Is your token a security? A founder’s guide to token offerings.

Before a token is sold, one question shapes everything: is the sale a securities offering? The answer drives how you can raise money, who can buy, what you must disclose and what you can say in your marketing.

The Howey test

Under the Supreme Court’s decision in SEC v. W.J. Howey Co. (1946), an investment contract — and therefore a security — exists when people invest money in a common enterprise with an expectation of profits from the efforts of others. Token sales are analyzed under this test, and the details matter: what buyers are told, what the team controls, and how the token is actually used.

Exempt-offering paths for token sales

If a token sale is a securities offering, it must be registered or fit an exemption. The common paths:

• Regulation D, Rule 506(b) — capital from accredited investors plus up to 35 non-accredited purchasers in any 90-day period, who must be financially sophisticated (alone or with a purchaser representative) and must receive disclosure documents; no general solicitation.
• Regulation D, Rule 506(c) — general solicitation is allowed, but every purchaser must be accredited and the issuer must take reasonable steps to verify it.
• Regulation S — offers and sales made outside the United States, with no directed selling efforts into the U.S.
• Regulation A — a qualified public offering of up to $75 million, with SEC review and ongoing reporting.
• Regulation Crowdfunding — up to $5 million through a registered intermediary.

Regulation D offerings require a Form D filing with the SEC within 15 days after the first sale. Securities sold under Regulation D are generally restricted, which limits resale and affects when and where tokens can trade.

What could change: the SEC’s proposed Regulation Crypto Assets

On August 18, 2026, the SEC proposed Regulation Crypto Assets, a framework written specifically for token offerings. As proposed, it would add a startup exemption of up to $5 million over four years and a fundraising exemption of up to $75 million in each 12-month period, require principles-based disclosure, preempt state registration for covered offerings, and create a conditional safe harbor under which a crypto asset would no longer be treated as an investment contract once the issuer has completed or permanently ceased its essential managerial efforts.

It is a proposal, not law. Comments are due October 20, 2026, and the final rule may differ. Until then, the Howey test and the existing exemptions above govern.

Beyond federal securities law

• State law — notice filings and, in some cases, state securities requirements.
• Money transmission — some token mechanics can trigger state licensing or federal registration.
• Sanctions and AML — OFAC compliance shapes who can participate and how funds are handled.
• Outside the U.S. — regimes such as the EU’s MiCA have their own white-paper and marketing rules.

Design choices that matter

• How the token is described and marketed.
• Whether its value depends on the team’s ongoing efforts.
• Vesting, lockups and distribution mechanics, including airdrops.
• How pre-launch fundraising — SAFEs and token warrants — connects to the later distribution.

Our outlook: tokens are moving inside the system

Our thesis: the future of token offerings runs through the regulated system, not around it.

With the CLARITY Act stalled after a failed 49–50 cloture vote in the Senate on September 15, 2026, the agencies are setting the course, and they are building lanes rather than walls. The market’s plumbing is being rebuilt to carry tokenized assets as well: in December 2025 the DTCC received SEC no-action relief to tokenize securities it holds in custody, with rollout expected in the second half of 2026. Capital is laying the rails first; the rules are following.

What we expect: whatever form the final rule takes, a safe harbor tied to completing essential managerial efforts will reward honest, specific disclosure about what a team will build, and the discipline to build it. Founders who make careful promises and keep them will be well positioned under any version.

At their best, token offerings widen the circle of who can build and who can share in what gets built. That idea deserves protection from the shortcuts that have cost this industry trust. Clarity, disclosure and good faith keep the circle open.

The bottom line

Most token-offering problems start with decisions made before launch, when they are still easy to change. Design in good faith, document what you promise, and you will be ready for whichever framework the SEC adopts.

Crystal V. Venning, Esq.

Founder and Managing Partner, Crypto Law Hub. Admitted in New York, Texas and Georgia. Educated at Yale University and Columbia Law School (J.D.). She advises founders, funds and institutions on digital-asset law, from stablecoins and token offerings to disputes and cross-border launches.