Cryptocurrency Securities Exemptions Explained: Federal and State Pathways

Trying to launch a token or raise money with an NFT can feel like walking a legal minefield. The good news is that the U.S. regulatory system already carved out a handful of clear shortcuts-called cryptocurrency securities exemptions-that let projects move forward without a full securities registration. This guide walks you through the main federal routes, the newest SEC ideas, state‑level options, and the practical steps you need to take before you hit “publish.”

Why the Howey Test Still Rules the Roost

At the heart of every exemption is the Supreme Court’s Howey Test is a four‑part analysis that asks whether a transaction involves an investment of money in a common enterprise with an expectation of profit derived from the efforts of others. If a crypto arrangement ticks all four boxes, the SEC treats it as a security and the full registration regime kicks in. Understanding the Howey Test helps you decide whether you need an exemption at all.

Federal Registration Exemptions You Can Use Today

Three well‑established SEC pathways let token issuers sidestep a full registration filing. Below is a quick snapshot of each, followed by a deeper dive.

Regulation D lets you pitch a token to accredited investors without filing a Form S‑1. You still need a private placement memorandum and must verify each investor’s accredited status. The exemption is popular because it keeps disclosure costs low while giving sophisticated backers legal certainty.

Regulation S is the go‑to for projects that are purely overseas. The key rule is that the offering must not be directed at U.S. persons-no marketing on English‑language crypto forums that have a sizable U.S. readership, for example. If you keep the sales channel offshore, the SEC generally stays out of the picture.

Regulation A+ bridges the gap between private placements and a full public offering. You file a Form 1‑A, get SEC qualification, and can sell to the broader public, albeit with limits on how much each investor can contribute (up to $10000 for non‑accredited individuals). The process is more involved than Reg D but opens up a larger pool of smaller investors.

The Proof‑of‑Work Mining Exemption emerged from a March2025 SEC staff paper. It says that simply mining a covered crypto asset-like Bitcoin or Ethereum (post‑merge)-does not create a security because there’s no expectation of profit from another’s managerial effort. However, any profit‑sharing contract that promises a slice of future block rewards re‑triggers the Howey Test, so pooled mining funds still need registration or another exemption.

Emerging SEC ideas: Conditional Exemptive Orders and NFT Carve‑outs

Commissioner Hester Peirce is a longtime SEC commissioner known for advocating flexible crypto regulation hinted at two game‑changing moves in 2025.

• Conditional exemptive order for blockchain‑based securities issuance: In a May8,2025 speech, Peirce said the Crypto Task Force is drafting an order that would let firms use distributed ledger technology to issue, trade, and settle securities, provided they meet market‑integrity safeguards. If approved, platforms could run their own tokenized secondary markets without seeking separate broker‑dealer registration.
• Potential NFT exemption: On March21,2025, Peirce suggested the SEC might label certain art‑focused NFTs as non‑securities, allowing creators to raise funds via NFT sales without a registration filing. The exemption would likely be limited to purely artistic works that don’t convey profit‑sharing rights.

These proposals are not final yet, but they signal a shift toward more nuanced, use‑case‑specific relief. Keep an eye on SEC press releases throughout 2025; the final rules could be the missing piece for many token projects.

Office of Government Ethics (OGE) Rules for Federal Employees

Even if you’re not a federal employee, the OGE’s definition of a “covered security” matters for anyone dealing with government contracts or public‑sector investors. According to OGE Legal Advisory LA‑24‑02 (Jan31,2024), Bitcoin exchange‑traded product (ETP) shares are classified as “Excepted Investment Funds” rather than covered securities. That means they’re excluded from the public‑official‑holding exemption under 5C.F.R.§2640.202. In plain language, a federal employee can hold Bitcoin ETP shares without breaching ethics rules, but they can’t count those holdings toward the standard securities exemption that applies to common stock or corporate bonds.

State‑Level Exemptions: The Louisiana Model and Beyond

States have started writing their own playbooks. Louisiana’s Virtual Currency Business Act is a statute that requires licensing for most crypto‑related businesses, but also lists specific exemptions. Key take‑aways:

• Businesses already regulated under the Electronic Fund Transfer Act, the Securities Exchange Act of 1934, or the Commodities Exchange Act are exempt.
• Licensed financial institutions, attorneys offering escrow services, and individuals using crypto for personal or academic purposes don’t need a separate crypto license.
• Operations with projected annual volume under $35,000 (U.S. dollar equivalent) are automatically exempt under §6:1389.

Other states-like Wyoming and Texas-have broader “crypto‑friendly” statutes, but the core idea is the same: if your activity fits a pre‑existing federal exemption, you often won’t need a state license. However, always double‑check the latest state bulletin because definitions can shift year‑to‑year.

Practical Steps: How to Determine the Right Exemption

1. Map the token’s economics. List who contributes capital, who runs the network, and what profit‑sharing rights (if any) exist.
2. Apply the Howey Test. If any element fails, you likely have a security and need an exemption.
3. Match the economics to an exemption.‑
   • Pure mining without profit‑sharing → Proof‑of‑Work Mining Exemption.
   • Accredited investors only → Regulation D.
   • Non‑U.S. investors → Regulation S.
   • Public‑facing sale under $75M → Regulation A+.
4. Check for emerging orders. If your project fits the criteria for the pending blockchain‑based exemptive order, you can start building a compliance framework now (e.g., audit trails, anti‑manipulation policies).
5. Confirm state licensing. Look up the relevant state’s virtual‑currency statutes; many will defer to federal exemptions.
6. Prepare disclosure documents. Even exempt offerings need accurate, honest offering memoranda, especially under Reg D and Reg A+.
7. Engage counsel. A qualified securities attorney can confirm that your facts fit the exemption and help you file the necessary forms.

Enforcement History: What the SEC Has Punished

The SEC’s enforcement trail reads like a cautionary tale. A few landmark cases illustrate why cutting corners is risky:

• The DAO Report (2017) - The SEC declared DAO tokens to be securities, launching the first crypto‑focused enforcement wave.
• Telegram’s Gram (2019) - The agency halted a $1.7billion token sale, citing a failure to register under the Securities Act.
• BlockFi Settlement (2022) - A $100million penalty for offering “interest‑bearing” crypto products that the SEC deemed securities.
• Ripple Labs Lawsuit (2023‑2024) - Ongoing litigation over whether XRP is a security; the case underscores that even well‑known tokens can be scrutinized.

These actions show that the SEC will pursue unregistered offerings aggressively, but they also highlight the importance of a solid exemption strategy.

Quick Reference Checklist

• Identify investor pool (accredited, non‑U.S., general public).
• Determine capital amount and whether you stay within exemption caps.
• Confirm that token economics don’t create an investment contract (Howey Test).
• Select appropriate exemption (RegD, RegS, RegA+, PoW mining).
• Prepare required disclosure documents (offering memorandum, Form 1‑A, Form D).
• Verify state licensing requirements based on activity size and jurisdiction.
• Monitor SEC announcements for new conditional exemptive orders or NFT carve‑outs.

Frequently Asked Questions

Do I need to register a token if I only sell to friends?

If the friends are all accredited investors and you file a Form D, you can rely on RegulationD. Without accreditation, you’d need RegulationS (if they’re non‑U.S.) or a RegulationA+ filing for a broader public offering.

Can I mine Bitcoin and also sell a token tied to the mining revenue?

Pure mining is exempt, but a token promising a share of future mining profits creates a profit‑sharing contract. That triggers the Howey Test, so you’d need an exemption or registration.

What’s the difference between a RegulationA+ offering and a RegulationD private placement?

RegA+ allows you to raise up to $75million from the general public after SEC qualification, while RegD is limited to accredited investors and requires no public solicitation. RegA+ also imposes ongoing reporting requirements.

Will the pending SEC exemptive order let my DEX list tokenized securities without a broker‑dealer license?

The draft order proposes a conditional exemption that would still require market‑integrity safeguards, such as anti‑manipulation monitoring. If approved, compliant DEXs could list tokenized securities without separate broker‑dealer registration, but they must meet the SEC’s conditions.

Are NFTs automatically exempt from securities registration?

Not yet. Commissioner Peirce’s comments hint at a possible carve‑out for pure art NFTs, but any NFT that promises revenue sharing, royalties tied to future platform profits, or governance rights may still be a security.