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California objects to SEC crypto exemption plan

California filed a formal objection on October 21 against the $75 million funding exemption in the SEC's crypto plan on the grounds that it would weaken state oversight.
Yatırım Masası2 min read
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Against the draft federal crypto exemption allowing funding of up to $75 million, the California Department of Financial Protection and Innovation (DFPI) submitted an official objection letter to the US Securities and Exchange Commission (SEC) on October 21 on the grounds that it weakens investor protection. The state regulator stated that the exemptions planned at the federal level would restrict states' pre-sale review authority and leave investors unprotected.

What do the SEC's new crypto exemptions cover?

The draft Regulation Crypto Assets, prepared by SEC Chairman Paul Atkins to foster capital formation and attract issuers to the US, grants qualified issuers a venture exemption of up to $5 million within 4 years, and the right to raise capital of up to $75 million per 12-month period through a separate crypto funding exemption. While both pathways require written disclosures detailing project risks, the funding channel requires financial statements and regular reporting. While federal anti-fraud provisions remain in effect, a conditional safe harbor is provided that allows the asset to fall outside the scope of an investment contract once the promised managerial efforts cease.

Why did the state of California object to the regulation?

California officials emphasized that they would not accept an attempt by federal authorities to override state powers and protection mechanisms while stepping back from their own oversight responsibilities. Reporting that with a 30% increase compared to the previous year, nearly 200 new crypto fraud cases were added to the state tracking system, the DFPI opposed the loss of preventive screening tools. On the market side, blockchain payments company Ripple sought transaction protections, crypto exchange Coinbase (Nasdaq: COIN) called for clear rules on secondary token sales, and exchange operator Nasdaq (Nasdaq: NDAQ) demanded changes to the draft by requesting protection for traditional securities, including tokenized stocks and funds.

This content is for information purposes only and does not constitute investment advice.

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This article is a translation of the original Turkish version published by Yatırım Masası. Read the original in Turkish
Prepared by the Yatırım Masası newsroom from current market developments and official data.
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