US Tokenization Regulations: SEC Reg D, Reg S, Reg A+ Complete Guide
Tokenization in the United States operates within existing securities law. The technology is new; the legal framework is not. This is actually good news—clear rules mean reduced legal risk.
The SEC's Position on Tokenization
The SEC has been consistent: tokens representing investment contracts are securities. This means:
- Same registration requirements
- Same exemptions available
- Same investor protections
- Same disclosure obligations
The blockchain is just the record-keeping technology. The underlying security remains subject to the Securities Act of 1933 and Securities Exchange Act of 1934.
Primary Exemptions for Tokenized Securities
Regulation D: The Workhorse Exemption
Reg D is the most common path for tokenized private placements.
Rule 506(b): Traditional Private Placement
Best for: Existing investor networks, relationship-based raises
Key Requirements:
- Unlimited raise amount
- Up to 35 non-accredited investors (must be sophisticated)
- Unlimited accredited investors
- No general solicitation (no public marketing)
- Form D filing within 15 days of first sale
Accredited Investor Definition (2024):
- Income: $200K individual / $300K joint for 2 years
- Net worth: $1M+ excluding primary residence
- Professional certifications (Series 7, 65, 82)
- Knowledgeable employees of private funds
- Family offices with $5M+ AUM
Pros:
- No SEC review or approval
- Self-certification of accredited status acceptable
- Most flexible structure
- Lower compliance costs
Cons:
- No public marketing
- Limited to existing networks
- Must have pre-existing relationship
Rule 506(c): Verified Accredited Only
Best for: Public marketing, broader reach, digital fundraising
Key Requirements:
- Unlimited raise amount
- Accredited investors ONLY (verified)
- General solicitation PERMITTED
- Must verify accredited status (not self-certification)
- Form D filing required
Verification Methods (SEC approved):
- Income: Tax returns, W-2s, or third-party verification
- Net Worth: Bank/brokerage statements + credit report
- Professional Letter: CPA, attorney, or broker-dealer letter
- Prior Verification: Re-verify within 90 days
Pros:
- Can market publicly (LinkedIn, ads, content)
- Broader investor reach
- Better for tokenized offerings (digital discovery)
Cons:
- Verification costs ($30-50 per investor)
- Only accredited investors
- Documentation requirements
Regulation S: International Investors
Best for: Non-US investor capital, parallel offerings
Key Requirements:
- Offered and sold outside the United States
- No directed selling efforts in US
- Restrictions on resale to US persons (1 year for equity)
- Compliance with local laws still required
Category 1 (Non-US Company, No US Interest):
- Simplest compliance
- No distribution compliance period
Category 2 (Reporting Company or Most Equity):
- 40-day distribution compliance period
- No offers/sales to US persons during period
Category 3 (Non-Reporting US Company):
- 1-year distribution compliance period
- Strictest requirements
Practical Application:
US Investors → Reg D 506(c) → US Issuing Entity
↘
Asset
↗
Non-US Investors → Reg S → Same or Parallel Entity
Regulation A+: Mini-IPO
Best for: Retail investors, larger raises, liquidity planning
Tier 1: Up to $20M
- Up to $20M in 12 months
- State registration required (each state)
- No ongoing SEC reporting
- No investor limits
Tier 2: Up to $75M
- Up to $75M in 12 months
- State registration preempted (federal only)
- Annual, semi-annual, and current reporting required
- Non-accredited investor limits: 10% of income or net worth
Reg A+ for Tokenization:
Several tokenized offerings have used Reg A+:
- Public marketing allowed
- Retail investors can participate
- Path to secondary trading
- SEC qualification required (6-12 months)
Costs: $100K-500K+ for qualification
Regulation CF: Crowdfunding
Best for: Community raises, smaller amounts
- Up to $5M in 12 months
- Through registered funding portal
- All investors can participate
- Investment limits based on income/net worth
- Required disclosures (Form C)
Tokenization Note: Few platforms support tokenized Reg CF currently.
Comparison: Which Exemption?
| Factor | 506(b) | 506(c) | Reg S | Reg A+ | Reg CF |
|---|---|---|---|---|---|
| Max Raise | Unlimited | Unlimited | Unlimited | $75M | $5M |
| Retail Investors | 35 max | No | Varies | Yes | Yes |
| Public Marketing | No | Yes | Outside US | Yes | Yes |
| SEC Approval | No | No | No | Yes | Via Portal |
| Timeline | Immediate | Immediate | Immediate | 6-12 mo | 2-4 weeks |
| Cost | $15-50K | $20-60K | $20-50K | $100-500K | $10-50K |
| Ongoing Reporting | Form D only | Form D only | Varies | Required | Required |
State Securities Laws (Blue Sky)
Federal Preemption
506(b), 506(c), and Reg A+ Tier 2 are federally preempted—states cannot block the offering.
However, states can require:
- Notice filings
- Filing fees ($150-500 per state)
- Agent registration
Practical Approach
Most tokenized offerings:
- File Form D federally
- File state notice in investor states
- Use registered agents for compliance
Secondary Trading Considerations
Rule 144: Resale Restrictions
Securities sold via Reg D have a holding period:
- Reporting Issuers: 6 months
- Non-Reporting Issuers: 12 months
After holding period:
- Accredited buyers: Generally free to trade
- Public resale: Requires registration or exemption
ATS (Alternative Trading Systems)
For tokenized securities to trade:
- Must use SEC-registered ATS
- Several now support security tokens (tZERO, INX, etc.)
- Broker-dealer involvement required
Future: Potential SEC Rule Changes
The SEC has signaled potential modernization:
- Expanded accredited investor definition
- Possible Reg D+ with limited public resale
- Harmonization of exemptions
Compliance Infrastructure
What You Need for US Tokenized Offering
- Legal Counsel: Securities attorney (essential)
- PPM (Private Placement Memorandum): Disclosure document
- Subscription Agreement: Investment terms
- Operating Agreement/Bylaws: Entity governance
- KYC/AML Provider: Identity verification
- Accreditation Verification: For 506(c)
- Transfer Agent: Token transfer records
- Form D Filing: SEC and state notices
Timeline: Reg D 506(c) Tokenized Offering
| Week | Activity |
|---|---|
| 1-2 | Entity formation, legal engagement |
| 2-4 | PPM drafting, structure finalization |
| 3-4 | Platform setup, smart contract review |
| 4-5 | Legal review, compliance integration |
| 5-6 | Soft launch, initial investors |
| 6+ | Public marketing, ongoing compliance |
Common Mistakes to Avoid
1. General Solicitation Under 506(b)
If you're using 506(b), no public marketing. This includes:
- Social media posts about the offering
- Website "invest now" buttons
- Conference presentations about investment opportunity
Solution: Use 506(c) if you want to market publicly.
2. Inadequate Accreditation Verification
For 506(c), self-certification is not sufficient. You must:
- Collect documentation, OR
- Use third-party verification service
Solution: Use automated verification (Parallel Markets, VerifyInvestor, etc.)
3. Missing State Filings
Even with federal preemption, states require notice.
Solution: File in all investor states within required timeframes.
4. Integration of Offerings
Multiple offerings can be "integrated" (combined) if:
- Same class of securities
- Same general purpose
- Close in time
Solution: Structure as distinct offerings with clear separation.
Working With Asset Haus
Our US offerings include:
- Legal Network: Securities attorneys in 20+ states
- Compliance Platform: Integrated KYC/AML, accreditation
- Form D Filing: Handled automatically
- State Filings: Multi-state notice filing
- Ongoing Support: Cap table, distributions, reporting
Ready to launch a compliant tokenized offering in the US? Book a consultation to discuss your structure.