SEC Proposes $75 Million Crypto Capital Raise Limit

The Securities and Exchange Commission proposed allowing issuers to raise up to $75 million annually. This new framework would enable companies to use crypto assets for capital without issuing equity or debt.

The rule would also permit companies to raise up to $5 million over four years. Issuers seeking the higher annual limit must provide financial statements and comply with federal anti-fraud provisions.

Disclosure rules differ from equity standards

Global Finance Magazine notes the proposal allows principles-based financial disclosures. Issuers can select which information to share rather than following a prescriptive list of required data points.

This approach contrasts with Regulation A and Regulation Crowdfunding. Those existing rules require specific financial reports and impose strict limits on how much non-accredited investors can invest.

Investment limits for non-accredited investors drop

The proposed rule removes investment caps for non-accredited investors. Current regulations limit these investors to $107,000 in crowdfunding or 10% of net worth in Regulation A Tier 2.

Regulation D allows unlimited issuance but restricts access to 35 non-accredited investors. The new crypto rule would allow unlimited participation from non-accredited investors in offerings up to $75 million.

Critics warn of heightened investor risk

Legal experts argue the proposal concentrates significant risk in unsophisticated investors. Tilden Moschetti stated that principles-based disclosure does not verify information and antifraud liability arrives after losses occur.

Neil Osanto suggested the SEC needs a distinction between claimed and achieved conditions. He wrote that disclosure of a claimed condition is not evidence that the condition has been achieved.