California’s Department of Financial Protection and Innovation has formally opposed the Securities and Exchange Commission’s proposed Regulation Crypto Assets, arguing that new federal exemptions for certain crypto securities offerings would strip state regulators of pre-sale screening powers. In a comment letter filed by the October 20, 2026 deadline, officials said the SEC plan would undercut investor safeguards by treating many digital asset offers and sales as covered securities, preempting state registration and qualification requirements known as blue-sky laws.
The SEC released the proposal in August 2026 amid stalled congressional action on broader digital asset legislation such as the CLARITY Act. It would create two pathways exempting qualifying issuers from full registration under the Securities Act of 1933: a startup exemption for up to $5 million over four years, and a tiered fundraising exemption modeled partly on Regulation A with a ceiling of $75 million in any 12-month period and a lower tier of $20 million. Issuers would still face principles-based disclosure obligations and antifraud or antimanipulation rules, and the package includes a conditional safe harbor for when an asset may no longer be considered an investment contract.
California’s central objection targets Proposed Rule 500, which would redefine qualified purchaser under Section 18(b)(3) of the Securities Act. State officials say the practical effect would be federal preemption of state merit review, leaving states only antifraud authority and the ability to require notice filings. California argues this exceeds the authority granted by the National Securities Markets Improvement Act of 1996, which contemplated preemption mainly for financially sophisticated investors rather than ordinary retail buyers in complex digital asset deals. DFPI also pointed to high crypto-related losses, citing FBI Internet Crime Complaint Center data showing a record $11.3 billion in 2025 and a roughly 30 percent year-over-year increase in entries on its Crypto Scam Tracker.
Separately, the Commodity Futures Trading Commission is moving ahead with a voluntary registration framework for cryptocurrency exchanges after the CLARITY Act stalled in the Senate on September 15, 2026, with a 50–49 vote short of the required 60-vote threshold. The CFTC published a request for comment on October 13, 2026, introducing the Cryptoasset Transaction Rules (CTX) and Cryptoasset Market Rules (CAM) for leveraged digital asset transactions offered to retail users. Chairman Mike Selig confirmed the initiative in a Bloomberg TV interview on October 26, saying the goal is to extend traditional derivatives market safeguards to digital exchanges and prevent insolvencies and corporate fraud like the 2022 FTX collapse.
The proposed CTX and CAM frameworks address custody requirements, balance sheet segregation, and conflict-of-interest mitigations. Because the CFTC lacks a statutory mandate to compel registration, participation would be voluntary. The public comment period remains open until December 14, 2026, while the CLARITY Act remains on the Senate’s legislative calendar after earlier House passage in July 2025 and Senate Banking Committee approval in May 2026.
