The public comment period for the SEC's new crypto regulations has ended. How far are we from a "compliant ICO"?

Written by: Meng Yan

On August 18, 2026, the SEC proposed the Regulation on Crypto Assets, attempting to end the past years' reliance on enforcement actions to regulate token offerings, and establish a dedicated public fundraising framework for crypto assets. On October 20, the public comment period closed.

The four most important changes in the new rules are:

First, it provides a registration exemption for early-stage projects, allowing them to raise up to $5 million over four years without audits or through licensed intermediaries.

Second, it offers a two-tiered fundraising exemption for more mature projects, with annual caps of $20 million and $75 million respectively, accompanied by varying levels of disclosure, financial reporting, and audit requirements.

Third, it establishes a Safe Harbor for exiting security status. After a project completes or permanently ceases the promised development work, issuers can submit a Form TR to ensure the relevant tokens are no longer deemed securities under the original investment contract.

Fourth, federal rules exclude state-level security registration requirements within a specific scope, reducing compliance barriers for cross-state offerings and trading.

What does the public think?

Mert Erinc, a researcher at BI Norwegian Business School, created a public tracking website that uses three independent AI reviewers to categorize each comment line by line.

As of October 20, the SEC had received 171 comments, 165 of which have been coded.

Categorized by overall stance:

Clear support: 8 comments, 5%

Conditional support: 115 comments, 70%

Clear opposition: 14 comments, 8%

Mixed stance: 3 comments, 2%

Procedural or off-topic comments: 25 comments, 15%

Notably, the 70% conditional support does not mean 70% approve the proposal as written. Most accept the direction of reform but request modifications to specific provisions.

Nasdaq gave clear support, calling the Safe Harbor a "well-designed mechanism" and noting the tiered disclosure requirements are appropriate. Letters under SkyBridge Capital described the proposal as "thoughtful, measured, and long overdue." The Hyperliquid Policy Center urged swift passage but wanted it clarified that submitting a Form TR does not constitute an admission that the tokens were previously securities. Ava Labs called it an "important first step" while arguing the definition of "crypto asset" is too broad.

Five securities law scholars—Coates, Coffee, Cox, Fox, and Seligman—jointly argued the proposal has fundamental flaws. They contend the early-stage exemption breaks from nearly a century of securities law tradition, and the fundraising exemption could be achieved by amending Regulation A. John Reed Stark and Lee Reiners of Duke University call for a complete withdrawal. Public Citizen criticizes the Safe Harbor as a "regulatory loophole," arguing that preempting state law equates to shielding bad actors. The Independent Community Bankers Association (ICBA) argues the proposal should not be finalized unless these conveniences are proven to be risk-based, and demands a sunset clause. In between, Davis Polk & Wardwell suggests there are "better ways to do this without starting from scratch."

If looking further into the directions for amendments:

Deregulation requested: 44 comments, 27%

Stricter regulation requested: 49 comments, 30%

Both deregulation and stricter regulation requested: 23 comments, 14%

The remainder mainly request clarification, maintenance of the original proposal, or are not applicable to this classification.

Supporters argue that existing securities regulations are not suitable for all token offerings. The new rules would reduce startup fundraising costs, provide legitimate channels for retail investors to participate, and clarify when tokens can exit securities regulation.

Opponents hold two diametrically opposed views: some believe the new rules still over-regulate by forcing decentralized projects into traditional securities frameworks; others worry the exemptions are too lax, which would weaken investor protection and even create opportunities for fraud and insider selling.

The debate between deregulation and stricter regulation centers on four issues.

First, fundraising limits. Deregulation advocates want to raise the $5 million cap for early-stage fundraising and exclude non-fundraising token distributions like airdrops and staking rewards; stricter regulators worry the exemption scale is too large.

Second, disclosure. Deregulation advocates emphasize cost reduction; stricter advocates demand unified disclosure via the SEC’s EDGAR system, enhanced financial auditing, and ongoing reporting. This is the area with the strongest calls for tightening, with 83 requests for stricter measures versus only 8 for relaxation. Key demands include mandating EDGAR submissions for early-stage disclosures and requiring audits for Tier 1 financial reports. State law preemption saw 19 requests for relaxation, and issuer eligibility saw 15, focusing on whether DAOs without legal entity status can qualify.

Third, insider sales. The new rules lack a mandatory lock-up period, and audit firms like the Center for Audit Quality have also put forward supplementary requirements. There are 20 comments requesting tighter rules on insider resale, advocating for holding periods or lock-ups.

Fourth, and most controversially, the Safe Harbor. 97 comments address the security status exit mechanism, with 36 requesting relaxation and 28 requesting tightening. Deregulation advocates want broader exit conditions that better acknowledge network functionality and decentralization; stricter advocates demand independent verification to prevent issuers from permanently exiting securities oversight based solely on self-declarations. Bitwise hopes exits will be judged by externally observable facts, while Public Citizen and others argue the exit threshold is too low.

My assessment is that it is highly likely the new rules will eventually take effect, though they will require revisions. It is estimated that final implementation is only a few months away.

The reason is that the reform direction has already established a clear regulatory policy foundation, and the vast majority of substantive comments focus on how to amend the rules rather than outright rejecting the framework. However, the SEC must still address investor protection, statutory authority, and potential judicial challenges, leaving the final timeline uncertain.

If implemented, the U.S. crypto industry will see three major shifts: token public fundraising will gain a dedicated lawful pathway, effectively restarting compliant ICOs; projects will have a clear procedure for exiting securities regulation; and regulatory boundaries between federal and state levels will become more unified.

The most profound significance of this reform is its attempt to build a complete regulatory pathway for crypto projects, spanning from fundraising and development to mature networks. For many in the industry, a more understandable concept is "restarting compliant ICOs."

Of course, regulatory certainty does not equal investment safety. What will truly determine the quality of the new rules in the next phase are these three lines of defense: disclosure requirements, insider restrictions, and security status exit conditions. The future will undoubtedly still be a mixed terrain, with both groundbreaking innovations and reckless speculation. But regardless, once this new rule takes effect, the crypto industry will step into a new era. My long-awaited vision of AI + tokenomics will finally have room to thrive.