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Crypto Law/Level III · Tokens and securities law/3.2 US rules in motion/Lesson 6

Exemptions: Regulation D, A+ and S

How a token sale that is a securities offering can avoid full SEC registration through Regulation D, Regulation A or Regulation S, and why each exemption’s conditions collide with freely tradable tokens.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Cheapest exemption for a private raise: Rule 506(b), no dollar cap, no SEC filing fee, a free Form D within 15 days of first sale, and federal pre-emption of state registration; the catch is no general solicitation and restricted resale under Rule 144.
  2. To advertise publicly, Rule 506(c) allows general solicitation if every buyer is accredited (income above $200,000, or $300,000 jointly, or $1 million net worth excluding home) and verified; state notice filings and fees still apply.
  3. Regulation Crowdfunding allows up to $5,000,000 per 12 months from the public, within per-investor limits, through a registered funding portal or broker, with Form C disclosure; securities bought cannot be resold for one year, which conflicts with freely trading tokens.
  4. Regulation S excludes sales outside the United States, at minimal cost, if no US persons buy and Category 3 compliance periods are observed; flowback to US buyers on global exchanges defeats it. Other countries’ laws, including MiCA, still apply.
  5. Regulation A Tier 2 permits up to $75 million a year from the public but requires SEC qualification and periodic reports, so it is costlier and suits only larger raises. The proposed Regulation Crypto Assets (August 2026) is not law.

Materials17 CFR 230.501, 230.504 and 230.506 (Regulation D) and 230.251 (Regulation A) on ecfr.gov17 CFR 230.901 and 230.903 (Regulation S) and 230.144(d), the holding-period rule for restricted securitiesEDGAR full-text search, to find a project’s Form D or offering statement and see which exemption it claimed

Wonder

  1. If a token sale is a securities offering, does the project have to file a full registration statement?
  2. Can a project sell tokens to anyone online under an exemption?
  3. Why did exemptions not protect some of the best-known token sales?

Explore

  1. Section 5 of the Securities Act of 1933 requires every offer and sale of a security to be registered with the SEC unless an exemption applies. If a token is sold as part of an investment contract (lessons 3.1.1 and 3.1.4), the seller needs either a registration statement or an exemption. Exemptions remove the registration duty, not liability for fraud: an exempt offering with false statements is still unlawful. The three most used are Regulation D, for private placements, Regulation A, a small public offering, and Regulation S, for sales outside the United States. Each was written for shares and bonds, not instantly tradable tokens.
  2. Regulation D has two main paths. Rule 506(b) has no dollar limit but bars general solicitation, and allows up to 35 non-accredited purchasers in any 90-day period, each financially sophisticated. Rule 506(c) permits general solicitation, including public websites, but every purchaser must be accredited and the issuer must take ‘reasonable steps to verify’ this, for example by reviewing two years of IRS income forms. Under Rule 501, a person is accredited with income above $200,000 ($300,000 jointly) in each of the last two years, or net worth above $1 million excluding the primary residence. Rule 504 allows up to $10 million in 12 months. Form D is due 15 calendar days after the first sale.
  3. The trap is resale. Securities bought in a Regulation D offering are generally ‘restricted securities’. Under Rule 144(d), a buyer who wants to rely on that rule to resell must hold for at least six months if the issuer has been an SEC reporting company for at least 90 days, or one year if not. Tokens can trade on-chain within minutes. If private buyers are really a channel to the public, the offering is a public distribution in disguise. In 2020 a court found the SEC likely to prove exactly that about Telegram’s Gram sales to 171 initial purchasers, and Telegram later agreed to return more than $1.2 billion (lesson 3.1.6).
  4. Regulation A, often called Reg A+, is a smaller public offering open to ordinary investors. Under Rule 251, Tier 1 allows up to $20 million in 12 months and Tier 2 up to $75 million, with smaller caps for sales by affiliated holders. In a Tier 2 offering of securities not listed on a national exchange, a non-accredited investor may generally invest no more than 10 percent of the greater of annual income or net worth. The issuer files an offering statement, and no sale may be made until the SEC has qualified it. Tier 2 issuers must then file annual and other periodic reports, so the disclosure burden is real.
  5. Regulation S is territorial: Rule 901 says that, for Section 5, offers and sales occurring outside the United States are not covered. Rule 903 sets conditions by category. For equity securities in Category 3, the residual category for securities not eligible for Categories 1 or 2, there is a one-year distribution compliance period, or six months for a reporting issuer, when sales may not go to US persons and buyers must certify they are not US persons. For tokens the problem is flowback: a coin sold abroad can reach US buyers on a global exchange within hours. Regulation S is no licence to sell to US persons, and other countries’ laws apply too (lesson 3.3.7).
  6. Because these rules fit tokens poorly, on 18 August 2026 the SEC proposed Regulation Crypto Assets. It would add two exemptions for crypto investment contracts: up to $5 million over a four-year period, and up to $75 million in each 12-month period, the larger one requiring financial statements and ongoing reports. Both would require principles-based narrative disclosure and keep antifraud liability. A conditional safe harbor would treat a crypto asset as not subject to an investment contract if its conditions are met. Comments were due by 20 October 2026; it is a proposal, not law. A practical check: search EDGAR for a project’s Form D or offering statement and note which exemption it claims.

Key facts

  • Rule 506(c) of Regulation D allows general solicitation only if all purchasers are accredited investors and the issuer takes reasonable steps to verify their status.
  • Rule 506(b) bars general solicitation and allows no more than 35 non-accredited purchasers in any 90-calendar-day period.
  • A Form D notice must be filed no later than 15 calendar days after the first sale in a Rule 504 or Rule 506 offering.
  • Regulation A caps Tier 1 offerings at $20 million and Tier 2 offerings at $75 million in a 12-month period.
  • Under Regulation S Category 3, equity securities carry a one-year distribution compliance period, or six months for a reporting issuer.
  • The SEC proposed Regulation Crypto Assets on 18 August 2026, including exemptions of up to $5 million over four years and up to $75 million per 12 months.

Exercise nine, six, three, one

9CollectList up to 9 token sales you know of, or that you are considering for a project, and note for each who could buy, how buyers were found and where the tokens could be resold (some lists are shorter).
6ClusterSort them into 6 categories: sales to accredited investors only, sales with public advertising, sales open to non-accredited US buyers, sales only outside the United States, sales with resale limits, and sales with no stated exemption.
3DistillReduce the 6 categories to 3 groups: sales that fit Regulation D, sales that fit Regulation A or S, and sales that fit no exemption as described.
1CrystallizeWrite 1 sentence explaining, in your own words, why a token that trades freely from day one strains an exemption built on resale limits.

Fact check

Dates, figures and claims checked against the published sources listed below.

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