SEC's crypto fundraising rules face consumer group pushback

The Securities and Exchange Commission's proposed "Regulation Crypto Assets" rules, which would ease fundraising requirements for crypto firms, drew pushback from investor protection groups, consumer advocates and state regulators during the comment period, which closed Oct. 20. The SEC proposed the rules in September, partly in response to stalled congressional efforts to advance crypto market structure legislation. The proposal includes two exemptions allowing certain crypto companies to raise capital without traditional securities registration: a one-time offering of up to $5 million over four years, and an offering of up to $75 million in a 12-month period, the latter subject to ongoing reporting requirements. It also includes a conditional safe harbor under which certain crypto assets could eventually fall outside the definition of a security, and would limit states' ability to impose separate registration requirements on offerings that qualify for the federal exemptions.

Commentators including the California Department of Financial Protection and Innovation (DFPI), Better Markets and Americans for Financial Reform Education Fund raised concerns about investor protections, the agency's legal authority and the durability of the framework. Americans for Financial Reform Education Fund said it "has grave concerns" about financial stability effects and argued the rules would provide weaker protections and disclosure than public equity markets. Better Markets urged the SEC to withdraw the proposal, arguing it conflicts with the Securities Act of 1933, and cited a 2025 FBI internet crime report finding cryptocurrency-related complaints carried the highest reported losses, exceeding $11 billion across 181,565 complaints. DFPI said the preemption of state registration and qualification requirements "would harm investors by depriving them of critical protections against potentially unfair, abusive, and fraudulent securities offerings."

The CFA Institute, while supportive of regulatory clarity for crypto markets, warned of potential legal challenges, pointing to the Supreme Court's 2024 decision in Loper Bright Enterprises v. Raimondo, which ended judicial deference to federal agencies' interpretations of ambiguous laws. Crypto companies broadly supported the proposal. Coinbase urged the SEC to raise the startup exemption cap to $20 million over four years and eliminate the $75 million Tier 2 cap for issuers providing audited financial statements, warning that without higher limits, large projects would be forced to register on an ill-suited Form S-1 or raise capital privately or offshore.

The proposal comes as the CLARITY Act remains stalled in Congress, prompting the SEC and the Commodity Futures Trading Commission to pursue separate efforts to clarify their responsibilities and create registration pathways for crypto exchanges and custodians. The SEC also issued an order allowing certain tokenized U.S. stocks to trade on blockchain-based platforms under a temporary, limited framework, while the CFTC moved in October to solicit public input on a potential federal framework for leveraged crypto trading. Industry insiders warn that agency rules lack the permanence of congressional legislation and could be more easily reversed by future administrations.