The SEC wants to let crypto issuers raise $75m a year without registering, and to let the security label fall away once the promised work is finished

Release 33-11434 runs to 402 pages. Inside it is something the Commission has not offered crypto issuers before, which is a route by which the crypto asset they sold stops being subject to an investment contract at all.

The SEC proposed the rules on Tuesday under the title Regulation Crypto Assets. They build on an interpretive release the Commission issued in March on how the federal securities laws apply to crypto assets and to transactions involving them. Chairman Paul S. Atkins said the proposal would give entrepreneurs and market participants "clear pathways to raise capital under the federal securities laws."

Two exemptions, and the larger one is tiered

The first is a one-time startup exemption from the registration requirements of the Securities Act of 1933. It would permit offerings of up to $5m over a period of up to four years, conditioned on public filings at the start and the end of that period and on narrative disclosures made available to investors throughout it.

The second is a fundraising exemption modelled in part on Regulation A, and it has two tiers. Tier 1 would permit up to $20m of covered investment contracts in a twelve month period. Tier 2 would permit up to $75m, and a Tier 2 issuer would have to file audited financial statements and take on continuing reporting obligations. Issuers using either exemption would remain subject to the antifraud and antimanipulation provisions.

The safe harbour is the load-bearing part

An issuer would satisfy the proposed investment contract safe harbour on two conditions. It must have completed or permanently ceased every essential managerial effort it represented or promised it would make, and it must not intend to make new promises of that kind. Then it files a public certification, with an analysis supporting it.

Meet both and the Commission would deem the covered investment contract to have ceased to exist, and would deem the crypto asset not to be subject to that investment contract for the purposes of the definitions of "security" in the 1933 Act and the Securities Exchange Act of 1934. The filing that starts this is the issuer's own.

The proposal would also add a definition of "qualified purchaser" that preempts state registration and qualification requirements, both for the initial offerings and for certain secondary trades by anyone other than an issuer, underwriter or dealer. That secondary preemption would run only while the issuer keeps meeting the reporting conditions attached to its exemption.

Comments are due 60 days after publication in the Federal Register. That has not happened. The release still carries a bracketed placeholder where its own publication date belongs, so the clock has not started.