SEC throws a bombshell—has the spring of compliant token financing finally arrived?

Public token sales for fundraising have regained a legal pathway in the United States.

On August 18, the U.S. Securities and Exchange Commission released the draft "Regulation Crypto Assets." Under this proposal, startup projects can raise up to $5 million over a maximum of four years, while larger projects can raise $20 million or $75 million within 12 months. Projects would be able to sell tokens to investors and raise funds for network development without completing a full securities registration.

It sounds like ICOs are back.

But the SEC's proposal offers far more than just three funding tiers. It aims to establish a set of rules for tokens from birth to "graduation": projects can sell tokens to raise funds, but must clearly state what they plan to do with the money; if the team fails to complete the key work it committed to, the token continues to carry the regulatory burden of investment terms; only after commitments are fulfilled does the token get the chance to exit this relationship.

"Commitment" is the core of the entire draft — devs must "deliver" until the token "graduates" before they can "dev sell."

The Rules

The draft offers project teams two options.

The first option suits early-stage teams. Suppose a project needs $3 million for development. In the past, common choices were seeking venture capital, restricting buyers and launching tokens outside the U.S., or bearing the high costs of securities registration. The new draft allows it to use the "startup exemption," raising no more than $5 million over a maximum of four years, while filing with the SEC at the start and end of the fundraising period.

The second option suits projects with larger capital needs. The first tier allows raising up to $20 million per 12-month period, and the second tier up to $75 million. Compared to the $5 million startup exemption, this path can be used repeatedly, but the rules are stricter.

Projects cannot simply submit a whitepaper and start selling tokens. Both exemptions require teams to disclose how the network is governed, how the product will be developed, what security risks exist in the code, what the company's financial condition is, and who manages the project. The two larger fundraising tiers also require financial statements with ongoing updates, and the $75 million tier requires audits.

The SEC has not dismantled its existing guardrails. Issuers and insiders with serious violation records cannot use these exemptions, and anti-fraud and anti-manipulation responsibilities remain in effect. Projects using other securities exemptions simultaneously must also comply with existing rules on aggregating offerings.

Defining "Graduation"

The most intricate and important part of the draft is separating the token itself from the investment relationship formed around it.

When a project sells tokens to raise money for building a network, buyers at that moment often aren't just purchasing a digital asset that already works. They are also expecting the team to build the product, attract users, increase demand for the token, and profit from those efforts. This relationship of dependence on the team's future work is what the SEC calls the "investment terms."

A token itself can simply be a digital asset, but how a project sells it and what it promises to buyers wraps it in a layer of investment terms. What the SEC actually regulates is this relationship between the issuer and the buyer.

The draft designs an exit path for tokens. Only after the issuer completes or permanently ceases all key managerial work it committed to, makes no further related commitments, and submits a public certification and analysis to the SEC, can the token enter a "safe harbor."

Tokens thus gain the concept of "graduation."

When a project sells tokens and promises to build, the token can only "graduate" once the project is built, key work is complete, and buyers no longer depend on the team to fulfill old commitments — only then can the project team exit.

The New Rules Don't Focus on Whether Tokens Are Securities

In the past, the market often judged when a token was no longer subject to securities laws by asking whether the network was "sufficiently decentralized." As long as the foundation, development company, or founding team continued to work, many interpreted this as the token still depending on a central entity.

The SEC draft asks a different question: What commitments did the project rely on to sell tokens, and have those commitments now been fulfilled?

For example: Project A told investors when selling tokens that the team would develop the mainnet, launch transfer and staking features, and then hand the network over to decentralized validators. Later, the mainnet launches and the features work, but the validators remain controlled by the team. Since "decentralizing the network" was also a commitment made during fundraising, the token still cannot "graduate" at this point.

Project B only committed to building a functional network when selling tokens, without writing "the team must disappear" or "the network must reach a certain level of decentralization" into its fundraising commitments. Once the network launches and the product is usable, the team's continued bug fixes, version updates, developer grants, and product promotion are routine maintenance — not part of the "investment terms." The product investors were initially waiting for has been delivered, and the token's value now increasingly derives from actual usage, network operation, and market supply and demand.

The SEC's focus is whether the market is still waiting for the team to fulfill key commitments made at the time of the token sale. The continued presence of a core team is no longer a universal standard for whether a token can graduate.

The core team can stay. Unfulfilled commitments cannot.

Say Less, Do Less

This approach to determining whether commitments have been fulfilled will significantly impact project promotion strategies.

Corporate securities lawyer Gabriel Shapiro has noted that by tying a token's ability to shed investment terms to the project's public commitments, teams will be incentivized to say less and promise less going forward. The fewer commitments a project makes, the less work it needs to prove before "graduation."

Roadmaps therefore cease to be mere marketing material. If a project commits to mainnet launch, revenue growth, decentralization, or building certain features, it will have to answer the same question in the future: Has this work been completed? The fuller the story a team tells during fundraising, the harder it becomes to exit after TGE.

This also hides a new contradiction. Buyers need sufficient information to judge whether a project is worth investing in, while project teams have an incentive to lower their commitments to reach the "safe harbor" earlier. Disclose too little, and investors can't assess risk; promise too much, and the project struggles to graduate.

A New Paradigm for Airdrops

The draft will also affect the design of airdrop and points programs.

The first scenario is retroactive airdrops. The project made no prior commitment to issue tokens and simply rewards early users after the fact. Recipients paid no money and provided no services for the airdrop, and there are no trades or tasks required after the announcement. Such airdrops of non-securities crypto assets fall within the scope the SEC has previously explained.

The second scenario is announced points programs. The project tells users in advance that trading, buying certain assets, purchasing services, or completing tasks can earn future tokens. Since participants contribute money, services, or actions, such distributions are more likely to create investment terms and count against the $5 million ICO exemption limit.

This has led some to link the draft with Hyperliquid's Season 3 airdrop, which has yet to be publicly confirmed. If a project only rewards past behavior after the fact, the legal relationship is much simpler; if a project announces points rules in advance and uses future tokens to attract trading volume, the points program creates additional regulatory burdens.

Existing information cannot prove that Hyperliquid knew the SEC's policy direction in advance; this association remains market speculation. More importantly, the SEC itself is soliciting comments: how the value of airdropped tokens should be calculated, and whether the startup exemption needs dedicated rules — there are currently no final answers.

The current Regulation Crypto Assets remains a draft. All three sitting SEC commissioners voted in favor, but the rules still await public comments.

The "my project is cool, send me money" ICO model is gone for good. Going forward, how much a project can raise will be determined by exemption limits. Whether a token can "graduate" depends on what the team said to the market — and what it actually delivered.