SEC's Proposed Token Offering Rules: What Firms Need to Know
The Securities and Exchange Commission unveiled its long-awaited Regulation Crypto Assets proposal on 18 August 2026, creating two new exemptions that would let qualifying token issuers raise capital from the public without registering a full securities offering. The rules are a genuine step forward for US crypto capital markets, but legal experts warn they are unlikely to trigger an ICO revival and carry embedded risks that accounting and compliance teams at both issuers and their professional advisers need to understand now.
What the SEC Actually Proposed
The proposal contains two distinct exemptions, each aimed at a different stage of a project's life.
The Small-Issuer Exemption
Startups can raise up to $5 million over a four-year window through a one-time, lighter-touch pathway. The ceiling is low enough that this track is best suited to very early-stage projects testing market demand before committing to heavier disclosure obligations.
The Larger Rolling Exemption
The more consequential track allows issuers to raise up to $75 million in any 12-month period. It is modelled in part on existing Regulation A, so it comes with ongoing disclosure and reporting obligations. Issuers must file an offering statement and submit to SEC staff review before each raise, and they must continue filing annual and semiannual reports throughout the life of the project.
Critically, the $75 million cap is not a lifetime ceiling. Drew Hinkes, a partner at Winston & Strawn, has noted that the 12-month structure permits "serial raises" of up to $75 million every year, provided each raise constitutes a genuinely distinct offering. Lilya Tessler, a partner and leader of Sidley's Global FinTech and Blockchain group, adds that while nothing formally prevents an issuer from using the exemption repeatedly, each subsequent raise is not automatic: the issuer must file a new offering statement, disclose what was raised under the exemption in the prior 12 months so the cap can be verified, and satisfy a fresh SEC staff review.
The SEC has estimated that around 130 offerings per year would use the two new exemptions, and roughly 475 issuers could rely on the broader investment contract safe harbour also included in the proposal. Those numbers suggest a measured expansion of public token offerings, not a flood.
Why This Is Not 2017
The question being asked across the industry is whether these rules will restart the initial coin offering mania that defined 2017 and 2018. The short answer, based on what legal experts have told journalists reviewing the proposal, is almost certainly not.
Investor Appetite Has Changed
Lee Reiners, a lecturing fellow at Duke University with expertise in financial regulation, has pointed out that fundraising markets are shaped by investor appetite, token economics, liquidity, custody arrangements, and the reputational damage left by the last ICO cycle. Up to 90% of projects funded via ICOs between 2017 and 2019 ultimately failed. A generation of retail investors absorbed those losses, and institutional participants now apply far more rigorous due diligence before committing capital.
Non-Accredited Investors Face Limits
The proposal includes an explicit cap on individual participation for non-accredited investors: they may not invest more than 10% of the greater of their annual income or net worth in any single token offering under these exemptions. That structural guardrail did not exist during the 2017 ICO boom and will meaningfully constrain the kind of all-in retail speculation that characterised that era.
Scarcity Is Not New
Some commentary has speculated that capping early-round sizes could create FOMO-driven demand if investors expect later rounds to price tokens higher. Tessler has pushed back on this framing, noting that scarcity in token sales and exempt securities offerings long predates this proposal. Issuers have always been able to limit round sizes and continue to be able to do so. The mechanics are not fundamentally different from how equity rounds are structured today.
The Accounting Implications for Issuers and Their Advisers
For firms advising token issuers, the proposed rules create a defined accounting and reporting calendar that is more demanding than many projects may anticipate. This is where the practical workload sits.
Ongoing Reporting Under the Larger Exemption
Issuers using the $75 million track must file both annual and semiannual reports with the SEC. For accounting teams, this means establishing a repeatable close process that produces SEC-quality disclosures, not just internal management accounts. Firms preparing or auditing these financial statements will need to apply the applicable framework: for US issuers, that means US GAAP, which now includes the FASB's fair value model under ASC 350-60 for crypto assets held on the balance sheet. The interaction between token treasury holdings and evolving AICPA guidance on digital asset auditing will be directly relevant for auditors reviewing these filings.
Revenue Recognition and Token Classification
When a project raises capital through a token offering, the proceeds do not automatically flow to the income statement. The accounting treatment depends on whether the token represents a financial liability, an equity instrument, or something else entirely. Under US GAAP, the classification of token proceeds is fact-specific and will hinge on the terms attached to the token, including any promises made by the issuer to token holders. Those promises are also central to the SEC's legal analysis of whether an investment contract exists, which means the accounting team and legal counsel need to be working from the same set of facts.
Disclosure of Prior Raises
Because each subsequent raise under the rolling exemption requires the issuer to disclose what was raised in the prior 12 months, there must be a clean, auditable record of prior offering proceeds. For CFOs and their advisers, this is a data-integrity requirement that needs to be built into treasury management and financial reporting systems from the outset, not retrofitted after the fact.
The Investment Contract Grey Zone: A Compliance Risk That Will Not Go Away
The most technically complex element of the SEC's proposal is its treatment of tokens that transition between security and non-security status over time.
How the Transition Works Under the Proposal
The SEC's draft rules state that the investment contract associated with a crypto asset can continue to transfer to subsequent purchasers in secondary market transactions until the crypto asset separates from the issuer's representations or promises. In plain terms: a token that starts life as a non-security can become subject to an investment contract if the issuer's communications in the secondary market lead buyers to expect profits from the issuer's managerial efforts.
Hinkes has flagged that this creates a risk that the sale of a non-security crypto asset could be viewed as a securities transaction if the associated investment contract transfers to the secondary market buyer. For issuers, this means the legal classification of a token is not fixed at issuance. For secondary market platforms listing these tokens, it raises ongoing compliance questions that go beyond the initial offering.
Regulatory Arbitrage Risk
Reiners has identified a deeper concern: that the exemption could become a vehicle for regulatory arbitrage. An issuer might satisfy the formal conditions for an exempt sale while continuing to market a token whose value depends heavily on the issuer's ongoing managerial efforts. If that happens, retail investors could find themselves in the same grey area that existed a decade ago, exposed to opaque disclosures, concentrated insider holdings, and aggressive promotion, all within a formally compliant structure.
For accounting firms, auditors, and CFOs advising on or signing off these filings, that risk has a professional dimension. Signing an offering statement for an issuer whose post-offering communications undermine the legal basis of the exemption is not a theoretical concern. Compliance review of marketing materials, social media activity, and community communications will need to be part of the ongoing engagement, not just the initial offering document review.
Practical Steps for Accounting and Compliance Teams
The proposal is at the consultation stage, meaning final rules are still some way off. But the structure is clear enough to begin planning now.
For Firms Advising Token Issuers
Map the client's planned offering against both exemption tracks early. The $5 million four-year track has minimal ongoing disclosure requirements; the $75 million rolling track does not. Clients who plan to raise significant capital in stages will need a reporting infrastructure capable of producing SEC-quality annual and semiannual filings from day one. Identify which accounting framework applies, confirm the token classification under that framework, and establish a process for documenting prior raises in a format that satisfies the cap-verification requirement in the offering statement.
Firms that already handle complex digital asset financial statements and are familiar with the reporting risks that arise when specialist staff are not in place will recognise that digital asset issuer work carries similar demands. The FASB's fair value model under ASC 350-60, alongside the AICPA's updated practice aid guidance, provides the current US GAAP reference point for crypto asset accounting in these filings.
For CFOs at Potential Issuers
Treat the semiannual and annual reporting obligations as a hard operational requirement before committing to the $75 million track. The rolling nature of the exemption is commercially attractive, but each subsequent raise triggers a fresh SEC review and requires current, complete disclosures. A CFO who cannot produce reliable periodic financial statements under US GAAP should resolve that gap before filing an initial offering statement, not after.
Also take legal advice on the investment contract transfer risk specific to your token's design and the communications your team plans to make post-offering. The accounting treatment of proceeds and the legal classification of the token need to be aligned. Discrepancies between what the offering statement says and what the marketing team communicates can create both legal exposure and audit findings.
Where This Leaves the Market
The SEC's Regulation Crypto Assets proposal is the most substantive attempt to create a workable domestic framework for public token offerings since the agency began engaging with the sector. For issuers that previously faced a binary choice between a full securities registration or legal uncertainty, the new exemptions provide a third path. The explicit regulatory pathway also removes the need for projects to self-evaluate whether their offerings fit within existing securities law frameworks, a process that led to expensive litigation for several high-profile projects in the past.
But the rules are not a return to anything resembling the unregulated environment of 2017. The disclosure obligations, the SEC staff review process, the investment limits on non-accredited investors, and the unresolved questions around investment contract transfer in secondary markets all point to a more structured, more demanding environment than the one that produced the last ICO boom. Accounting and compliance teams that get ahead of these requirements now will be better positioned to serve clients when the final rules take effect.
Source: Cointelegraph
Frequently Asked Questions
What are the two exemptions in the SEC's Regulation Crypto Assets proposal?
The first is a one-time exemption allowing startups to raise up to $5 million over four years with lighter disclosure requirements. The second allows issuers to raise up to $75 million in any 12-month period, modelled in part on existing Regulation A, with ongoing annual and semiannual reporting obligations and an SEC staff review for each raise.
Can a project raise $75 million every year under the larger exemption?
Potentially yes, but each raise must be a genuinely distinct offering, require a new offering statement, pass an SEC staff review, and disclose what was raised in the prior 12 months. There is no automatic entitlement to a subsequent raise simply because the previous one was completed.
How does this affect crypto financial statements for US issuers?
Issuers using the $75 million track must produce SEC-quality annual and semiannual financial statements. Under US GAAP, that means applying ASC 350-60 for any crypto assets held on the balance sheet, with fair value measurement and disclosure. Token proceeds will need careful classification as either a financial liability, equity, or a deferred item, depending on the specific rights and obligations attached to the token.
What is the investment contract transfer risk and why does it matter?
The SEC's proposal states that the investment contract associated with a token can follow the token into secondary market transactions until the asset is no longer linked to the issuer's representations or promises. If secondary market buyers could reasonably expect profits from the issuer's managerial efforts based on post-offering communications, the token sale could be treated as a securities transaction even if the token was originally issued as a non-security. This creates a continuing legal and compliance obligation for issuers after the offering closes.
How many token offerings does the SEC expect under the new rules?
The SEC has estimated approximately 130 offerings per year would rely on the two new exemptions, with around 475 issuers potentially using the broader investment contract safe harbour included in the proposal. These are the SEC's own projections based on the proposed rules as drafted.