Exempt Token Sales | Reg D + Reg S

As a general rule, all securities offered or sold in the U.S. (including tokens treated as securities under US law) must be registered with the SEC, unless the offering falls under one of the available exemptions from registration.  Different exemptions offer different advantages and impose different restrictions. The most commonly used exemptions from registration with the SEC in the US utilized by blockchain projects are known as Regulation D (sale to accredited investors only) and Regulation S (sale to non-US investors with no directed selling efforts in the US).

Our team of attorneys have guided blockchain projects through exempt token sales under both Regulation D and Regulation S frameworks in a variety of industries.

Requirements for Exemption Under Regulation D

U.S law generally requires securities (including virtual tokens that qualify as securities) to be registered with the government before they can be offered or sold. Regulation D provides two major exemptions from registration for some offerings.

Under Rule 504 of Regulation D, a company can offer and sell its virtual tokens to an unlimited number of investors, but the offering is limited to only $5 million during any 12-month period.

In comparison, under Rule 506, a company can offer and sell an unlimited amount of its virtual tokens. Rule 506(b) permits sales to up to 35 purchasers who do not qualify as accredited investors, but prohibits general solicitation. Rule 506(c) requires that all purchasers qualify as accredited investors, but permits general solicitation.

Regardless of which rule is used to exempt an offer of virtual tokens under Regulation D, the tokens will be subject to transfer restrictions. In general, those restrictions prohibit the tokens from being resold or transferred for at least one year after purchase.

Guidance for Token Sales Under Reg D

KSTechLaw provides comprehensive legal guidance and practical solutions throughout a Regulation D offering of virtual tokens.

Our services include:

  • Carefully reviewing our clients’ circumstances and advising them on the optimal registration exemption for their token sales, whether under Regulation D or not
  • Drafting detailed private placement memorandum that clearly describe the virtual tokens and contain all necessary disclosures and disclaimers
  • Advising clients on verification of the identifying information provided by prospective purchasers and determining purchasers’ eligibility to participate in a token sale
  • Preparing and filing Form D to notify the SEC of the offering under Regulation D
  • Structuring a simultaneous offering outside of the United States under Regulation S, if necessary

Requirements for Exemption Under Reg S

In addition to exemption from registration under Regulation D, the US securities laws also provide a framework for issuing securities exempt from registration with the SEC under Regulation S.

Specifically, Rule 903 of Regulation S provides an exemption when an offer or sale is made in an offshore transaction, and no directed selling efforts are made in the United States. An offshore transaction is generally one in which the offer is not made to a person in the U.S, and the buy order originates when the buyer is outside the United States.

Fortunately, although Rule 903 prohibits directed efforts in the United States, an international offering under Regulation S can be coupled with a U.S offering exempt from registration under Regulation D.

Guidance for Token Sales Under Reg S

KSTechLaw provides comprehensive legal services throughout an offering under Regulation S.

Our services include:

  • Reviewing our clients’ planned token sales and advising them on applicable U.S. laws, including qualifying offshore transactions for the Regulation S exemption
  • Drafting detailed offering memorandum and purchase agreements to make clear who is eligible to participate and what U.S restrictions apply to the virtual tokens
  • Assisting clients in conducting appropriate Anti-Money Laundering and Know Your Customer screening of prospective purchasers, ensuring that purchasers are who and where they claim to be
  • Structuring a simultaneous offering within the United States under Regulation D or another applicable exemption from registration


Represented B2B / B2C blockchain freelance platform in the process of raising capital through Regulation D and S offerings to U.S and non-U.S investors. We preformed a review and analysis of the white paper and the project, and prepared the private placement memorandum (PPM) and subscription agreements. We also provided guidance regarding the process of investor accreditation as well as AML/KYC checks, and filing Form D with the SEC

Represented a blockchain based gaming platform in connection with structuring Regulation D and S offerings. We provided a full review of the project, and drafted a private placement memorandum and purchase agreement to launch the sale. We provided guidance through the process of verifying U.S accredited investors and completing KYC/AML checks, as well as filing form D with the SEC

Represented a decentralized crypto exchange platform and advised the company regarding the process of raising capital in the U.S through SEC Regulation A+ and D offerings. We provided assistance on obtaining money transmitting licenses in all 50 states, and prepared all necessary offering documents to launch token sale in the U.S.

Advised a real estate development blockchain startup from UAE regarding a pre-ICO sale in the U.S and compliance with SEC rules and regulations

Represented a blockchain-based marine navigation service with AI capabilities in the process of raising capital via a TGE from U.S and non-U.S investors through Regulation D and S offerings. We preformed a review and an analysis of the white paper and the project, and prepared of all necessary documentation for the launch of the TGE. We provided guidance regarding the process of investor accreditation and AML/KYC checks

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