California regulators oppose SEC's new rules on crypto asset financing, concerned they will undermine state-level investor protection.

on October 26, according to Bitcoin.com, the California Department of Financial Protection and Innovation (DFPI) filed comments with the U.S. SEC opposing its proposed "Regulation Crypto Assets" rule, arguing that the framework could restrict states' authority to register and conduct qualification reviews prior to crypto asset offerings, thereby undermining investor protection. The DFPI website also confirmed that California has formally objected to the proposal.

The SEC's proposal seeks to establish two types of registration exemptions for certain investment contracts involving crypto assets, with a "startup exemption" allowing up to $5 million in fundraising over four years, and another exemption permitting up to $75 million every 12 months. Issuers will still be required to make relevant disclosures and remain subject to federal anti-fraud and anti-manipulation rules.

The main concern from California is not that the state government will completely lose anti-fraud enforcement authority, but rather that preempting state registration and qualification requirements via federal rules would undermine the ability of state regulators to conduct reviews before products are officially sold.