SEC’s Crypto Proposal Could Ease Token Launches, but Not Replace CLARITY

Washington is now pursuing two different routes toward solving one of crypto’s longest-running regulatory problems.

On August 18, 2026, the U.S. Securities and Exchange Commission (SEC) proposed Regulation Crypto Assets, a 402-page framework that would create purpose-built exemptions for certain token fundraising transactions and a conditional path for a crypto asset to stop being subject to an investment contract. The proposal was released without an open Commission meeting after the SEC canceled its August 14, 2026 meeting on the same rulemaking, citing an “unforeseen scheduling issue,” per Reuters coverage of the earlier cancellation.

The timing is significant.

The proposal arrived just as the path for the much broader Digital Asset Market Clarity Act, or CLARITY Act, had narrowed in Congress. Galaxy Research cut its estimate of passage in 2026 to 10% on August 14, citing unresolved ethics negotiations, pressure over stablecoin rewards, and the limited Senate calendar. The Senate has nevertheless scheduled an important procedural step for September 15, when cloture on the motion to proceed to CLARITY is set to ripen.

That creates an obvious question for the crypto industry: If the SEC can give token issuers a workable fundraising regime through rulemaking, does Congress still need to pass CLARITY?

The answer is yes—but with an important qualification.

Regulation Crypto Assets could substantially reduce the immediate regulatory problem facing projects trying to issue tokens and raise capital in the United States. On that narrow issue, it overlaps with—and could temporarily substitute for—part of CLARITY.

But it does not provide the full market structure that CLARITY attempts to establish. It does not give the Commodity Futures Trading Commission a comprehensive federal spot-market regime, create registration frameworks for digital commodity exchanges, settle the treatment of DeFi and software developers, establish self-custody protections or create a statutory division of authority between the SEC and CFTC.

In other words, the SEC proposal could solve much of the issuance problem. CLARITY is intended to solve the market-structure problem.

What exactly is Regulation Crypto Assets?

Regulation Crypto Assets is the SEC’s proposed offering regime for certain “covered investment contracts.”

That term is important.

The proposal does not assume that the underlying crypto asset itself is a security. Instead, a covered investment contract would involve a transaction or scheme that qualifies as an investment contract where:

1. A crypto asset is subject to that investment contract;
2. The crypto asset itself is not a security; and
3. No other asset is subject to the investment contract.

That approach builds directly on the SEC’s March 2026 interpretation, issued with guidance from the CFTC, which distinguished a non-security crypto asset from an investment contract that can arise from the way the asset is offered and sold.

This distinction is central to the new framework.

A token can therefore be non-security property while still being sold as part of a securities transaction because buyers are relying on promises from a development team to create a network, application or other source of value.

The SEC’s proposal tries to give projects a compliant way to conduct that fundraising without forcing every qualifying token launch through the full public-company registration system.

The SEC is proposing three main pathways

The startup exemption would be a one-time, non-exclusive exemption. It would allow an issuer to raise up to $5 million during a period lasting as long as four years while providing investors with narrative disclosures tailored to the project. Federal antifraud and antimanipulation provisions would continue to apply.

The fundraising exemption is more substantial.

Modeled partly on Regulation A, it contains two tiers. Tier 1 permits offerings of up to $20 million during a 12-month period. Tier 2 raises that limit to $75 million. Both require financial information and ongoing reports, but Tier 2 financial statements would need to be audited.

That distinction matters for issuers because a project seeking $10 million and one seeking $60 million would face materially different compliance burdens.

What changes for an early-stage token project?

Consider a U.S. development team that needs $3 million to build a blockchain application.

Under the proposed startup exemption, it could potentially sell covered investment contracts without undertaking full Securities Act registration, provided it qualifies and complies with the disclosure and filing conditions.

Instead of forcing disclosures designed primarily for traditional operating companies, Regulation Crypto Assets would require more principles-based information relevant to a crypto project. 

That could materially alter the legal calculus surrounding an early token launch.

Until now, a project concerned that its fundraising arrangement could satisfy the Howey investment-contract test has generally had to consider existing securities exemptions, registration, restructuring the sale, limiting U.S. participation or operating offshore.

The SEC itself says existing securities rules can be poorly matched to projects where the underlying crypto asset may eventually separate from the investment contract used to fund its development.

The startup exemption attempts to create a bridge through that development stage. It is not, however, a no-disclosure ICO exemption.

Issuers would still make public filings, provide required information to investors and remain subject to federal antifraud and antimanipulation law.

What about a project that needs $50 million?

A larger project could instead look to the fundraising exemption.

A $50 million offering would fall into Tier 2, because Tier 1 ends at $20 million. The issuer would therefore need audited financial statements in addition to the crypto-specific narrative disclosures and ongoing reporting required under the proposal.

That is more demanding than the startup exemption, but potentially far more workable for a token project than attempting to reshape itself around disclosure rules primarily built for conventional securities offerings.

Commissioner Mark Uyeda described the basic policy objective as replacing uncertainty with thresholds and conditions issuers can evaluate before launching rather than discovering their regulatory position through a later enforcement case, per his August 12, 2026 statement accompanying the proposal. 

The compliance burden therefore does not disappear. It becomes more predictable.

The safe harbor may be the most important part

For token issuers, the headline fundraising limits may ultimately be less significant than the investment contract safe harbor located in Subpart D, Rule 400 of the proposed rules.

Under the proposal, an issuer could certify that it has:

• completed or permanently ceased all essential managerial efforts it represented or promised it would undertake;
• made no new promises to perform such essential managerial efforts; and
• filed a transition report (designated Form TR in the proposal) explaining why those conditions have been satisfied.

If the conditions are met, the SEC would deem the covered investment contract to have ceased to exist and the underlying crypto asset no longer to be subject to that investment contract for purposes of the Securities Act and Exchange Act definitions of a security.

That creates something crypto regulation has historically struggled to provide: an identifiable transition point.

A project could raise money while investors depend on the founding team’s promised work, complete that work and then potentially move into a different regulatory phase in which the token is no longer tethered to the original investment contract.

This is not actually a decentralization test

One important detail risks being lost in simplified descriptions of the proposal.

The SEC is not proposing that a network must meet a numerical or technical decentralization threshold before its token can leave investment-contract treatment. Instead, the test focuses on the issuer’s essential managerial efforts.

The SEC considered an alternative that would have explicitly required sufficient network functionality and decentralization, but did not select that approach.

That is a meaningful policy choice.

A network does not necessarily need to prove decentralization through validator counts, token distribution or governance metrics. The central question is whether the issuer has completed or permanently stopped performing the managerial efforts that purchasers were promised and relied upon.

That may make the test more flexible. It could also make legal analysis more judgment-intensive because issuers and their counsel will still need to determine which activities qualify as “essential managerial efforts.”

Safe harbor is not an automatic declaration of independence from securities law

The exit mechanism is meaningful, but issuers should not read Form TR as a unilateral switch that makes SEC risk disappear.

The Commission expressly says it could challenge whether an issuer actually satisfied the conditions. If an issuer incorrectly certifies compliance, the SEC could maintain that the investment contract never ceased to exist.

There is another important limitation.

The SEC says the safe harbor would control the Commission’s administration of the federal securities laws, but would not prevent another party from arguing that the asset remains subject to an investment contract or otherwise qualifies as a security.

That is a considerably narrower form of certainty than a statutory classification enacted by Congress. And it is one reason CLARITY still matters.

The proposal also changes the state-law equation

Regulation Crypto Assets would also preempt certain state securities registration and qualification requirements for qualifying offerings. The preemption mechanism operates through a defined “Qualified Purchaser” category in Subpart E, Rule 500 of the proposal, per the SEC proposal document.

The proposal extends that preemption to certain secondary-market transactions involving covered investment contracts, subject to specified conditions. States would not lose all authority. The Securities Act preserves state powers involving fraud and deceptive conduct, among other areas.

For issuers, however, federal preemption could reduce the burden of navigating a patchwork of state registration requirements alongside federal securities law.

That may be more commercially significant than it initially appears.

Does the SEC’s proposal solve secondary-market regulation?

Only partly. It would address a narrow secondary-market issue by preempting certain state registration and qualification requirements.

It does not establish the comprehensive federal trading framework contemplated by CLARITY.

Regulation Crypto Assets does not, by itself:

• create CFTC spot-market jurisdiction over qualifying digital commodities;
• establish a federal digital commodity exchange regime;
• create comprehensive broker and dealer rules for digital commodities;
• settle all custody requirements;
• determine the broader treatment of DeFi protocols;
• establish statutory protections for non-custodial software developers; or
• create a comprehensive federal customer-property and insolvency framework.

Those are among the subjects addressed by the current Senate CLARITY proposal. This is the central limit of treating the SEC proposal as a replacement for legislation.

It can provide a better entrance into the market. It cannot build the entire market around that entrance.

Where the SEC proposal and CLARITY directly overlap

There is more overlap between the two frameworks than the simple “issuance versus market structure” description suggests. The latest July 22 Senate CLARITY text contains its own issuer exemption called Regulation Crypto.

Under that proposal, qualifying ancillary-asset originators could raise the greater of $50 million per calendar year for four years or 10% of the total dollar value of outstanding ancillary assets, subject to an overall cap of $200 million in gross proceeds. Initial and semiannual disclosure obligations would apply.

The Senate proposal also provides a mechanism under which an originator or intermediary can certify that the entrepreneurial or managerial efforts supporting an ancillary asset have ended, after which SEC disclosure obligations could cease.

That means Congress and the SEC are working on two overlapping versions of an issuer-side regulatory framework.

The names are confusingly similar:

• SEC proposal: Regulation Crypto Assets
• Current CLARITY proposal: Regulation Crypto

But they are not identical.

SEC proposal vs. CLARITY Act

Issue	SEC Regulation Crypto Assets	Current Senate CLARITY proposal
Status	Proposed SEC rule	Pending legislation
Primary-token fundraising	Yes	Yes
Small/startup offering	$5M over up to four years	Different statutory model
Larger offering	$20M Tier 1 / $75M Tier 2 per 12 months	Greater of $50M/year or 10% of outstanding ancillary-asset value, subject to $200M overall cap
Path out of investment-contract treatment	Yes, through essential-managerial-efforts safe harbor	Yes, through ancillary-asset framework and certification
SEC/CFTC jurisdiction	Does not create comprehensive statutory division	Central purpose of legislation
CFTC spot-market authority	No comprehensive framework	Yes
Digital commodity exchanges/brokers/dealers	Not comprehensively addressed	Yes
DeFi	Not comprehensively addressed	Dedicated provisions
Software-developer protections	No broad statutory framework	Yes
Self-custody protection	No broad statutory framework	Yes
Customer property/bankruptcy	Not comprehensive	Addressed
Stablecoin rewards	Not principal focus	Addressed
Durability	Agency rule, if finalized	Federal statute, if enacted

The issuer provisions therefore do compete at the margins.

If CLARITY passes in something close to its current form, Congress would have chosen a statutory token-fundraising structure that could require the SEC to revise, harmonize, or supersede portions of its own rulemaking.

Commissioner Uyeda acknowledged that possibility directly, saying nothing in the proposal prevents the Commission from taking subsequent legislation into account.

So does Regulation Crypto Assets reduce the need for CLARITY?

It reduces the immediate need for CLARITY to solve one specific problem: how a crypto project can raise capital while its token is associated with an investment contract.

That is not a trivial accomplishment. If finalized substantially as proposed, issuers could have:

• known fundraising limits;
• tailored disclosure obligations;
• clearer financial-reporting requirements;
• federal preemption of some state registration rules;
• continued antifraud protections; and
• a defined SEC safe harbor when the issuer’s promised managerial work ends.

For many token founders and their lawyers, those provisions could resolve a substantial portion of the uncertainty surrounding a U.S. token launch. But saying the proposal eliminates the need for CLARITY goes too far.

CLARITY is attempting to answer questions that the SEC cannot simply settle through a Securities Act exemption. Most importantly, Congress can establish the statutory boundaries between the SEC and CFTC and confer federal spot-market authority on the CFTC.

An SEC rule cannot, on its own, give another federal agency powers Congress has not granted it.

The durability problem may be even more important

Chair Paul Atkins made the distinction unusually clear when announcing the proposal. He said legislation remains “indispensable” to creating rules durable enough to survive changes in regulatory leadership, while reiterating his support for Congress sending CLARITY to the president.

That matters because agency rulemaking and legislation have different political durability.

A finalized SEC rule would carry substantially more legal weight than informal staff guidance, speeches or an enforcement posture. It would go through the Administrative Procedure Act’s notice-and-comment process.

But a future SEC could still attempt to amend or rescind the rule through another legally sufficient rulemaking process. The framework could also face court challenges, and Congress could later enact legislation that supersedes parts of it.

A statute establishes a different baseline.

That is why the SEC’s current leadership can simultaneously argue that its own proposal is important and that CLARITY remains necessary.

Those positions are not contradictory.

A separate institutional constraint reinforces the urgency of the SEC’s current pace. Commissioner Hester Peirce, the head of the SEC’s Crypto Task Force and the architect of much of the safe harbor framework, is scheduled to leave the Commission in November 2026 to join Regent University School of Law as an associate professor, according to a statement from the Regent University. When she departs, the Commission will drop to two active commissioners, Chairman Atkins and Commissioner Mark Uyeda, from a five-seat body. That composition change gives the current majority a narrow window to advance and potentially finalize the proposal. 

CLARITY’s path is narrow, but there is still a September vote

It would also be premature to write CLARITY’s obituary. The House passed its version in July 2025. Senate Banking advanced revised legislation in May 2026, and Sen. Cynthia Lummis released combined Banking and Agriculture text on July 22. The Senate then left Washington for its August recess without completing action on the bill.

Galaxy Research cut its own probability estimate for passage in 2026 to roughly 10%, citing unresolved ethics negotiations, bank pressure over stablecoin rewards, developer-protection disputes and a compressed pre-midterm legislative calendar.

But Senate Majority Leader John Thune filed cloture on the motion to proceed before the recess. That cloture motion is scheduled to ripen on September 15 at 2:15 p.m. September 15 is therefore an important test, but it should not be described as a guaranteed final-passage vote.

If senators cannot assemble the votes needed to advance the bill, the practical importance of agency-driven regulation will increase considerably.

Why the industry can support both

Crypto industry reaction to the SEC proposal has been positive, but major trade groups have not treated it as a reason to abandon CLARITY.

Blockchain Association CEO Summer Mersinger called Regulation Crypto Assets an important step toward tailored rules and added that “regulation and legislation go hand in hand,” per the association’s official statement on the proposal. The association said the SEC proposal complements congressional work toward a durable statutory framework.

That position is logically consistent with the structure of the two initiatives.

An issuer may need the SEC to answer: “How can I legally raise money for this network today?” The broader market still needs Congress to answer:

What happens to this asset, the exchanges trading it, and the intermediaries handling it after the fundraising stage ends? Those are different questions.

The proposal’s trade-offs should not be ignored

The SEC’s new approach will likely be welcomed by projects that regarded traditional registration as incompatible with token launches. But easier capital formation also transfers more responsibility to disclosure quality and investor judgment.

The startup exemption, for example, would not require the same financial information as the larger fundraising regime. The Commission says the lower $5 million limit is one reason it believes the lighter framework can still provide an appropriate level of investor protection.

The safe harbor raises another issue.

Its usefulness depends partly on how confidently lawyers, issuers and investors can determine when essential managerial efforts have actually ended.

A project may complete the development milestones promised in its initial offering while its founding company continues to maintain software, fund developers or promote network adoption. The SEC’s March 2026 interpretation and proposed rule attempt to distinguish those continuing activities from the essential managerial efforts that created the investment contract.

That distinction will likely become one of the most important subjects during the comment period.

What token issuers should watch next

The proposal is just that: a proposal.

The SEC’s comment period will remain open for 60 days after the proposing release is published in the Federal Register. The final thresholds, disclosure requirements and safe-harbor conditions could change before adoption.

Three developments now deserve particular attention:

• The first is industry and investor feedback on whether $5 million, $20 million and $75 million are the right fundraising thresholds.
• The second is how commenters respond to the safe harbor’s managerial-efforts test, especially the SEC’s decision not to require a separate quantitative decentralization standard.
• The third is Congress.

If CLARITY advances in September, the SEC may need to account for statutory language that already overlaps heavily with the proposal’s issuer framework. If CLARITY falters, Regulation Crypto Assets becomes considerably more important as the most concrete federal pathway available to token issuers under existing securities law.

The bigger shift: from classification fights to lifecycle regulation

There is a broader significance to the proposal beyond its dollar thresholds.

For years, much of U.S. crypto regulation revolved around a binary question: Is this token a security or not?

The SEC’s March interpretation and Regulation Crypto Assets move toward a more dynamic question: At what stage of the token’s lifecycle does an investment contract exist, what obligations apply during that period, and when does that relationship end?

That is a potentially consequential change in regulatory philosophy.

It recognizes that the legal relationship surrounding a token fundraising transaction can evolve even though the token’s underlying code or blockchain record remains the same.

CLARITY attempts to make a similar transition through statute, using concepts such as ancillary assets and eventual digital-commodity treatment.

That convergence may matter as much as the differences between Congress and the SEC.

Both are increasingly treating issuance, development, and mature secondary-market activity as distinct regulatory phases rather than trying to apply one classification permanently to every transaction involving a token.

Conclusion

Regulation Crypto Assets is more consequential than another piece of SEC crypto guidance.

If finalized substantially as proposed, it would give qualifying token issuers something they have sought for years: a defined pathway to raise capital in the United States, disclose information tailored to a crypto project, and potentially exit investment-contract treatment once the promised managerial work is finished.

That would reduce one of the strongest arguments for waiting on Congress. But it would not make CLARITY redundant.

The SEC can rewrite its own offering rules within the authority Congress has already given it. It cannot single-handedly create the comprehensive federal digital-commodity market that CLARITY envisions or permanently settle how authority should be divided between federal regulators.

There is therefore some competition between the two frameworks—but mainly around how token issuance should work.

At the market-structure level, they remain substantially complementary.

The clearest way to frame the change is this: If CLARITY fails, the SEC proposal could keep U.S. token fundraising reform moving. If CLARITY passes, Congress could turn parts of that regulatory experiment into a broader and more durable statutory system.

For token issuers, that means the regulatory question is changing.

The choice may no longer be simply between full securities registration, enforcement risk or leaving the United States.

Regulation Crypto Assets could create a fourth path.

Whether that path becomes permanent—and what market projects enter after taking it—still depends heavily on Congress.

This article is for informational purposes only and does not constitute legal, financial or investment advice. Regulation Crypto Assets remains a proposed rule, and the CLARITY Act remains pending legislation. Both frameworks may change.