Maybe the SEC should just exempt everybody

The Securities and Exchange Commission wants to make it easier for crypto-based companies to issue securities and raise capital. This is, apparently, such a dire need that the commission can't wait for Congress to get around to writing a law that would cover this need. They're planning to write their own rules.

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A whole bevy of critics have written letters to the commission explaining why this is a bad idea.

What the commission has proposed is essentially a carve-out for crypto-based firms. It comprises two exemptions that would allow these companies to raise capital without going through the traditional rigamarole every other company has to go through. SEC Chair Paul Atkins has said the exemptions are essential to…something. "The work before us is too important." 

The first question that should pop into your head is, why? What is so essential and important that crypto companies should be allowed to sidestep a process that has been in place for nearly a century? Atkins said he wants to ensure that the U.S. remains "the world's premier destination" for innovation and capital raising. Okay, fine.

How this rule would help that cause is not clear. Crypto companies were on pace to raise about $20 billion in 2026, according to crypto-finance firm Galaxy. That is a small sliver of the overall capital that's gone into businesses this year. IPOs raised $137 billion in the first half of the year alone, according to Generation Impact Global. Secondary offerings raised another $111 billion. Buyout and growth deals in the private equity market in 2025 totaled more than $1 trillion, according to McKinsey. And so on and so on. If all the crypto capital disappeared tomorrow, would anybody even notice?

Not likely. So why is the SEC even bothering with this? The letter that Coinbase wrote in support of the new rules explains it (though it still doesn't explain why the SEC considers it an imperative). "Without higher offering limits, large projects looking to raise capital in excess of the limits would be forced to register their contractual investment contracts on an ill-suited Form S-1 or, as they have done in the past, raise capital privately and/or offshore," the crypto exchange wrote. For good measure, Coinbase implored the SEC to actually raise the limits for the exemptions.

What exactly does that mean? "Contractual investment contracts" here essentially means some form of cryptocurrency (and ideally one Coinbase could list on its exchange). In other words, what these firms want is to be able to raise money by spinning up and selling new crypto tokens. What they don't want to have to do, in an "ill-suited Form S-1," is what every other company trying to raise capital has to do, which is basically just to explain themselves and be transparent.

And you know what? I'm not necessarily against that. I actually am in favor of it. Not the lack of transparency part, but the idea of being able to raise capital dynamically, on a platform that has global reach and can find investors anywhere. That really is an innovation. It is something we should be pursuing as a way to maintain America's capital supremacy.

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The problem I have with this is: why shouldn't everybody be allowed to do this? Why are we talking about this for only crypto companies? And, of course, there is no logical reason why a digital securities offering cannot carry the same amount of disclosure and transparency as the "ill-fitted" S-1. The problem isn't that the S-1 is an ill-fitted format, the problem is that crypto companies don't want to take the time to comply with existing securities laws. That has been the problem since at least 2017, which of course in itself is a message to any prospective investor. Or should be. 

And, look, maybe I'm being a little bit facetious. The infrastructure for what I'm talking about isn't near being in place. But I bet it will be eventually. Tokenized securities are going to be a feature of the capital markets, and once they are really in place people are going to discover there are all kinds of neat things you can do with them. 

Every company should have the option of creating a digital investment contract, administered via a smart contract, represented via a digital token, with all the protections of an SEC-compliant security offering, and maintained and managed on a transparent, on-chain platform. Crypto companies should not be the only ones rescued from the toil of trudging up and down Sand Hill Road with a cup in their hands looking for money.