A Proposed Offering Framework with Potential U.S., International, and Tax Structuring Implications

On August 18, 2026, the Securities and Exchange Commission (SEC) proposed “Regulation Crypto Assets” (Proposed Regs.), a tailored Securities Act of 1933 (Securities Act) offering regime for certain investment contracts involving crypto assets. The Proposed Regs., if adopted, would establish two exemptions from registration, a conditional investment-contract safe harbor and targeted state-law preemption. It would not change the federal income tax treatment of digital assets, as provided by the Internal Revenue Service (IRS), but its U.S.-nexus requirements and disclosure architecture could materially affect cross-border structuring and tax planning.

At a Glance

Scope: The Investment Contract and the Crypto Asset Are Distinct

Rule 100 of the Proposed Regs. would define a “covered investment contract” as an investment contract in which: (i) a crypto asset is subject to the contract, transaction, or scheme, (ii) that crypto asset is not itself a security, and (iii) no other asset, whether a security or non-security asset, is subject to the investment contract. A “crypto asset” would be a digital representation of value recorded on a cryptographically secured distributed ledger.

The proposed exemptions therefore would not cover crypto assets that are themselves securities, including tokenized equity and other digital securities. They also would not cover an investment contract involving another asset other than a non-security crypto assets. Those transactions would require another available exemption or Securities Act registration.

Principles-Based Narrative Disclosures

Rule 103 of the Proposed Regs. would require principle-based narrative disclosure tailored to the crypto asset, the covered investment contract, and the associated network or application including descriptions of (i) the covered investment contract, (ii) the offering, (iii) the subject crypto asset, (iv) management, related persons, and conflicts of interest, (v) the associated crypto network/application and plan of development, (vi) security of the subject crypto and associated crypto network/application and source code, (vii) the subject crypto asset economics and allocations, (viii) governance, (ix) the subject crypto asset ecosystem, and (x) risk factors.

The disclosure framework focuses on the issuer’s representations or promises to undertake essential managerial efforts, progress toward those efforts, technical and governance characteristics, allocation, liquidity, tradability, security, and material risks.

Startup Exemption: Up to $5 Million over Four Years

Rule 200 of the Proposed Regs. would provide a one-time, non-exclusive “startup exemption” for covered transactions occurring after a Form NOR is filed and ending on the earlier of four years after that filing or the filing of a transition report on Form TR. The aggregate offering limit would be $5 million. The issuer and its affiliates could not restart the period or limit for the same or a substantially similar crypto asset.

A “covered transaction” is defined as any offer, sale, or other distribution of a covered investment contract in reliance on the startup exemption and could include a public or private capital-raising transaction and certain distributions, including certain airdrops and incentive or reward distributions connected with use, operation, governance, or security of an associated network or application.

Eligible Issuers and International Relevance

The issuer could be an entity, an individual, or a group of individuals or entities. Each group member, or an authorized person for each member, would be responsible, individually and collectively, for satisfying the conditions of the startup exemption, signing the notice and transition report on Form TR and providing the required certifications. The proposed startup exemption is not subject to investor investment limitations, and issuers would be able to engage in general solicitation in connection with offerings conducted pursuant to the exemption. The proposed startup exemption does not contain the fundraising exemption’s express U.S.-organization, management, asset-location, and principal-administration tests. The SEC is requesting comment on whether to add U.S.-formation or other eligibility conditions. Accordingly, non-U.S. projects should not assume that the proposed eligibility scope will remain unchanged in a final rule.

Disclosure and Transition Obligations

Issuers must file a notice on Form NOR before the first covered transaction that includes information regarding the issuer, the subject crypto asset, the publicly accessible website for Rule 103 of the Proposed Regs, other narrative information, and certifications relating to Form NOR. Issuers must amend Form NOR as soon as practicable after discovery of a material mistake or error or after a material change in the filed information. 

Issuers must make the Rule 103 narrative disclosure publicly accessible, free of charge, at the website identified in Form NOR, keep the website disclosure available, and update it within 30 calendar days after each calendar year-end if material changes occurred.

A transition report on Form TR that includes information regarding the issuer, covered investment contract, and crypto asset and certifications related to conditions of Rule 400, and notifies the public that the issuer is no longer relying on the startup exemption, must be filed no later than four years after the filing of Form NOR.

Fundraising Exemption: Up to $75 Million in 12 Months

Rule 300 of the Proposed Regs. would create a Regulation A-style exemption, the “fundraising exemption” for public offers and sales of covered investment contracts. Tier 1 would permit up to $20 million in a 12-month period, including no more than $6 million by selling securityholders that are affiliates of the issuer. Tier 2 would permit up to $75 million, including no more than $22.5 million by selling securityholders that are affiliates of the issuer. Additional limits would apply to secondary sales during the first year of reliance on the fundraising exemption, and issuer and affiliate sales would be aggregated.

Eligible Issuers and Investment Limitations

In order to be eligible for the fundraising exemption, the issuer must have filed with the SEC all periodic, current and transition reports required pursuant to Rule 305 of the Proposed Regs. or pursuant to Sections 13 or 15(d) of the Securities Act during the two-year period prior to filing the offering statement on Form 1-CRYPTO (or such shorter period that the issuer was required to file such reports), and satisfied all other requirements under the Proposed Regs. The fundraising exemption is not available to development stage companies with no specific business plan or purpose, an investment company registered or required to be registered under the Investment Company Act, or a business development company or an issuer subject to certain orders of the SEC within five years prior to filing the offering statement.

Other than solicitations of interest communications, no offers or sales of securities may be made unless an offering statement has been filed with, and qualified by, the SEC. Additional conditions may apply to the sale of the securities and the delivery of the related offering statement, depending on factors such as the accredited investor status of the purchasers, whether the offering is conducted on a continuous or delayed basis, the involvement of an underwriter or dealer, whether the securities are listed on a national securities exchange, and the issuer's reporting status under the federal securities laws.

Disclosure and Transition Obligations

An issuer would file an offering statement on Form 1-CRYPTO, which contains Rule 103 narrative disclosure and a discussion of financial condition of the issuer and the issuer’s financial statements. The requirements for the age of the financial statements included are based on the issuer's stage in its fiscal reporting cycle, including interim financial statements where appropriate. For Tier 1, there generally would be no mandatory financial-statement assurance, although qualifying audited statements already obtained would be filed. Tier 2 financial statements would be audited under U.S. generally accepted accounting principles or Public Company Accounting Oversight Board standards by an auditor satisfying the applicable independence requirements. Both tiers would have periodic, current, and transition reporting obligations.

In addition, issuers would be required to file exhibits to the offering statement, including organizational and transaction documents, securityholder agreements, material contracts, underwriting and escrow agreements, consents, legal opinions, testing-the-waters materials, and related ancillary documents.

U.S.- Nexus Requirements

The fundraising exemption would be available only to an entity organized in the United States. In addition, rule 300 of the Proposed Regs. would require:

• a majority of the issuer’s executive officers or directors to be U.S. citizens or residents;
• more than 50 percent of the issuer’s assets to be located in the United States; and
• the issuer’s business to be administered principally in the United States.

A U.S.-organized entity alone would, therefore, be insufficient. A U.S. holding company with predominantly non-U.S. management, foreign-located assets, or principally foreign administration could fail one or more eligibility tests. The SEC expressly requested comment on whether the eligibility criteria should be expanded or modified, including in response to suggestions concerning non-U.S. issuers and foreign private issuers.

Conditional Investment Contract Safe Harbor

Rule 400 of the Proposed Regs. would provide a conditional safe harbor from the term “investment contract” from the Security Act’s definitions of “security.” The central condition of the safe harbor would require the issuer to have completed, or otherwise permanently ceased, all essential managerial efforts it represented or promised to undertake, and not to be making, or intending to make, new representations or promises to undertake essential managerial efforts with respect to the crypto asset.

The issuer would file a transition report on Form TR with a certification and supporting analysis to perfect the reliance on the investment contract safe harbor. If an issuer satisfies the investment contract safe harbor, the SEC would take the position that the reporting, registration, and other requirements of the federal securities laws no longer apply from the point in time at which the issuer satisfied the safe harbor and thereafter. Even if an issuer has not satisfied the investment contract safe harbor, a crypto asset may nonetheless not be subject to an investment contract under the Howey test.

Preemption of State Securities Laws

Rule 500 of the Proposed Regs. would define “qualified purchaser” for purposes of the Section 18(b)(3) of the Securities Act so that state registration and qualification requirements would be preempted for offers and sales of covered investment contracts issued exempted under the Proposed Regs. and certain secondary-market transactions. The Proposed Regs. would not preempt state antifraud or antimanipulation authority.

Cross-Border Offering Coordination

The Proposed Regs. would be non-exclusive. An issuer could seek to rely on another exemption or safe harbor if each framework’s conditions are independently satisfied. Rule 101 of the Proposed Regs. would direct issuers to Rule 152 of the Securities Act for integration analysis. Projects considering concurrent U.S. and offshore, Regulation D placements or other distributions would need to separately establish the basis for each transaction and evaluate integration, communications and resale restrictions.

Federal Income Tax Considerations

The Proposed Regs. do not amend the Internal Revenue Code (Code), Treasury regulations, or IRS guidance on the taxation related to digital assets. Securities-law treatment under the Proposed Regs. would not determine U.S. federal income tax treatment. The IRS states that digital assets are property, not currency, for U.S. federal tax purposes, and that income from digital-asset transactions is taxable. General tax principles applicable to property transactions continue to apply.

Accordingly, qualifying for an SEC exemption, or later satisfying the proposed conditional investment-contract safe harbor, would not itself make an issuance, distribution, exchange, reward, compensation payment, or restructuring tax-free. The tax result depends on the transaction, the parties, the rights transferred, the applicable accounting method, and the relevant jurisdiction. Importantly, issuers that contemplate setting up their structure to comply with the Securities Act’s exemptions (or the U.S. nexus requirements) should be aware of the tax ramifications associated with establishing such nexus, with regard to the entity(ies), the management, the activities, and the intergroup transactions.

Tax Issues for Issuers, Founders, and Service Providers

The following may present potential tax issues for issuers, founders, and service providers of digital assets:

• Issuance proceeds and token distributions.
• Compensation and incentives.
• Airdrops and rewards.
• Treasury and disposition activity.
• Financial reporting and tax consistency.

International Tax and Entity-Structuring Considerations

The U.S.-nexus requirements of the fundraising exemption may cause foreign-founded groups to consider a U.S. issuer or the relocation of management, assets, or administration. All of these steps are required by the Proposed Regs. if the group contemplate to elect to pursue the fundraising exemption, and none should be implemented solely as a securities-law formality.

Depending on the existing structure and the steps undertaken, relevant tax questions may include:

• whether a transfer of intellectual property, tokens, contractual rights, or other assets produces gain, withholding, or indirect-tax consequences;
• whether a U.S. entity becomes subject to federal and state income or franchise taxes and whether foreign entities acquire a U.S. trade or business, permanent establishment or state nexus;
• whether Sections 367 and 482 of the Code or other cross-border provisions apply to asset transfers, service arrangements, cost sharing, licensing, or intercompany funding;
• whether U.S. owners of foreign entities have controlled foreign corporation, net CFC tested income, Subpart F, or passive foreign investment company consequences;
• whether non-U.S. owners or recipients are subject to U.S. withholding, information reporting, treaty documentation, or effectively connected income rules; and
• whether the restructuring creates non-U.S. exit tax, migration tax, value-added tax, stamp tax, transfer-pricing, or local substance consequences.

These consequences are fact-specific. The Proposed Regs. do not state that moving an entity, personnel, or assets into the United States creates any particular tax result. The point is that the activities needed to satisfy the proposed eligibility tests for the Securities Act exemptions can change the facts on which tax residence, nexus, source, transfer pricing, and anti-deferral regimes depend.

Investor Tax and Reporting Considerations

Investors would continue to apply existing tax rules to acquisitions, receipts, sales, exchanges, and other dispositions of digital assets. The IRS requires taxpayers to report digital-asset transactions whether or not they produce taxable gain or loss. Investors should maintain records of acquisition date and time, basis, fair market value, disposition date and time, and proceeds or value received. Non-U.S. investors should also determine whether U.S. withholding or information-reporting documentation is required for the particular payment or distribution.

Key Takeaways

The Proposed Regs. would create a bespoke federal securities-law pathway for covered investment contracts involving non-security crypto assets. The proposed startup exemption appears broader in issuer eligibility, while the larger fundraising exemption is expressly limited to U.S.-organized and U.S.-centered issuers. For international projects, the principal structuring question is whether access to the fundraising exemption justifies the operational, regulatory, and potentially significant tax consequences of satisfying those U.S.-nexus requirements.

The Proposed Regs. does not alter tax law. Any issuance, distribution, compensation arrangement, cross-border transfer, or restructuring should be evaluated under existing U.S. and non-U.S. tax rules, with the securities disclosure record coordinated with the project’s tax positions and transfer-pricing documentation.

Issuers and other stakeholders can provide comments on the Proposed Regs. until October 20, 2026. The exemptions, eligibility conditions, and disclosure requirements may change in the final rule.