SEC Proposes First Formal Rules for Crypto Token Sales

The proposal includes a safe harbor provision. Under the safe harbor, a qualifying token stops being subject to an investment contract once the issuer has completed or permanently ceased all the essential managerial efforts it promised. Chairman Paul Atkins traced the framework directly to the Token Safe Harbor that Commissioner Hester Peirce first proposed in February 2020.

The 2017 ICO boom died after the SEC decided token sales were unregistered securities offerings and started suing issuers. Every team since has built around that ruling. They used Cayman and Swiss foundations, sales restricted to non-U.S. buyers, accredited-only rounds under Reg D, airdrops and points programs engineered to look like anything other than a sale. Those structures existed because there was no legal onshore option.

Now the SEC has proposed clear rules for token sales in the U.S. If the rules go through, token offerings could return to the domestic market. The SEC is accepting comments on the proposal for 60 days before a final vote.