Last week, the SEC finally put out its formal Regulation Crypto rulemaking.
The proposal is the agency’s first real attempt at formal rules for token fundraising. For months, the SEC has issued staff statements and guidance. But this is actual rulemaking.
It lays out how startups and developers might use tokens to raise money without falling under the SEC’s enforcement path. Still, the agency will need time to finalize the rules. Firms will need more time after that to comply. Timing, as always in Washington, is everything.
A proposal after months of statements
The early reaction from industry lawyers seems cautious but positive. Lewis Cohen, a partner at Cahill Gordon and Reindel, said the proposal goes a long way and that the SEC should be credited for the effort. At the same time, he noted that the Clarity Act would still be needed to really get the job done. That seems to be a common view across the industry: the proposal is welcome, but it is not the final answer.
The Clarity Act is a legislative effort in Congress that would set clearer rules for digital assets. The SEC proposal does not replace that. It might even be seen as a backup or a stopgap, depending on how things play out.
Different paths for different fundraisers
The proposal includes several provisions. They depend on how much a startup wants to raise and how the company plans to operate. A small project might follow a different path than a larger issuer. The SEC also tried to address developer activity, which has been a gray area for years. Some of that language matters because many projects are run by foundations or developer teams, not traditional companies.
There are still questions. The details are dense. People will need time to read the full text and figure out what it means in practice. I think it is fair to say no one knows yet how this will actually look once implemented.
Still room for legislation
Last Wednesday, President Donald Trump held a press conference with crypto executives and traditional finance leaders. He urged Congress to pass the Clarity Act. The event included SEC Chairman Paul Atkins and CFTC Chairman Mike Selig. Coinbase CEO Brian Armstrong and Kraken CEO Arjun Sethi were there too.
The next day, the CFTC Innovation Advisory Committee met. Selig said his agency is ready to start rulemaking if the Clarity Act does not become law. That is worth watching. Two agencies may end up with overlapping rules, and that could create its own complications.
For now, the SEC proposal is out. Comments will come next. There will be revisions, probably. And then the hard part begins: turning this proposal into something that works for both companies and regulators. That part is rarely quick or clean.
