The U.S. Securities and Exchange Commission closed the 60-day comment window on its proposed Regulation Crypto Assets (Reg CA) on October 20, 2026, collecting approximately 140 submissions. The 402-page rule, published in the Federal Register on August 21, would create a bespoke offering framewor...
"As Congress works to establish a lasting regulatory framework, Regulation Crypto Assets seeks to provide crypto asset entrepreneurs and market participants with clear pathways to raise capital under the federal securities laws." — Paul Atkins, Chairman, U.S. Securities and Exchange Commission
The U.S. Securities and Exchange Commission closed the 60-day comment window on its proposed Regulation Crypto Assets (Reg CA) on October 20, 2026, collecting approximately 140 submissions. The 402-page rule, published in the Federal Register on August 21, would create a bespoke offering framework for crypto tokens sold as investment contracts — the first time the SEC has attempted to codify how the Howey test applies to digital assets in a standalone rulemaking.
The filing marks one piece of a three-pronged federal rulebook now being assembled entirely by administrative action. On October 1, the SEC proposed a parallel Crypto Custody Rule for registered investment advisers and funds. On October 5, the Commodity Futures Trading Commission published its own advance notice of proposed rulemaking for Regulation CTX and Regulation CAM, targeting leveraged retail crypto trading. All three initiatives trace their urgency to the same event: the U.S. Senate's 49–50 failure to invoke cloture on the CLARITY Act on September 15, 2026.
With the 119th Congress unlikely to revisit digital-asset market structure before its term ends, regulators are now writing the rules that legislators could not pass. The result is a patchwork of overlapping proposals, a jurisdictional gap in spot crypto markets, and a deepening rift between the SEC, state regulators, and the industry over the appropriate level of investor protection.
The House of Representatives passed the CLARITY Act (H.R. 3633) in July 2025 with bipartisan support. The bill would have established a comprehensive federal digital-asset framework, drawing jurisdictional lines between the SEC and CFTC and creating registration categories for crypto exchanges and broker-dealers.
The Senate killed it. On September 15, 2026, cloture failed on a 49–50 vote. According to reporting by CNBC and CoinDesk, the defeat centered on three disputed provisions: conflict-of-interest rules for government officials holding crypto, liability standards for noncustodial wallet developers, and banking-lobby objections to stablecoin yield provisions that overlapped with the separately enacted GENIUS Act.
The Senate is not scheduled to return to legislative business until November 9, and the 119th Congress concludes in January 2027. According to FinTech Weekly's CLARITY Act tracker, the bill would need full reintroduction in the 120th Congress, resetting the legislative clock.
SEC Chairman Paul Atkins stated explicitly that the Commission acted because "Congress was unsuccessful in advancing the CLARITY Act." He added that "legislation remains indispensable to enacting future-proofed rules of the road," but characterized the rulemaking as a necessary interim step. Representative French Hill (R-AR), chair of the House Financial Services Committee, countered that agency-drafted rules "fall short of legislation" and risk being overturned by future administrations, according to Crypto.news.
Regulation Crypto Assets, proposed August 18 and published in the Federal Register on August 21, spans 402 pages. According to SEC data, 9,746 crypto assets currently trade on global exchanges, and 636 issuers have conducted crypto-related offerings in the U.S. using existing exemptions — 581 under Regulation D, 14 under Regulation A, and 41 under Regulation Crowdfunding — between 2016 and 2024.
The rule creates two new offering exemptions under the Securities Act of 1933:
Startup Exemption. Permits offerings of up to $5 million over a four-year period. Requires minimal disclosure. No audited financials. Available only once per crypto asset, to the issuer and its affiliates. According to analysis by Fenwick & West, this functions as a "nondilutive financing tool" — the issuer raises capital without equity dilution, selling utility tokens or network participation rights instead.
Fundraising Exemption. Two tiers. Tier 1 permits up to $20 million per 12-month period. Tier 2 permits up to $75 million per 12-month period. Both require ongoing SEC reporting and GAAP financial statements. Tier 2 requires audited financials. Both tiers preempt state "blue sky" registration and qualification requirements — a provision that has drawn sharp opposition from state regulators.
The exemptions apply specifically to "covered investment contracts" — investment contracts involving crypto assets — rather than to crypto assets generally. Issuers remain subject to antifraud and antimanipulation provisions of federal securities law regardless of which exemption they use.
According to Davis Polk's analysis, the framework marks "a meaningful offering framework, though key questions remain" — particularly around secondary-market trading, where the proposal does not establish a clear exchange-registration pathway.
Proposed Rule 400 contains the most structurally significant provision: a safe harbor under which a "covered investment contract" ceases to exist. When the safe harbor applies, the underlying crypto asset is no longer deemed subject to that investment contract — and by extension, is no longer a security for purposes of federal securities law.
The mechanism requires the issuer to:
According to Greenberg Traurig's analysis, the safe harbor does not codify the test for determining when a token sale initially involves an investment contract — that remains a fact-specific determination under the 1946 SEC v. W.J. Howey Co. framework. Failure to satisfy Rule 400 does not, by itself, establish that an investment contract continues to exist; issuers may independently analyze their arrangements under Howey.
The practical effect: for the first time, a token issuer would have a defined regulatory off-ramp. If a network achieves sufficient decentralization and the issuer stops performing managerial functions, the token could formally transition from security to non-security status through an SEC filing rather than through litigation or no-action letter.
On October 1, the SEC proposed a separate rulemaking addressing custody of crypto assets by registered investment advisers and regulated funds. The proposal, published in the Federal Register on October 6, has a 60-day comment period.
According to SEC Chairman Atkins' statement accompanying the proposal, the rule would "provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before."
Key provisions, per Sullivan & Cromwell's analysis:
According to Ropes & Gray, the proposal represents "the most comprehensive custody framework to date" and would apply to an estimated $340 billion in crypto assets currently held by U.S.-registered investment advisers.
Five days after the SEC's custody proposal, the CFTC published its own advance notice of proposed rulemaking on October 5. Regulation CTX (Crypto Asset Transactions) and Regulation CAM (Crypto Asset Markets) target a different segment: leveraged, margined, or financed retail crypto trading.
According to Baker Botts' analysis, the proposals:
Platforms that do not register under CAM remain limited to spot trading under state money-transmitter licenses. The comment period runs 60 days from Federal Register publication, with a firm deadline of December 14, 2026.
Of the approximately 140 comment letters received by October 20, the submissions revealed a clear fault line.
Industry support with modifications. Coinbase, in a letter submitted on the final day, backed the Regulation Crypto Assets framework but requested that the Tier 1 fundraising cap be raised to $120 million per 12-month period and that the Tier 2 ceiling be removed entirely for issuers providing audited financials, according to TokenPost. The Hyperliquid Policy Center supported adoption but asked the SEC to revise how the rule treats airdrops, arguing that the safe harbor's certification requirements present a bar many projects cannot meet.
State regulator opposition. The North American Securities Administrators Association (NASAA), representing state securities regulators across all 50 states, submitted a letter on October 20 demanding the SEC withdraw the proposal entirely. NASAA President Elizabeth Bowling, the assistant commissioner for securities with the Tennessee Department of Commerce and Insurance, stated the proposal would put "the commission's thumb on the scale to overcome weaknesses common to crypto offerings in order to facilitate sales to retail investors."
NASAA's core objection: the exemptions strip away disclosure requirements, filing requirements, and resale restrictions, and the preemption of state blue-sky laws removes the state-level enforcement layer that has historically been the first line of defense against retail crypto fraud.
Additional opposition came from consumer advocacy group Better Markets, New York State Attorney General Letitia James, and Massachusetts Secretary of the Commonwealth William Galvin, according to Law360 reporting.
The SEC has stated it will continue accepting comments after the deadline, according to Crypto Briefing.
The three parallel rulemakings leave one critical gap: spot crypto markets where no leverage is involved and the asset in question has satisfied the safe harbor (or was never deemed a security) remain without a federal regulator.
The SEC's Regulation Crypto Assets addresses offerings and the conditions under which a token exits securities law. The CFTC's Regulation CTX addresses leveraged trading. Neither addresses the secondary trading of non-security crypto assets on spot exchanges.
According to CoinDesk's analysis of the CFTC proposals, "the spot-market gap lingers." Under the failed CLARITY Act, a "digital commodity exchange" registration category would have filled this gap. Without legislation, spot exchanges continue to operate under a patchwork of state money-transmitter licenses — the same regime that existed before any of these rulemakings were proposed.
This means that even if a token successfully transitions out of securities status via Form TR, the exchange on which it trades has no federal registration obligation for spot transactions. The practical effect is a regulatory gap between the SEC's exit ramp and the CFTC's entrance ramp.
From an economic-value perspective, these rulemakings redistribute compliance costs across the ecosystem.
Compliance cost reduction for issuers. The startup exemption's $5 million cap with minimal disclosure lowers the cost of token issuance. According to SEC Commissioner Hester Peirce's August 18 statement, market participants have repeatedly expressed that "the cost and feasibility of registration" under existing Regulation A and Regulation D frameworks is prohibitive for crypto offerings. The new exemptions reduce legal and accounting expenses, which for full SEC registration can exceed $1–2 million per offering.
Compliance cost increase for custodians. The custody rule imposes new written-determination requirements and board-oversight mandates on advisers who self-custody crypto. For the estimated $340 billion in adviser-held crypto, firms will need to invest in key-management infrastructure, insurance, and governance documentation.
State revenue displacement. Blue-sky preemption eliminates state filing fees and review processes for offerings conducted under Reg CA. NASAA's opposition is partly economic: state regulators lose both revenue and enforcement jurisdiction over a growing asset class.
The safe harbor's hidden cost. Form TR requires issuers to certify cessation of "essential managerial efforts" — a determination with significant legal liability if contested. Projects that claim decentralization prematurely face SEC enforcement risk; projects that delay filing remain subject to securities law. The safe harbor creates a new category of legal and compliance expense for projects in the transition zone.
The three rulemakings represent the most comprehensive attempt to date to establish a federal regulatory framework for crypto assets through administrative action. They address token offerings, institutional custody, and leveraged trading — three of the four pillars of crypto market structure. The fourth pillar, spot exchange regulation, remains absent.
The regulatory architecture is being built in the absence of legislative consensus, by agencies acting at the boundaries of their existing statutory authority. The CLARITY Act's failure exposed a fundamental disagreement in Congress over how to balance innovation with consumer protection — the same disagreement now playing out in comment letters between Coinbase and NASAA, between Silicon Valley and state securities offices.
Whether these rules survive legal challenge, future administration reversals, or the eventual passage of comprehensive legislation remains uncertain. What is certain: for the first time, the outline of a federal crypto regulatory framework exists in proposed form. The comment period is closed. The rulemaking process continues.