SEC proposes $75M token sale exemption as ICO demand fades

The US Securities and Exchange Commission has proposed letting crypto projects raise up to $75 million a year without full registration, reopening a legal route for public token sales at a time when the speculative frenzy that defined the 2017-2018 ICO cycle has largely evaporated.

The proposal, called Regulation Crypto Assets, was unveiled Aug. 18 and includes two exemptions. An early-stage startup exemption would allow projects to raise up to $5 million over four years. A separate fundraising exemption would permit issuers to collect as much as $75 million in any 12-month period. Both routes require disclosures to investors. The larger exemption comes with financial statement and ongoing reporting requirements, according to Bloomberg.

The SEC set a 60-day public comment period after publication in the Federal Register.

Public token sales were once crypto's dominant fundraising method. ICOs raised roughly $3 billion in January 2018 alone at their peak, Bloomberg reported. Projects attracted capital with little more than a white paper and a newly issued token. Buyers often bet on the token rising once it hit secondary markets. Failed projects, falling crypto prices, pump-and-dump schemes, and regulatory lawsuits eventually shut down much of that activity.

Under the new framework, issuers remain subject to federal antifraud and antimanipulation rules. The proposal also includes a conditional safe harbor that would let a crypto asset stop being treated as an investment contract once the issuer has completed or permanently ended the essential managerial work it promised investors. That mechanism separates the original fundraising contract from the token after conditions are met.

Making public token fundraising available again does not guarantee projects will find the same pool of buyers. Investor activity has concentrated around Bitcoin and a smaller group of established crypto assets. Speculative traders have gained access to perpetual futures, prediction markets, and AI-linked stocks, which have become another destination for risk capital, Bloomberg reported.

Crypto venture firms have changed their investment strategies. Token deals have fallen from earlier levels. Some large crypto investors have expanded into artificial intelligence, robotics, and other technology sectors.

April fundraising data offered another view of where capital has been going. Crypto companies raised about $860 million across 55 disclosed deals that month. Centralized finance accounted for roughly $606 million of that total, according to crypto fundraising data reported by crypto.news. Infrastructure projects raised about $105 million. Decentralized finance companies attracted roughly $90 million. Two centralized exchanges accounted for around $580 million, or about 67% of the month's disclosed total. Prediction market and AI projects attracted early-stage investment.

For newly issued tokens, competition for speculative capital now extends across several markets that either did not exist or were far smaller during the ICO boom.

“ICOs of 2026 are not the ICOs of 2018,” GSR research analyst Carlos Guzman told Bloomberg. “The days when a white paper and a dream were enough to attract capital are over.”

Dragonfly general partner Tom Schmidt raised a similar concern over the timing of the SEC proposal. He argued that market structure questions have become more pressing for the industry.

“It’s obviously better than nothing, but would have been helpful to have this a few years ago versus now, where the most pressing items are things that CLARITY was supposed to answer, and less on fundraising,” Schmidt said.

The SEC proposal is moving separately from the Digital Asset Market CLARITY Act, leaving Congress to determine the longer-term division of regulatory authority over crypto markets. The CLARITY Act would divide digital assets into statutory categories and assign responsibilities between the SEC and the Commodity Futures Trading Commission. The legislation has faced delays in the Senate despite advancing through earlier stages. Senate Republicans released a 616-page merged draft in July that combined Banking and Agriculture committee provisions. The text divided digital assets into digital commodities, investment contract assets, and permitted payment stablecoins, with a maturity certification process allowing qualifying tokens to move from securities treatment as their networks decentralize.

Regulation Crypto Assets addresses part of the same problem through the SEC's existing authority. Under the agency's proposal, the $5 million startup exemption applies over a four-year period. The $75 million fundraising route can be used each 12-month period. The latter imposes financial statement and ongoing reporting requirements that were largely absent from the ICO market of 2017 and 2018.

For some venture investors, having a defined route for legitimate token launches could still change how early-stage crypto networks raise money in the US.

“In the midst of this sideways market, this proposal makes me cautiously optimistic around what to expect ahead for digital assets in the US,” Strobe Ventures partner Winnie Lau told Bloomberg. “It’s a step in the right direction with a pathway for early-stage teams to build token networks, raise capital, and innovate in the US.”

Pantera Capital general partner and portfolio manager Cosmo Jiang pointed to the difference between speculative memecoin launches and projects attempting to build networks with functional tokens.

“We lived in a strange world where if one launched a memecoin it was legal, but if one launched a token that actually tried to produce any value it was illegal, that’s the exact opposite of functional capitalist society,” Jiang said.

Market conditions provide another hurdle for projects considering new token sales. Bitcoin remained down nearly 10% for 2026 despite its latest recovery, while gold had gained more than 7% for the year, according to Bloomberg data. Crypto prices were still recovering from the sharp market selloff in October, leaving investors less willing to finance projects solely because they issued a token.

The concentration of investment in established assets has not eliminated demand for crypto exposure. Exchange traded funds tracking gold and Bitcoin attracted a combined record $7 billion over the five trading days through Tuesday, Bloomberg reported.

Regulators, meanwhile, continue to work on rules governing how crypto assets are classified and traded after issuance. The SEC and CFTC issued a joint interpretation in March setting out categories for digital assets. The CLARITY Act would put classifications and regulator responsibilities into federal law if Congress passes the legislation.

The Senate debate has continued into August. Senators Elizabeth Warren and Richard Blumenthal asked the SEC this month to investigate President Donald Trump's memecoin as lawmakers remained divided over ethics provisions in the legislation, with the dispute becoming one of the issues holding up the CLARITY Act.

For projects that choose the SEC's proposed fundraising route, compliance would begin well before secondary trading. Issuers using the exemptions would remain subject to federal antifraud and antimanipulation rules. The larger fundraising exemption requires financial statements and continuing reports after capital has been raised.

The proposal is open for 60 days.