SEC's Crypto New Regulation Public Comment Period Ends: How Far Are We from 'Compliant ICO'?

If implemented, the U.S. crypto industry will see three significant changes.

Written by: Meng Yan

On August 18, 2026, the SEC proposed the "Regulation Crypto Assets" aiming to end years of relying mainly on enforcement actions to regulate token issuance and establish a public financing system specifically for crypto assets. The public comment period ended on October 20.

The most important changes in the new regulation include four key points:

1. It provides registration exemptions for startups, allowing them to raise up to $5 million within four years without audits or licensed intermediaries.

2. It offers two tiers of financing exemptions for more mature projects, with annual financing caps of $20 million and $75 million, accompanied by varying degrees of information disclosure, financial reporting, and audit requirements.

3. It establishes a safe harbor for exiting securities status. After completing or permanently terminating the promised development work, project teams can submit Form TR to ensure that the related tokens are no longer considered securities due to the original investment contract.

4. Federal rules exclude state-level securities registration requirements within specific scopes, reducing compliance barriers for interstate issuance and trading.

What does the public think?

Mert Erinc, a researcher at Norway's BI Business School, created a public tracking website that categorizes comments using three independent AI reviews.

As of October 20, the SEC had received 171 comments, of which 165 were fully coded.

Classified by overall stance:

• Clear support: 8 comments, accounting for 5%
• Conditional support: 115 comments, accounting for 70%
• Clear opposition: 14 comments, accounting for 8%
• Mixed stance: 3 comments, accounting for 2%
• Procedural or off-topic comments: 25 comments, accounting for 15%

Notably, the 70% conditional support does not mean 70% agree with the original text passing. They generally accept the direction of reform but call for modifications to specific terms.

Nasdaq expressed clear support, stating that the safe harbor is a "well-designed mechanism" and believes the disclosure requirements are appropriately tiered. A letter from SkyBridge Capital described the proposal as "thoughtful, moderate, and long overdue." The Hyperliquid Policy Center urged for swift passage but hoped to clarify that submitting Form TR does not equate to acknowledging prior status as securities. Ava Labs called it an "important first step" but also believed the definition of "crypto assets" is too broad.

Five securities law scholars—Coates, Coffee, Cox, Fox, and Seligman—jointly argued that the proposal has fundamental flaws. They believe the startup exemption deviates from nearly a century of securities law tradition, suggesting that the fundraising exemption could simply amend Regulation A. John Reed Stark and Duke University's Lee Reiners called for a complete withdrawal. Public Citizen criticized the safe harbor as a "regulatory loophole," arguing that replacing state law equates to sheltering bad actors. The Independent Community Bankers Association (ICBA) insisted that unless all facilitative measures are based on risk assessment, the proposal should not be finalized and called for an automatic expiration clause. Davis Polk law firm, positioned between the two sides, argued that "there are better ways, and it doesn't have to start from scratch."

Looking further into the direction of modifications:

• Calls for loosening regulation: 44 comments, accounting for 27%
• Calls for tightening regulation: 49 comments, accounting for 30%
• Calls for both loosening and tightening: 23 comments, accounting for 14%
• The rest mainly requested clarification, maintenance of the original proposal, or deemed the classification inapplicable.

Supporters argue that existing securities regulations are not suitable for all token issuances. The new regulation could lower startup financing costs, provide legitimate participation channels for ordinary investors, and clarify when tokens can exit securities regulation.

Opponents, however, hold two diametrically opposed positions: one group believes the new regulation is still overly regulatory, incorporating decentralized projects into the traditional securities framework; the other group worries that the exemptions are too lenient, potentially weakening investor protection and even creating opportunities for fraud and insider selling.

The debate over loosening versus tightening focuses on four issues.

First, the financing cap. The loosening faction hopes to raise the $5 million startup financing limit and exclude non-financing token distributions such as airdrops and staking rewards; the tightening faction is concerned about the scale of exemptions being too large.

Second, information disclosure. The loosening faction emphasizes lowering costs; the tightening faction demands unified disclosures through the SEC's EDGAR system, strengthening financial audits and ongoing reporting. This is the area with the most concentrated tightening calls, with 83 letters requesting tightening and only 8 requesting loosening, mainly demanding that startup disclosures must be submitted to EDGAR and that Tier 1 financial reports should also be audited. Nineteen letters prioritized state law requests for loosening, and 15 letters requested loosening on issuer qualifications, focusing on whether DAOs without legal entities can apply.

Third, insider sales. The new regulation does not mandate a lock-up period, and auditing agencies like the Center for Audit Quality have also proposed supplementary requirements. There are 20 letters requesting tightening on insider resale, advocating for holding periods or lock-up periods.

Fourth, and the most controversial, is the safe harbor. Ninety-seven comments addressed the mechanism for exiting securities status, with 36 letters requesting loosening and 28 letters requesting tightening. The loosening faction hopes to expand exit conditions, more fully acknowledging network functionality and decentralization; the tightening faction demands independent verification to prevent project teams from permanently exiting securities regulation based solely on self-declaration. Bitwise hopes to judge exits based on externally observable facts, while Public Citizen and others believe the exit threshold is too low.

My judgment is that the new regulation is likely to be implemented, but it will require modifications. I estimate that it is only a few months away from final implementation.

The reason is that a clear regulatory policy foundation has already formed in the direction of reform, with the vast majority of substantive opinions focused on how to modify rather than a complete denial of the system. However, the SEC still needs to address investor protection, legal authorization, and potential judicial challenges, leaving the final timeline uncertain.

If implemented, the U.S. crypto industry will see three significant changes: a dedicated legal path for token public financing, effectively restarting compliant ICOs; a clear procedure for projects to exit securities regulation; and a more unified regulatory boundary between federal and state levels.

The most profound significance of this reform is the attempt to establish a complete regulatory path for crypto projects from financing, development to mature networks. For many in the industry, a more understandable concept is the "restart of compliant ICOs."

Of course, regulatory certainty does not equate to investment safety. The next stage that will truly determine the quality of the new regulation will be the three defenses of information disclosure, insider constraints, and conditions for exiting securities status. The future will undoubtedly still be a mixed bag, with both good and bad actors. However, once this new regulation is implemented, the crypto industry will enter a new era. The AI + token economy that I have been thinking about should also find its place.

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