SEC draft allows immediate token sales; Senate bill sets lockups

The SEC’s draft Regulation Crypto Assets would let most tokens be traded as soon as a buyer acquires them, unless an issuer or another law restricts transfers. The draft frames disclosure of insider holdings and related risks as the principal investor protection and asks for public comment on whether a one-year holding requirement should be imposed before final rulemaking.

Under the SEC fundraising framework, Tier 1 offerings can raise up to $20 million with affiliates allowed to sell up to $6 million. Tier 2 offerings can raise up to $75 million with affiliates allowed up to $22.5 million. A separate cap limits insider sales during an issuer’s first year of offerings to 30% of the aggregate offering price. The draft does not include a mandatory time-based lockup for insiders.

The Senate’s July 22 CLARITY draft would impose time-based restrictions on insiders. It would require insiders to hold covered tokens for at least 12 months before a network is certified free of coordinated control and bar sales for an additional six months after certification. The bill would also cap how much an insider may sell in any 12-month period, with the SEC given authority to set that numerical limit.

The proposals use different definitions of insiders. The SEC applies a broad related-person disclosure framework that covers founders, employees, officers, directors, consultants, certain family members and affiliates. The Senate draft narrows coverage by using ownership and control thresholds-examples include founders holding a specified minimum of a project’s ancillary asset or holders controlling a defined percentage-and excludes decentralized governance systems from the related-person test.

The SEC’s draft cites research that token offerings often perform better when vesting or lockup terms exist and notes insiders can have an information advantage while a project is still being built. At the same time, the draft highlights that allowing quicker insider exits may encourage investment and capital movement. The proposal favors disclosure and sale caps over mandatory time locks but requests comment on a possible one-year holding rule.

Which approach becomes law remains unresolved. The SEC’s comment period could result in a longer holding requirement in the final rule, or Congress could pass CLARITY first. If neither occurs, market practice may split: some projects may adopt voluntary lockups, while others could raise funds without time-based restrictions and buyers would price the risk of early insider sales.

Neither the SEC draft nor the Senate bill is law. The provisions apply mainly to early-stage token projects with an active issuer or development team; established assets without an issuer, such as Bitcoin, fall largely outside the main focus of these proposals.