SEC and CFTC Declare Most Crypto Assets Are Not Securities in Joint Guidance
The question that has hung over the U.S. crypto industry for more than a decade, which tokens are securities, got its clearest official answer yet on Tuesday. The Securities and Exchange Commission issued a formal interpretation on March 17 setting out how federal securities laws apply to crypto assets, and the Commodity Futures Trading Commission joined it. The central message, in the words of SEC Chairman Paul Atkins, is that “most crypto assets are not themselves securities.”
The 68-page document, described by The Block, sorts tokens into five categories, explains when a token sold as part of an investment scheme becomes subject to securities rules and when it stops being subject to them, and addresses mining, staking, airdrops and wrapped tokens.
Five categories of crypto assets
According to the SEC’s press release, the interpretation sets out a token taxonomy covering digital commodities, digital collectibles, digital tools, stablecoins and digital securities.
Digital commodities are tokens whose value comes from the programmatic operation of a functioning blockchain network and from supply and demand, rather than from the managerial efforts of a company. The examples named in the interpretation include bitcoin, ether, Solana, XRP, Cardano, Dogecoin, Chainlink and Litecoin.
Digital collectibles cover items such as artwork, in-game items and internet memes, a group that includes meme coins and well-known NFT collections. Digital tools are tokens that perform a practical function, such as memberships, tickets or credentials. Neither category is treated as a security.
Stablecoins are split. Payment stablecoins of the kind covered by last year’s GENIUS Act are generally not securities under the interpretation, while stablecoins that pay yield may be. The fifth category, digital securities, covers traditional financial instruments such as stocks and bonds represented on a blockchain, which remain securities.
On ramps and off ramps
The interpretation does not abandon the Howey test, the 1946 Supreme Court standard the SEC has long used to decide whether something is an investment contract. Instead, it explains how that test applies to tokens.
A token that is not itself a security can still be sold as part of an investment contract if the issuer promises essential managerial work from which buyers expect a profit. In that case the offering must be registered or exempt. Under the interpretation, the token can later separate from that investment contract in one of two ways: the issuer completes the promised work and says so publicly, or it clearly and publicly abandons the effort. Issuers remain liable for earlier unregistered sales and for any misstatements.
The document also says that protocol mining, protocol staking, including liquid staking, and wrapping a non-security token do not involve the offer or sale of securities. Certain airdrops, where recipients give nothing in return, also fall outside the securities laws.
The CFTC signs on
The CFTC’s participation matters because it reduces the risk that a token judged not to be a security by one agency falls into a gap at the other. In the SEC’s release, the CFTC said it and its staff will administer the Commodity Exchange Act consistent with the SEC’s interpretation, and that the two agencies are working toward harmonized regulation.
CFTC Chairman Michael Selig was blunt about the significance. “The wait is over,” he said in the joint announcement.
Atkins said the interpretation would give market participants “a clear understanding” of how the Commission treats crypto assets. Speaking at the DC Blockchain Summit, he added that the SEC is no longer the “securities and everything commission,” according to The Block.
Why it matters for crypto
The guidance is a sharp break from the approach under former SEC Chairman Gary Gensler, whose agency argued that most crypto tokens were securities and brought enforcement actions against several of the industry’s largest companies. For exchanges, token issuers and investors, a written framework from the regulator itself replaces years of case-by-case enforcement and conflicting court rulings.
It also gives the industry something it has not been able to get from Congress. The CLARITY Act, the market structure bill that would write a similar framework into law, passed the House last year but has stalled in the Senate. An interpretation is not a statute, and a future commission could revise it. But until lawmakers act, this document is likely to be the main reference point for how U.S. regulators classify tokens.
There are limits. The interpretation does not change existing law or bind the courts, and many tokens will still require a facts and circumstances analysis, particularly those that do not fit neatly into one of the five categories. Projects that raised money through initial coin offerings or token sale agreements still face registration requirements for those sales.
The guidance arrived as the Federal Reserve opened a two-day policy meeting, and analysts have tied recent crypto price moves more closely to interest rates, oil and geopolitics than to policy news from Washington. How much the interpretation changes market behavior may only become clear as exchanges and token issuers act on it.
For an industry that spent years asking regulators to explain the rules, the SEC and CFTC have now put their answer in writing.