SEC’s Proposed Crypto Rules Likely Won’t Restart ICO Growth

The U.S. Securities and Exchange Commission has proposed a new regulatory framework for token issuers that, if adopted, would make public token fundraising in the United States more practical—at least for projects able to meet specific conditions. The proposal, unveiled Aug. 18, would introduce exemptions designed for certain “investment contract” offerings involving crypto assets.

At the center of the plan is a larger fundraising exemption that would let qualifying issuers raise up to $75 million in any 12-month period, alongside a smaller one-time exemption for startups. While the changes aim to reduce uncertainty, legal experts say the proposal is unlikely to recreate the unchecked ICO environment of 2017.

Key takeaways

• The SEC’s proposal would create a $75 million exemption that renews on a rolling 12-month basis for qualifying public token offerings tied to investment contract analysis.
• Issuers could potentially run “serial” fundraising rounds, but later raises would still require new filings and SEC staff review, not a simple repeat of the first approval.
• Non-accredited investors would face limits—under the proposal, they could buy no more than 10% of the greater of their income or net worth for the relevant exemption framework.
• The SEC’s approach may clarify primary sales, but risks could shift into the secondary market if a token is effectively treated as a securities instrument due to ongoing managerial expectations.
• Experts caution that even a formal exemption route could be used in ways that undercut investor protection, leaving retail participants exposed to familiar problems.

A rolling $75 million path for qualifying token sales

According to Cointelegraph’s reporting on the SEC rollout, the SEC proposal would establish two exemptions for certain investment contracts involving crypto assets. The smaller exemption is a one-time option for startups raising up to $5 million over four years. The larger exemption would allow qualifying issuers to raise up to $75 million during each 12-month period.

The structure is modeled in part on Regulation A, including disclosure and ongoing reporting obligations for issuers that rely on the safe harbor. That matters because a large portion of the market’s compliance burden has historically come from the need to determine whether a token sale is viewed as a securities offering under existing law.

Can issuers raise $75 million repeatedly?

One of the practical questions is whether the rolling nature of the $75 million cap enables projects to return to the market multiple times. Legal professionals cited in the article suggest that it’s possible in concept, though not frictionless.

Drew Hinkes, a partner at Winston & Strawn, told Magazine that the 12-month limitation could support “serial raises” of $75 million every 12 months, “provided they are actually distinct offerings.” In other words, the cap appears designed to be reset on a time-based schedule rather than tied to a single lifecycle event.

However, Lilya Tessler, partner and leader of Sidley’s Global FinTech and Blockchain group, said “nothing prevents an issuer from relying on the exemption more than once,” but each raise is “isn’t automatic.” She explained that any additional fundraising would require a new offering statement and an SEC staff review. Issuers would also have to continue providing annual and semiannual reports, as well as disclose how much was raised under the exemption in the prior 12 months so the SEC can verify the cap’s usage.

For investors, this creates a different fundraising dynamic than the typical single-shot token launch. For example, if a project targets a total of $225 million, the exemption could—at least in theory—allow fundraising in stages while the network develops between rounds. That could make early allocations more meaningful to investors who anticipate later token issuance at a potentially higher valuation as the ecosystem matures.

Will the cap revive ICO-era FOMO?

The idea of a hard funding ceiling raises another concern: whether limited allocation size could intensify demand for early rounds. Reiners, a Duke University lecturing fellow and financial regulation expert, suggested that scarcity could make initial allocations more attractive if investors expect higher valuations in later offerings.

But Reiners also emphasized that the exemption is unlikely to bring back ICO mania. As he put it, the $75 million exemption could make public token offerings more feasible, but it is unlikely to produce a return to the “ICO boom.”

That view is consistent with Tessler’s comparison to traditional securities behavior, where issuers often restrict round sizes. She also highlighted a key investor-protection difference: non-accredited investors would not be able to “go all in” on a single token sale. Under the proposal framework, Tessler said participation would be limited to buying “10% of the greater of their income or net worth,” regardless of which round they choose.

Clarity for token issuers—without a clean return to 2017

The market’s posture toward token fundraising has changed materially since the last major ICO cycle. Reiners pointed to the reputational and economic aftermath of the 2017–2019 period, noting that up to 90% of projects funded via ICOs during those years ended up failing. He argued that fundraising is shaped not just by legal pathways, but also by investor appetite, token economics, liquidity, custody, and lingering damage from the prior cycle.

The SEC’s proposal is also framed, in part, as a manageable shift rather than a floodgate. The SEC estimates that around 130 offerings would use the two new exemptions each year, while around 475 issuers could use the broader investment contract safe harbor. In other words, the agency’s own expectations point to a steady rollout instead of a sudden wave.

For companies, the appeal is that the SEC is proposing an explicit regulatory route rather than leaving issuers to self-assess whether their offerings fit neatly into existing securities-law categories. Crypto lawyer Jake Chervinsky—referenced in the article—characterized the SEC approach as timely.

Secondary-market uncertainty remains a live risk

Even with a clearer primary-sale pathway, the SEC proposal introduces potential complexity when tokens begin trading. The filing indicates that an investment contract tied to a crypto asset could continue transferring to later purchasers in secondary market transactions until the token separates from the issuer’s representations or promises.

The practical effect is that marketing and expectation-setting around “managerial efforts” could matter even after the initial distribution. If the issuer or related parties communicate in a way that leads buyers in secondary markets to reasonably expect profits derived from essential managerial work, the token could be treated as part of an investment contract framework.

Hinkes warned about this dynamic. He said that if a transaction of a non-security covered crypto asset causes the transfer of the investment contract from seller to buyer, there is a risk the later cryptoasset sale could be viewed as a securities transaction. This could be consequential for exchanges and other trading venues that must navigate whether listed tokens implicate securities compliance requirements.

Investor protection concerns could persist under a “form over substance” scenario

Reiners also cautioned that the new structure could be gamed. In his view, a public offering exemption might be used as a vehicle for regulatory arbitrage if issuers satisfy the technical conditions of an exempt sale while continuing to market an asset whose value depends heavily on issuer-led managerial efforts.

That would leave retail investors facing many of the same issues seen during earlier cycles—such as opaque disclosures, concentrated insider holdings, and promotional tactics that can outpace transparency. The proposal may improve the legality of certain token issuances, but it doesn’t automatically solve the broader question of how investor expectations are formed and maintained.

As the SEC moves forward, market participants should watch how the final rule is shaped through the comment and approval process—especially the details tied to secondary market treatment, investor limits, and what constitutes sufficient separation from issuer representations. The proposal could be an important step toward more predictable compliance, but it also shifts some of the key uncertainty to what happens after trading begins.