Key Takeaways
- Reg CA Startup Exemption allows up to $5M over four years with no audited financials required
- Reg CA Fundraising Tier 2 matches Reg A's $75M cap but requires SEC qualification and audited statements
- Neither Reg CA exemption requires an intermediary, unlike Reg CF's mandatory funding portal
The SEC proposed Regulation Crypto Asset (Reg CA) this week, giving crypto issuers two new securities exemptions modeled directly on Reg CF and Reg A. The Startup Exemption caps raises at $5 million over four years. The Fundraising Exemption offers two tiers, topping out at $75 million with audited financials and SEC qualification. Both drop the intermediary requirement that defines traditional crowdfunding.
For fintech teams weighing token offerings, the choice between these exemptions hinges on raise size, compliance burden, and timeline. Here's how Reg CA stacks up against the JOBS Act exemptions it borrows from.
| Feature | Reg CA Startup | Reg CA Fundraising Tier 1 | Reg CA Fundraising Tier 2 | Reg CF | Reg A Tier 2 |
|---|---|---|---|---|---|
| Max raise | $5M (aggregate, 4 years) | $20M (12 months) | $75M (12 months) | $5M (12 months) | $75M (12 months) |
| SEC qualification | No | No | Yes | No | Yes |
| Financial statements | None required | Unaudited | Audited | Reviewed or audited | Audited |
| Intermediary required | No | No | No | Yes (funding portal) | No |
| Ongoing reporting | Limited (Transition Report) | Yes | Yes | Annual reports | Semiannual + annual |
| Resale restrictions | None | Varies | None (Tier 2) | 12-month hold | None (Tier 2) |
| General solicitation | Permitted | Permitted | Permitted | Permitted | Permitted |
| Usage limit | Once per issuer | Unlimited | Unlimited | Unlimited | Unlimited |
What is the Startup Exemption?
The SEC designed this tier as a regulatory runway for early-stage crypto projects. Issuers can raise up to $5 million in aggregate over four years, a structure that mirrors Reg CF's $5 million annual cap but stretches the window. The key trade: you can only use it once.
No financial statements are required. Issuers file a Notice of Reliance to start and must submit a Transition Report (Form TR) within four years. The SEC explicitly framed this as breathing room for projects working toward decentralization. An individual, group, or entity can qualify.
Securities issued under this exemption face no rule-based resale restrictions. General solicitation is permitted. There are no limits on non-accredited investors.
How does Fundraising compare to Reg A?
The Fundraising Exemption splits into two tiers. Tier 1 allows raises up to $20 million over 12 months without SEC qualification. Tier 2 matches Reg A's $75 million ceiling but requires the SEC to qualify the offering statement, just as Reg A Tier 2 does.
Tier 2 issuers must provide audited financial statements. Both tiers carry ongoing reporting obligations, though the SEC has not detailed exactly what those look like yet.
The biggest departure from Reg A: no intermediary is required. Under Reg CF, issuers must use a registered funding portal or broker-dealer. Reg A issuers typically work with underwriters. Reg CA issuers can go direct.
Why drop the intermediary requirement?
Funding portals under Reg CF handle investor verification, fund escrow, and compliance checks. They also take a cut. For crypto projects issuing tokens on-chain, that model fits awkwardly. Smart contracts can handle escrow. Blockchain addresses complicate investor identity checks. The SEC appears to be acknowledging that reality.
This creates an open question: who verifies investor disclosures? Under Reg CF, the portal provides a backstop. Under Reg CA, that burden shifts entirely to the issuer. Projects without in-house compliance expertise will need to build it or buy it.
Logicity's Take
The Startup Exemption looks like a carve-out for projects that intend to decentralize governance over time. Four years to hit $5 million, no audits, one-time use. It's a bet that some token projects will mature out of securities law entirely. Whether that bet pays off depends on how the SEC defines 'decentralization' in practice. For teams evaluating this path, expect compliance costs to land well below Reg A but above a simple SAFT. The bigger constraint is the single-use limit: burn this exemption early and you cannot come back.
What happens to existing crowdfunding platforms?
Platforms like Wefunder, Republic, and StartEngine built their businesses on Reg CF and Reg A. The SEC's proposal does not require Reg CA offerings to use them. But the economics suggest they will adapt.
Crowdfunding platforms already handle investor verification, compliance filings, and deal marketing. Adding Reg CA offerings is a natural extension. The proposal, as written, does not bar platforms from participating. It just does not mandate them.
Expect these platforms to offer Reg CA as a product line within months of final rules. The alternative is watching crypto-native issuers bypass them entirely.
Another recent corporate structure shift ahead of major capital raise
When do these rules take effect?
The SEC released these as proposed rules, not final ones. A comment period will follow. The agency indicated the framework is "pretty hardened," signaling limited appetite for major changes, but the timeline to final adoption remains unclear.
For teams planning a token offering, this is a signal to start compliance planning now. The exemption structure is visible. The filing requirements are outlined. Waiting for final rules means competing against issuers who prepared earlier.
Frequently Asked Questions
Can accredited and non-accredited investors both participate in Reg CA offerings?
Yes. Neither the Startup nor Fundraising exemptions impose rule-based limits on non-accredited investors, unlike Reg CF's investment caps tied to income and net worth.
Do I need a funding portal to issue under Reg CA?
No. Unlike Reg CF, neither Reg CA exemption requires an intermediary. Issuers can conduct offerings directly.
Can a project use both Startup and Fundraising exemptions?
The Startup Exemption can only be used once per issuer. After that, a project would need to rely on the Fundraising Exemption or another securities exemption.
Need Help Implementing This?
Logicity helps fintech teams navigate securities compliance and capital formation strategy. Reach out for a consultation on structuring your next raise under Reg CA, Reg CF, or Reg A.
Source: Crowdfund Insider
Huma Shazia
Senior AI & Tech Writer
Produced with AI assistance and reviewed by the Logicity editorial team. Learn more in our Editorial Policy.
