SEC Staff Offers Crypto Disclosure Guidelines

On April 10, 2025, the SEC's Division of Corporation Finance issued a nonbinding statement explaining the general application of existing disclosure requirements under the federal securities laws to crypto asset offerings, and provided example disclosures under certain requirements. The statement provided the following guidance concerning disclosures in crypto asset offering documents.

Description of Business. Regarding material information about the business, blockchain companies may include current or proposed business plans and the purpose of the applicable blockchain network or application and its operations. The staff stated that disclosures should generally avoid technical jargon and descriptions of crypto technologies immaterial to the business and should be consistent with other public disclosures, such as technical white papers.

Risk Factors. Blockchain-related business risk disclosure may relate to planned operations, cybersecurity, and reliance on another network or application. Risks relating to the crypto asset may include its form, price volatility, rights, valuation, liquidity, supply, and custody. Regulatory risks may include those regarding money transmission laws or federal or registration requirements with other federal or state regulators.

Description of Securities. Descriptions of the crypto asset should include its terms, rights, and specific characteristics.For example, disclosure of the rights, obligations, and preferences may include voting rights, dividend entitlements, network effects, transferability, and how these rights are memorialized. Technical specifications may include information on the blockchain technology used and its relation to alteration of rights, wallets and keys, transaction fees, asset divisibility, and whether such technology has been subject to third-party audit. Risk disclosure may also relate to the total supply of crypto tokens and how supply is controlled or maintained, as well as any contemplated arrangements with market makers.

Directors, Executive Officers, and Significant Employees. Disclosure regarding a third party performing critical functions may be included even if not a director, officer, or employee of the issuer. For example, directors and officers of a spot crypto exchange's sponsor may perform functions similar to directors and officers of the exchange itself. Disclosure related to such a third party may be included, as well as any fees paid to such third parties.

Financial Statements. Issuers may contact the SEC with specific questions on financial statement requirements, especially those regarding unusual, complex, or innovative transactions.

Exhibits. If the rights, preferences and obligations of holders of subject securities are memorialized in smart contracts or otherwise contained in code, the issuer may file the code of the smart contract as an exhibit.

The Division emphasized that its statement does not address all material disclosure items, and that each issuer should consider its own facts and circumstances when preparing disclosures.