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California’s financial regulator has opposed the SEC’s proposed Regulation Crypto Assets, which would let eligible token issuers raise up to $75 million in any 12-month period, warning that limits on state registration would weaken preventive oversight of crypto offerings, according to DFPI, published October 21, 2026.
The SEC announced the proposal on August 18, 2026. The California Department of Financial Protection and Innovation (DFPI) would keep its powers to pursue fraud after the fact.
The SEC proposal, formally titled Regulation Crypto Assets, outlines two potential exemptions designed to give eligible issuers alternative routes to raise capital.
The commission announced the proposal on August 18, 2026, as part of its broader effort to clarify how federal securities laws apply to digital assets.
Under the first proposed exemption, qualifying issuers could raise up to $5 million over a four-year period. A second route would permit eligible offerings of up to $75 million during any 12-month period.
The proposal is particularly relevant to companies whose token offerings may constitute investment contracts under U.S. securities law.
However, the SEC Crypto Plan does not mean that eligible fundraising would become entirely unregulated. Issuers using either exemption would have to provide narrative disclosures explaining their projects, associated risks and other material information needed by prospective investors.
Companies relying on the larger fundraising exemption would face additional requirements, including financial statements and continuing reporting obligations. Federal antifraud and antimanipulation provisions would also remain applicable.
Even where a company qualifies for a simplified fundraising route, the quality and accuracy of its disclosures remain important considerations.
The proposal therefore seeks to create a more flexible route to capital while maintaining certain investor safeguards. Whether those requirements will provide adequate protection is one of the central questions raised by California’s opposition.
California’s objection is rooted in concerns about the potential consequences of reducing state-level screening of investment offerings.
According to the report, the DFPI believes that restrictions on state registration and qualification requirements could weaken preventive oversight, even if state authorities retain powers to investigate fraud, deceit and unlawful broker or dealer conduct.
The regulator has also highlighted the growing number of crypto-related scams. Its reported figures show that the DFPI added nearly 200 crypto-related schemes to its scam tracker, representing a 30% increase from the previous year.
These concerns are significant because the crypto market includes projects with different levels of transparency, financial backing and operational maturity.
Disclosures can help investors understand an offering, but their usefulness depends on whether the information is complete, accurate and presented clearly enough to support informed decisions.
The dispute does not establish that the SEC proposal will necessarily lead to more fraud. Instead, it reflects a disagreement over whether the proposed exemptions strike the right balance between reducing compliance burdens for issuers and preserving effective investor protection.
The SEC’s announcement describes a regulatory framework under consideration, not a blanket authorization for crypto businesses to disregard existing securities obligations.
The debate surrounding the SEC Crypto Plan extends beyond California and the SEC. Industry participants, including Ripple, Coinbase and Nasdaq, have sought changes to aspects of the proposed framework, although their concerns differ.
According to the report, Ripple has called for trading safeguards, while Coinbase has sought clearer rules governing subsequent token sales.
Nasdaq has emphasized the importance of retaining investor protections for traditional securities, including tokenized stocks and investment funds.
Crypto companies want rules that accommodate new business models, while investors and regulators need safeguards that address risks arising from complex products, limited disclosures and potential conflicts of interest.
The SEC has presented its proposal as an effort to establish clearer pathways for responsible capital formation in the United States. Its wider regulatory work includes clarifying when crypto assets and transactions fall under federal securities laws.
SEC Chairman Paul S. Atkins explained the commission’s position in its official announcement, saying Regulation Crypto Assets seeks to provide crypto asset entrepreneurs and market participants with clear pathways to raise capital under the federal securities laws.
The proposed framework also includes a conditional safe harbor that could allow certain crypto assets to fall outside the definition of an investment contract once specified conditions are satisfied.
This provision is intended to address circumstances in which an issuer has completed or permanently ceased the essential managerial efforts it previously promised to undertake.
Investors should follow developments in the rulemaking process, examine project disclosures carefully and avoid treating regulatory exemptions as endorsements of a project’s financial soundness.
A company’s ability to raise funds under a particular exemption does not guarantee that its token will appreciate or that the business will succeed.
The SEC Crypto Plan also raises questions about how federal and state regulators will coordinate their oversight if the proposal advances. The final balance between fundraising flexibility and preventive supervision could shape how crypto businesses approach U.S. markets and how investors evaluate new offerings.
California’s opposition demonstrates that regulatory clarity and investor protection remain contested priorities in the evolution of U.S. crypto policy.
The eventual framework will be important not only for issuers seeking capital, but also for investors deciding whether a project’s legal disclosures and risk profile justify their exposure.
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