SEC Proposes New Token Fundraising Rules, But ICO Boom Unlikely to Return

SEC Establishes Regulatory Pathway for Token Offerings

The Securities and Exchange Commission has introduced proposed regulations to clarify how cryptocurrency projects can raise capital through token sales. Unveiled in mid-August, the proposal creates two distinct exemptions for investment contracts involving crypto assets, providing long-sought legal certainty for projects navigating U.S. securities law.

The framework offers two fundraising routes. Startups can conduct offerings of up to $5 million over a four-year period, while more established projects can access a larger pathway allowing up to $75 million within any 12-month period. The larger exemption draws its structure from existing Regulation A and requires issuers to maintain ongoing disclosure and reporting obligations.

Potential for Repeated Fundraising With Regulatory Oversight

A notable feature of the $75 million exemption is its potential for repeat use across years. Projects could theoretically raise the maximum amount annually if each offering represents a distinct fundraising round. However, subsequent offerings are far from automatic—each new round requires separate filing, SEC staff review, annual reporting, and semiannual updates. Issuers must also publicly disclose prior 12-month fundraising to verify compliance with caps.

This structure could create a staged fundraising model where projects raise funds, build infrastructure, and return to investors at higher valuations. Non-accredited investors, however, face protective limitations: they cannot invest more than 10% of their combined annual income and net worth in any single offering, regardless of fundraising round.

Why Market Observers Expect Gradual Rather Than Explosive Growth

Despite providing regulatory clarity, experts caution against expecting another ICO boom comparable to 2017. A sobering historical fact underlies this skepticism: approximately 90% of projects funded via ICOs between 2017 and 2019 ultimately failed. Investors have absorbed painful lessons from that cycle, and that accumulated market wisdom will likely dampen initial enthusiasm.

The SEC’s own projections support a measured view. The agency estimates approximately 130 offerings annually will utilize the new exemptions, with around 475 issuers potentially relying on the broader investment contract safe harbor. These figures suggest steady growth rather than exponential expansion.

The proposal does offer genuine relief for projects that previously endured costly securities-law battles. Companies like Tezos and Telegram faced multimillion-dollar legal challenges navigating ambiguous regulatory territory. An explicit pathway eliminates much of that uncertainty and reputational wear. One regulatory caveat remains: tokens traded in secondary markets can retain investment contract status if issuers or their representatives suggest buyers should expect profits from the team’s essential managerial efforts.

Source: SEC, via Cointelegraph. Not financial advice.