Chris Hayes

The @SECGov just proposed Regulation Crypto Assets, its first actual rulebook for token offerings. The gist: you can raise money selling tokens under a $5M exemption or a $75M one, and there's a defined way for the token to stop being a security when the company's work is done. For a decade, the SEC's answer to "how do I sell a token legally" was "register it like an IPO" (or the infamous "come in and talk to us"). Nobody could since public company requirements don't track well for a distributed system. In March, the Commission finally wrote down what a lot of us had been arguing: the token itself usually isn't the security, the promise to build the network is. That promise is the "investment contract" and today's proposal builds the on-ramps around that idea. Call them the startup exemption and the fundraising exemption. The startup exemption: Sell or give away up to $5M of tokens over 4 years, once per token. Capital raises count, but so do airdrops, points-style usage rewards & validator or governance rewards. The paperwork is light. File a short notice to the SEC, plain-English disclosures on your website (who's building, what you promised, how you're doing on it), and a report when the 4 years are up. Retail can buy, you can market it publicly & the tokens aren't restricted. The fundraising exemption: Reg A (the "mini-IPO" rule) with a token skin: up to $20M or $75M per year, prepare a formal offering document the SEC reviews, and make ongoing reports after. This higher threshold comes with a few hooks, though. Retail investors are capped at 10% of income or net worth, reports never turn off, and only US companies with US management can use it (and at the $75M level they need audited financials). The Safe Harbor. If you've finished (or permanently stopped) the work you promised token holders that you would do and you file a report saying so, the SEC treats the investment contract as over and the token is just another thing that a company made and distributed. @HesterPeirce floated a version of this back in 2020 tied to decentralization, but this one turns on whether YOU finished your job rather than how many validators the network has. Why does this matter? The biggest problem with tokens wasn't the sale, it was that nobody could say when the security stopped being a security. So what happened? Exchanges, custodians & funds treated every token like it was radioactive forever. A filed, dated, public exit is the thing every one of them wanted to point at when questioned about their treatment. There's much more to cover in the proposal than a single not-too-long post can get to, but here's a few other fun easter eggs: State securities laws are preempted, both for the offering and for people trading the token afterward (as long as filings are kept current, no pressure). And second, slipped into a footnote, the SEC says these investment contracts aren't "equity securities," so a big holder count won't force you into full SEC registration. They ask whether to make that official. Please do 🙏 The two exemptions are definitely a useful step, but Congress can rewrite them, and every commissioner said today they still want the Clarity Act. How far we've come. A few years ago "is this token [offering] a security" led to a high six-figure legal bill, a memo that ends in "maybe," and possibly a subpoena from a government agency. Now that same question is about to have a real answer and a real pathway.