with no filing, no date, and no record. Form TR would change that.
Third, offerings under the new regime would be exempt from state registration and qualification requirements, so one federal framework instead of 51.
Why Advisers Should Care
Start with diligence. Today, evaluating a token project usually means reading a whitepaper and hoping it bears some relationship to reality. Under this proposal, issuers relying on the exemptions would produce SEC-filed disclosure documents and ongoing reports, reviewed against a defined set of requirements. That gives your diligence process something to anchor to, and it gives you a basis for comparing projects against each other that simply doesn't exist right now.
Then there's classification, whether a portfolio holding is a security drives custody analysis, trading venue selection, and a fair amount of regulatory reporting. A public Form TR filing, with a date on it, would give compliance teams something concrete to point to. That said, don't read the safe harbor as ironclad. It only protects issuers that genuinely satisfy its conditions, and the release states plainly that the SEC can take the position that a token remains a security if the filing misrepresents the facts. A Form TR is the start of the analysis, not the end of it.
And keep in mind what doesn't change. Antifraud and antimanipulation provisions apply in full to every offering under these exemptions. Exempt does not mean unregulated, and the diligence and disclosure review you do now remains just as necessary; the inputs get better, that's all.
The Window to Weigh in
This is a proposal, not a final rule, and comments are due 60 days after publication in the Federal Register. The SEC is asking open questions about nearly every design choice: whether the offering limits are right, whether the tiers make sense, whether the safe harbor conditions should be tighter or looser. Managers running digital asset strategies have a legitimate stake in those answers, and a comment letter is a more effective way to shape the outcome than most people assume.
Even before anything is final, the direction is hard to miss. Crypto offerings are moving out of the enforcement gray zone and into a disclosure regime, and the firms that come out ahead will be the ones that really thought through the implications for their compliance programs, their diligence checklists, and how they talk to clients about crypto exposure.
We're tracking the rulemaking closely at PINE and working through these questions with firms now. If you'd like to talk about what the proposal could mean for yours, we welcome the conversation. Reach out anytime.