Galaxy Research: SEC Reg Crypto Could End Token Legal Ambiguity

Under the new framework, issuers could terminate an investment contract by fulfilling promised managerial obligations and filing a transition report with the SEC. Once these requirements are met, the token would no longer be treated as a security, allowing it to trade independently of the original contract. Galaxy Research notes that this process does not require the token to have been sold through the new fundraising routes, making it a viable option for legacy assets that have languished in regulatory limbo for years.

Alex Thorn, Galaxy’s head of firmwide research, emphasizes that while the proposal provides a necessary legal model for a token’s lifecycle, it is not a permanent solution. Because an agency rule can be altered by future commissions, only congressional action can ensure lasting clarity. The SEC estimates that roughly 475 issuers would utilize this safe harbor annually, far outpacing the 130 expected participants for the proposal’s fundraising tracks. Despite the potential benefits, issuers will likely require significant legal support to navigate the filing process, which the agency estimates will take approximately 30 hours per report. Public comments on the framework are open until Oct. 20.