A tokenized security must be registered or sold under an exemption, just like any other security, so issuers use familiar paths such as Regulation D private placements, Regulation A offerings of up to $75 million, and Regulation S offshore sales. The SEC's proposed Regulation Crypto Assets (published August 21, 2026, comments closed October 20, 2026, not adopted as of November 2, 2026) would add two new exemptions, but only for investment contracts involving non-security crypto assets, not for tokenized securities.
In this lesson you will
- Explain why tokenized securities need registration or an exemption
- Compare Rule 506(b), Rule 506(c), Regulation A Tier 1 and Tier 2, and Regulation S
- Describe the two proposed Regulation Crypto Assets exemptions, the safe harbor, and state preemption
- Explain why the proposed exemptions are not available for digital securities
The baseline: register or find an exemption
SEC staff state that the format of a security does not affect how the federal securities laws apply, and that regardless of format, the Securities Act requires every offer and sale of a security to be registered unless an exemption is available [7]. The SEC's small-business guidance states the same baseline for all securities: every offer and sale must be registered or rely on an exemption [1]. Tokenizing a share therefore changes the plumbing of an offering, not the legal analysis.
Regulation D: private placements
- Rule 506(b) permits private placements without general solicitation and limits sales to no more than 35 non-accredited investors in any 90-day period [1].
- Rule 506(c) permits general solicitation, but all purchasers must be accredited investors and the issuer must take reasonable steps to verify their status [1].
- Rule 504 permits up to $10 million of securities in a 12-month period [1].
- A Form D notice must be filed within 15 days after the first sale in a Regulation D offering [1].
For tokenized offerings, a token can make transfer restrictions programmable, for example by permitting transfers only among whitelisted wallets. The legal restrictions still come from the exemption relied on, not from the code. The economic analysis in the Regulation Crypto Assets proposal found that recent crypto asset-related offerings relied mainly on Rule 506(c) and involved almost no non-accredited investors [6].
Regulation A: a public offering with limits
Regulation A is an exemption for public offerings with two tiers: Tier 1 for up to $20 million in a 12-month period, and Tier 2 for up to $75 million in a 12-month period [2]. Tier 2 adds limits on how much non-accredited investors may invest, audited financial statements, and ongoing reports, and Tier 2 issuers do not have to register or qualify their offerings with state securities regulators [2]. Because Tier 2 permits sales to non-accredited investors within those limits, it is the exemption to study for a tokenized offering aimed at a broad retail investor base.
Regulation S: offshore offerings
Regulation S provides that, for purposes of Section 5's registration requirement, offers and sales that occur outside the United States are not covered [3]. An issuer's offer or sale is deemed to occur outside the United States if it is made in an offshore transaction, no directed selling efforts are made in the United States, and additional conditions that vary by category of security are met [4]. Tokenized securities make this harder in practice, because tokens on public ledgers can move across borders easily. An issuer planning an offshore token offering needs to think about how wallet eligibility and transfer controls will keep the offering within those conditions.
Proposed Regulation Crypto Assets
On August 18, 2026, the SEC proposed new rules titled "Regulation Crypto Assets" to create a tailored offering framework for certain investment contracts involving crypto assets [5]. The proposal was published in the Federal Register on August 21, 2026 as Release No. 33-11434, with comments requested by October 20, 2026 [6]. It would include [5]:
- A one-time startup exemption permitting offerings of up to $5 million during a four-year period [5].
- A fundraising exemption permitting offerings of up to $75 million in each 12-month period, with financial statements and ongoing reporting [5].
- Principles-based narrative disclosure under both exemptions [5].
- For non-accredited purchasers in the fundraising exemption, a cap of 10 percent of the greater of annual income or net worth [6].
- A conditional safe harbor from the term "investment contract": if its conditions are met, the crypto asset would be deemed not subject to an investment contract [5].
- Preemption of state registration and qualification requirements for offers and sales under the exemptions and for certain secondary market transactions [5].
Status check: a search of the Federal Register and SEC releases through November 2, 2026 found no final adoption of Regulation Crypto Assets. The Federal Register lists it as a proposed rule [6]. The SEC said the comment period would remain open for 60 days after Federal Register publication [5], which matches the October 20, 2026 deadline [6]. Any final version could differ from the proposal.
Disclosure is where tokenized offerings differ
Even when the exemption is familiar, the offering documents must explain how the token works. Staff note that a tokenized class may be the same class as traditional shares when its rights are substantially similar, or a separate class when they are not [7]. Offering materials should say which applies, which network holds the record, how holders convert between formats, and what happens if the network or a key service provider fails.
Key terms
- Rule 506(c)
- A Regulation D exemption allowing general solicitation if all purchasers are verified accredited investors.
- Regulation A Tier 2
- A public-offering exemption for up to $75 million per 12 months with audited financials, ongoing reports, and state preemption.
- Regulation S
- SEC rules treating offers and sales that occur outside the United States as outside Section 5's registration requirement, subject to conditions.
- Directed selling efforts
- Activity that could condition the U.S. market for securities offered offshore; prohibited in Regulation S offerings.
- Covered investment contract
- In proposed Regulation Crypto Assets, an investment contract involving a non-security crypto asset; it excludes contracts involving digital securities.
- Safe harbor
- A set of conditions that, if met, gives certainty about legal treatment; here, that a crypto asset is deemed not subject to an investment contract.
- State preemption
- Federal law displacing state registration or qualification requirements for certain offerings.
Check your understanding
Sources
- [1]U.S. Securities and Exchange Commission, “Exempt Offerings,” June 21, 2024.
- [2]U.S. Securities and Exchange Commission, “Regulation A,” June 13, 2024.
- [3]Electronic Code of Federal Regulations, “17 CFR 230.901 — General statement,” Accessed November 2026.
- [4]Electronic Code of Federal Regulations, “17 CFR 230.903 — Offers or sales of securities by the issuer, a distributor, any of their respective affiliates, or any person acting on behalf of any of the foregoing; conditions relating to specific securities,” Accessed November 2026.
- [5]U.S. Securities and Exchange Commission, “SEC Proposes New Regulation Crypto Assets (Press Release 2026-76),” August 18, 2026.
- [6]Federal Register (U.S. Securities and Exchange Commission), “Regulation Crypto Assets (Proposed Rule, Release No. 33-11434),” August 21, 2026.
- [7]U.S. Securities and Exchange Commission (Divisions of Corporation Finance, Investment Management, and Trading and Markets), “Statement on Tokenized Securities,” January 28, 2026.
Educational content only — not legal, tax, or investment advice, or an offer to sell or a solicitation of an offer to buy any security. Rules and data are described as of November 2026 and may change. Securities offered through Umergence LLC, Member FINRA/SIPC.