California’s Department of Financial Protection and Innovation (DFPI) submitted a comment letter to the U.S. Securities and Exchange Commission (SEC) opposing the agency’s Regulation Crypto Assets proposal. The DFPI warned that the federal plan could reduce the state’s ability to screen crypto offerings and protect investors.
State Concerns About Oversight
The DFPI argued that the proposal would limit state registration and qualification requirements, potentially removing a layer of preventive screening against risky crypto investments. The department emphasized the importance of maintaining state authority to investigate fraud, deceit, and unlawful broker or dealer conduct under federal securities law.
SEC Proposal Details
The SEC’s framework includes two fundraising exemptions. One allows qualifying issuers to raise up to $5 million over four years under a startup exemption. A separate crypto fundraising exemption would permit raises of up to $75 million within a 12‑month period. Both exemptions require narrative disclosures describing the project, its risks, and other information needed for investor evaluation. The crypto fundraising route also mandates financial statements and ongoing reporting.
The proposal retains federal antifraud provisions and introduces a conditional safe harbor that could remove a crypto asset from investment‑contract classification if specified legal conditions are met.
Industry Response
Several industry participants, including Ripple, Coinbase, and Nasdaq, have expressed support for changes to the SEC proposal. Ripple seeks trading safeguards, Coinbase requests clearer rules for token sales, and Nasdaq emphasizes preserving investor protections for tokenized securities.
State Fraud Monitoring
The DFPI highlighted a 30 % increase in reported crypto‑related scams, adding nearly 200 incidents to its tracker over the past year. Officials warned that the SEC’s approach could set precedents affecting other investment products and indicated plans to explore additional state laws to address market manipulation and deceit.
