Key Takeaways
- • The SEC proposed a Regulation Crypto Assets framework on August 18, 2026, creating a start-up exemption for raises up to $5 million over four years and a two-tier exemption for raises up to $75 million per 12 months, both limited to U.S.-organized issuers.
- • On October 1, 2026, the SEC proposed custody rules allowing investment advisers to self-custody client crypto assets, and adding state trust companies as a permitted crypto custodian, subject to conditions.
- • The SEC's Innovation Exemption of September 17, 2026 created a five-year Tokenized Securities Venue permitting permissioned automated market makers to trade tokenized NMS stocks without exchange or ATS registration.
- • The Form PF compliance date was delayed a fourth time, from October 1, 2026 to July 1, 2027, while a proposal would raise the filing threshold from $150 million to $1 billion in private fund AUM.
- • CME Group's June 18, 2026 lawsuit challenges the CFTC's approval of KalshiEX's bitcoin perpetual futures and seeks to classify perpetuals as swaps; the CFTC moved to dismiss on September 2, 2026.
Summary
Cole-Frieman & Mallon's Q3 2026 update, dated October 8, 2026, catalogs a series of regulatory developments affecting fund managers, with digital assets and private-market access featuring prominently. The firm also noted it will be a Premier Sponsor of the CoinAlts Fund Symposium on October 14, 2026, at the Hyatt Regency in San Francisco, and welcomed partner Malhar Oza, who returned from Finality Capital Partners Management LLC.
On crypto custody, the SEC proposed on October 1, 2026 amendments to the Investment Advisers Act custody rule and new Investment Company Act custody rules. Advisers could self-custody crypto only after determining in writing that no qualified custodian is available, repeating that determination quarterly, and meeting safeguarding, internal control, and reporting requirements. State trust companies would also become permitted custodians, subject to authorization and audited-statement reviews. The firm noted these elements are consistent with positions it advanced in prior SEC submissions in 2017 and 2018. The comment period runs 60 days after Federal Register publication.
The SEC's August 18, 2026 proposal, Regulation Crypto Assets, sets out two Securities Act exemptions for offerings of crypto investment contracts: a start-up exemption for up to $5 million over a rolling four years, and a two-tier exemption for up to $75 million per 12 months. Both require a U.S.-organized issuer whose majority principals are U.S. citizens or residents. The firm flagged that this requirement could exclude non-U.S. managers and offshore-foundation structures, and that state securities law preemption is needed to avoid continued blue sky compliance.
On September 17, 2026, the SEC issued a conditional five-year Innovation Exemption creating a Tokenized Securities Venue. Venues may run permissioned automated market makers in tokenized NMS stocks without national exchange or ATS registration, and proprietary liquidity providers are relieved of dealer registration. Venues must notify the SEC within one business day of publishing notice and may begin trading 30 calendar days later. Order-book platforms do not qualify.
In private funds, the SEC and CFTC on August 31, 2026 delayed the 2024 Form PF amendments to July 1, 2027. A separate proposal would raise the general filing threshold to $1 billion and the large hedge fund adviser threshold to $10 billion; the agencies estimate this would eliminate Form PF obligations for about 43% of current filers. Managers should continue reporting under existing rules. The SEC's July 2026 rulemaking agenda, comprising 38 items, also contemplates accredited investor changes, broader performance fee use, and retail access to private markets through registered funds.
In derivatives, CME Group sued the CFTC on June 18, 2026 in the U.S. District Court for the District of Columbia over approval of KalshiEX's BTCPERP contract, arguing perpetuals should be classified as swaps. The CFTC moved to dismiss on September 2, 2026, arguing CME lacks standing. A ruling for CME could shift margin and clearing to swap-style requirements and affect Section 1256 tax treatment.
On crypto custody, the SEC proposed on October 1, 2026 amendments to the Investment Advisers Act custody rule and new Investment Company Act custody rules. Advisers could self-custody crypto only after determining in writing that no qualified custodian is available, repeating that determination quarterly, and meeting safeguarding, internal control, and reporting requirements. State trust companies would also become permitted custodians, subject to authorization and audited-statement reviews. The firm noted these elements are consistent with positions it advanced in prior SEC submissions in 2017 and 2018. The comment period runs 60 days after Federal Register publication.
The SEC's August 18, 2026 proposal, Regulation Crypto Assets, sets out two Securities Act exemptions for offerings of crypto investment contracts: a start-up exemption for up to $5 million over a rolling four years, and a two-tier exemption for up to $75 million per 12 months. Both require a U.S.-organized issuer whose majority principals are U.S. citizens or residents. The firm flagged that this requirement could exclude non-U.S. managers and offshore-foundation structures, and that state securities law preemption is needed to avoid continued blue sky compliance.
On September 17, 2026, the SEC issued a conditional five-year Innovation Exemption creating a Tokenized Securities Venue. Venues may run permissioned automated market makers in tokenized NMS stocks without national exchange or ATS registration, and proprietary liquidity providers are relieved of dealer registration. Venues must notify the SEC within one business day of publishing notice and may begin trading 30 calendar days later. Order-book platforms do not qualify.
In private funds, the SEC and CFTC on August 31, 2026 delayed the 2024 Form PF amendments to July 1, 2027. A separate proposal would raise the general filing threshold to $1 billion and the large hedge fund adviser threshold to $10 billion; the agencies estimate this would eliminate Form PF obligations for about 43% of current filers. Managers should continue reporting under existing rules. The SEC's July 2026 rulemaking agenda, comprising 38 items, also contemplates accredited investor changes, broader performance fee use, and retail access to private markets through registered funds.
In derivatives, CME Group sued the CFTC on June 18, 2026 in the U.S. District Court for the District of Columbia over approval of KalshiEX's BTCPERP contract, arguing perpetuals should be classified as swaps. The CFTC moved to dismiss on September 2, 2026, arguing CME lacks standing. A ruling for CME could shift margin and clearing to swap-style requirements and affect Section 1256 tax treatment.
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