SEC and CFTC Issue Guidance on the Applicability of Federal Securities Laws to Crypto Assets and Blockchain Activities

Key Points

• A newly issued interpretation from the SEC creates a “token taxonomy” that draws clear lines between the SEC’s and CFTC’s jurisdiction over crypto assets. The CFTC joined the Interpretation and affirmed it will administer the Commodity Exchange Act consistent with the SEC’s Interpretation. 
• The taxonomy establishes five categories of crypto assets: digital commodities, digital collectibles, digital tools, payment stablecoins and digital securities. According to the SEC, only the last category of assets meets the statutory definition of a security.
• The SEC reaffirmed that even if a crypto asset is not a security, it still may be sold subject to an investment contract, which is a security. The SEC offered guidance on how crypto assets can become subject to investment contracts, and in addition, how crypto assets may separate from associated investment contracts.
• The SEC also advised that certain foundational blockchain activities, including protocol mining and staking, do not involve the offer or sale of securities.

Background

On March 17, 2026, the U.S. Securities and Exchange Commission (SEC) issued an Interpretation (the Interpretation) to clarify the application of the federal securities laws to crypto assets. At the same time, the Commodity Futures Trading Commission (CFTC) affirmed it would administer the Commodity Exchange Act (CEA) consistent with the SEC’s Interpretation. The Interpretation represents a turning point in crypto enforcement: it is the clearest and most comprehensive statement by the SEC on its jurisdiction over digital assets. Among other things, the Interpretation: (1) establishes a token taxonomy identifying which types crypto assets are securities and which are not; (2) addresses how non-security crypto assets can become subject to—and separated from—an investment contract; (3) provides clarity on the application of the securities laws to certain fundamental blockchain activities; and (4) provides greater regulatory certainty as to what laws and regulations are applicable to investment managers engaged in crypto asset investment activities.

Token Taxonomy: Which Crypto Assets Are “Securities”

The Interpretation analyzed five types of crypto assets under the Howey test to determine whether the assets meet the definition of “investment contracts” and are therefore securities.¹

• Digital Commodities. A digital commodity is a crypto asset that is “intrinsically linked to and derives its value from the programmatic operation of a crypto system that is functional, as well as supply and demand dynamics.” Digital commodities encompass most assets commonly considered as “crypto,” including Bitcoin, Ether, Solana, Dogecoin and XRP. Because digital commodities do not derive their value from the managerial efforts of others, they are not securities. The Interpretation notes that these assets “could” meet the definition of a “commodity” under the CEA. 
• Digital Collectibles. A digital collectible is a crypto asset that is “designed to be collected and/or used and may represent or convey rights to artwork, music, videos, trading cards, in-game items, or digital representations or references to internet memes, characters, current events, or trends, among other things.” Digital collectibles include memecoins and many NFTs. Because digital collectibles do not derive their value from the managerial efforts of others, they are not securities.
• Digital Tools. A digital tool is a crypto asset that performs a practical function, such as a membership, ticket, credential or identification. Because digital tools derive their value from their functionality, rather than the managerial efforts of others, they are not securities.
• Payment Stablecoins. Payment stablecoins are crypto assets that are designed to maintain a stable value relative to a reference asset, most often the U.S. dollar. “Payment stablecoins” issued by a “permitted payment stablecoin issuer,” as defined under the GENIUS Act, are excluded from the definition of a security by the terms of that statute. The SEC reaffirmed a prior statement from the Division of Corporate Finance that certain “Covered Stablecoins,” as defined in that statement, are not securities.
• Digital Securities. A digital security (often referred to as a “tokenized” security) is a financial instrument enumerated in the definition “security” that is formatted as or represented by a crypto asset. Digital securities are the only category of crypto assets that constitute securities, according to the SEC. The SEC explained, “[a] security is a security regardless of whether it is issued, or otherwise represented, offchain or onchain.” 

How Crypto Assets May Become Subject to—and Separate from—an Investment Contract

According to the Interpretation, while most crypto assets are not securities, non-security crypto assets may still be offered and sold pursuant to investment contracts, which are themselves securities. A non-security crypto asset becomes subject to an investment contract when an issuer offers it by inducing an investment of money in a common enterprise with representations or promises to undertake essential managerial efforts from which a purchaser would reasonably expect to derive profits. The Interpretation offers guidance on factors relevant to assessing the reasonableness of a purchaser’s expectations, including whether representations were conveyed to the purchaser; the source and timing of the representation; the manner in which the representations were disseminated; and the specificity of the representations.

The SEC also advised on when a crypto asset may separate from an investment contract, such that it is no longer subject to the securities laws. According to the SEC, that occurs when a purchaser “could no longer reasonably expect the issuer’s representations or promises to engage in essential managerial efforts to remain connected to the non-security crypto asset.” The SEC highlighted two occasions when that might occur: when the issuer (1) fulfills its representations or promises, or (2) fails to satisfy those representations or promises. A failure may occur through the passage of a sufficiently long period of time without fulfillment, or through an issuer’s public announcement that it will no longer perform the managerial efforts it promised to undertake.

The Application of Securities Laws to Certain Blockchain Activities

The SEC also confirmed that certain categories of on-chain activities do not involve the offer or sale of securities: 

• Protocol mining activities (including mining pools), in which participants contribute computational resources to a blockchain network to validate transactions.
• Protocol staking, in which participants commit (or stake) digital commodities to a blockchain network to validate transactions. 
• “Wrapping” of non-security crypto assets, in which a person deposits a crypto asset with a custodian or cross-chain bridge and receives a wrapped token in exchange (typically native to a different crypto network than the original asset or based on a different token standard). 
• Airdrops, in which an issuer disseminates a crypto asset in exchange for no or nominal consideration.   

What This Means for Market Participants

The Interpretation is the most detailed statement yet by the SEC regarding the classification of crypto assets under the securities laws. For the first time, crypto market participants have a clear framework under which to assess the regulatory implications of their business. The CFTC’s agreement to administer the CEA consistent with the Interpretation is also significant, as the SEC and CFTC in the past have been at odds over the classification of crypto assets and at times have brought parallel enforcement actions relating to the same or similar assets. 

While the SEC has determined that most crypto assets are not securities, the SEC still has a significant role to play. Non-security crypto assets, like many other non-security assets, may be offered and sold in connection with an investment contract. Issuers, investors and other market participants must still consider whether a crypto asset is subject to an investment contract (and therefore subject to the securities laws). 

For many assets, there may be substantial ambiguity as to whether the securities laws apply. Determining when an investment contract has been formed—and when it has been terminated—requires fact-intensive inquiries regarding the nature of the promises made by the issuer and the reasonableness of relying on those promises. In addition, many crypto assets do not lend themselves to easy classification. According to the Interpretation, “[g]iven the variations in crypto assets and the constantly evolving nature of the crypto asset markets, including the underlying technology, there may be crypto assets that do not fall within any of these five categories, as well as crypto assets with hybrid characteristics that may fall within more than one category.” 

New legislation may also impact the classification of crypto assets. The CLARITY Act passed by the House of Representatives on July 17, 2025, for example, proposes a category of digital assets called “investment contract assets,” which are digital commodities that are sold or transferred pursuant to an investment contract. Under the CLARITY Act, investment contract assets would be treated as securities by default and subject to the SEC’s jurisdiction until they are determined to be part of a “mature blockchain system” (i.e., a blockchain system not controlled by any person or group of persons), at which point they become “digital commodities” subject to CFTC jurisdiction. If the CLARITY Act becomes law, determining the precise point of “maturity” will be a fact-intensive inquiry and may prove difficult in practice for specific assets.

Still, while questions remain, the Interpretation will be welcome news to the crypto industry and market participants including, without limitation, crypto investment managers, as it ends years of uncertainty and provides substantial clarity to market participants.

^{1 SEC v. W.J. Howey Co., 328 U.S. 293 (1946) (Howey). The Howey test defines an investment contract as a contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with an expectation of profits derived from the efforts of others.}