“No Longer the Securities and Everything Commission”: SEC and CFTC Issue Landmark Interpretation on Crypto Assets

Client Alert
On March 17, 2026, the Securities and Exchange Commission (the “Commission”), joined by the Commodity Futures Trading Commission (the “CFTC”), issued a comprehensive interpretive release (the “Interpretation”) that provides long-awaited clarity on the application of federal securities laws to crypto assets.¹ The Interpretation formally adopts the position that courts have consistently held: a crypto asset is not itself a security; rather, the transaction is the proper unit of analysis. This affirms what industry participants have long stressed: whether a token sale constitutes an investment contract depends on the promises made by the issuer, not the technological characteristics of the asset. Further, the Interpretation:

• establishes a five-category taxonomy for crypto assets, classifying digital commodities, digital collectibles, and digital tools as non-securities;
• explains how transactions in non-security assets can create investment contracts based on issuer promises, and how those investment contracts can terminate through fulfillment or abandonment;
• confirms that protocol mining, protocol staking, ministerial staking services, staking receipt tokens, one-for-one wrapped tokens, and certain airdrops do not involve securities transactions; and
• aligns SEC and CFTC oversight, with the CFTC confirming it will administer the Commodity Exchange Act consistently with the Interpretation. For market participants, the Interpretation provides the clearest regulatory framework to date for structuring crypto asset offerings, assessing secondary market trading, and understanding when, and how, securities obligations attach to token transactions.

Background

While the Interpretation represents a significant, public recalibration of the Commission’s approach to crypto asset regulation, it does not represent a significant reinterpretation of securities laws.

The Gensler-Era Approach to Tokens and Its Judicial Rejection The Commission has engaged with crypto assets for more than a decade, beginning with the first registration statement for a crypto asset exchange-traded product in 2013. In 2017, the Commission issued The DAO Report, determining that certain crypto assets were offered and sold as investment contracts and therefore securities.² In the years that followed, the Commission applied the Howey test primarily through enforcement actions, an approach critics described as “regulation by enforcement.”

While the Commission prevailed in most of these actions, courts consistently rejected the broader theory that digital assets themselves constitute securities. In case after case, courts emphasized that the transaction, not the token, was the proper unit of analysis. The tokens remained “things”, like gold, silver, or citrus groves, that may be sold as part of investment contracts depending on the circumstances of the transaction.

In SEC v. Telegram Group, Judge Castel explained that “the security in this case is not simply the Gram, which is little more than alphanumeric cryptographic sequence. . . . This case presents a ‘scheme’ to be evaluated under Howey that consists of the full set of contracts, expectations, and understandings centered on the sales and distribution of the Gram.”³ Similarly, in SEC v. Ripple Labs, Judge Torres held that “XRP, as a digital token, is not in and of itself a “contract, transaction[,] or scheme” that embodies the Howey requirements of an investment contract.”⁴ And in SEC v. Coinbase, Judge Failla observed that “the SEC does not appear to contest that tokens, in and of themselves, are not securities. The appropriate question, therefore, is whether transactions in which a particular token is implicated qualify as investment contracts.”⁵

The Interpretation represents a formal acknowledgment of this judicial consensus. Rather than continuing to press theories that courts have declined to adopt, the Commission has aligned its interpretive framework with the transactional analysis that courts have consistently applied. This is not an abandonment of securities regulation over crypto assets—the Interpretation makes clear that investment contracts can and do arise from token sales—but it is a retreat from the more aggressive position that the crypto ecosystem itself transforms tokens into securities.

Building Towards a Common-Sense Understanding

The Interpretation builds upon the January 2026 joint statement on tokenized securities issued by staff from the Division of Corporation Finance, the Division of Investment Management, and the Division of Trading and Markets.⁶ That statement emphasized that regulatory treatment turns on economic substance rather than technical form, and that structuring choices can affect how securities laws apply, themes that carry through to the Interpretation’s treatment of native crypto assets.⁷

Where the tokenized securities statement addressed assets that represent traditional securities in digital form, the Interpretation provides a comprehensive taxonomy for native crypto assets (i.e., those that originate on a blockchain rather than representing tokenized versions of existing instruments) and clarifies when such assets fall within or outside the securities regulatory framework.

The Commission’s Five-Category Classification of Crypto Assets

Overview of Categories

The Commission classifies crypto assets according to their characteristics, uses, and functionality. Three of the categories defined in the Interpretation, digital commodities, digital collectibles, and digital tools, are not considered securities. Stablecoins may or may not be securities, while Digital Securities are, by definition, securities.

The Commission recognizes hybrid features and acknowledges that facts and circumstances may place a given asset across more than one category or outside the five categories altogether.

Digital Commodities⁸

A digital commodity is a crypto asset that derives its value from the programmatic operation of a “functional” crypto system and market supply and demand dynamics, rather than from the expectation of profits from the essential managerial efforts of others. These assets are not securities because they lack the economic characteristics of securities (i.e., they do not generate passive yield, convey rights to future income or profits, or represent an interest in a business enterprise).

Functionality as the Touchstone. The defining characteristic of a digital commodity is its relationship to a functional crypto system. A crypto system is “functional” if the system’s native crypto asset can be used on the system in accordance with the system’s programmatic utility. The digital commodity must be necessary to participate in or use certain aspects of the associated functional crypto system (e.g., to pay transaction fees, participate in consensus mechanisms, or interact with system features), and its use is often essential for the operation and maintenance of the system’s infrastructure.

Importantly, a functional crypto system, as described in the Interpretation, does not have a central party that oversees participation or distributes rewards to users. Instead, the system incorporates programmatic economic mechanisms that reward voluntary cooperation and coordination among users. This characteristic distinguishes functional crypto systems from traditional managed enterprises and reinforces the conclusion that rewards are protocol outputs rather than profits derived from managerial efforts. However, the Interpretation does not fully explain how the absence of a “central party” relates to either the “functionality” requirement or the separate “decentralization” definition discussed below.

Technical and Governance Rights. Digital commodities typically convey certain technical rights, such as the ability to participate in the system’s consensus mechanism by staking the native digital commodity. They may also convey governance rights, allowing holders to vote on matters such as software upgrades and treasury expenditures. Importantly, the Interpretation confirms that such “governance tokens” remain digital commodities notwithstanding these participation rights; the existence of governance features does not transform a digital commodity into a security. These participation rights are viewed as integral to the decentralized nature and security of the system, rather than as economic rights akin to those found in securities.

Decentralization: Open Questions. The Interpretation states that a digital commodity “may” be native to a crypto system that is “decentralized,” which the Commission defines as a crypto system that “functions and operates autonomously with no person, entity, or group of persons or entities having operational, economic, or voting control of the crypto system.” Notably, the Interpretation does not elaborate on the relationship, if any, between decentralization and the key attributes of a digital commodity, namely, deriving value from the operation of a functional crypto system and supply and demand dynamics. The Interpretation also does not explain how this definition of decentralization interacts with the subjective, issuer-defined standards for “separation” from investment contract status discussed elsewhere in the release.⁹ These ambiguities are particularly notable given that many of the assets on the Commission’s list of digital commodities have identifiable development teams, foundations, or governance structures that may exercise some degree of influence over the associated system. We expect these open questions to generate significant discussion among practitioners.

Digital Collectibles

Digital collectibles parallel physical collectibles. This category would include many non-fungible tokens (NFTs), which are non-interchangeable crypto assets with unique digital identifiers. Under the Interpretation, 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. Critically, a digital collectible does not have intrinsic economic properties or rights, such as generating a passive yield or conveying rights to future income, profits, or assets of a business enterprise or other entity, promisor, or obligor. Digital collectibles may embed limited licenses or royalties, and their value may reflect subject matter, scarcity, or creator reputation. As with tangible art, a collectible can be sold or even increase in price without invoking the securities laws. However, the offer and sale of a single collectible with fractional ownership interests or that relies on a manager’s efforts to produce profit may constitute an investment contract, even if the underlying collectible remains a non-security.

Digital Tools

Digital tools are crypto assets that serve practical functions, such as membership access, event tickets, credentials, or ID badges, and often are non-transferable by design. A digital tool, as defined in the Interpretation, is not an investment contract because it is acquired for its utility, and does not convey any interest in a business enterprise. Even if the developer of a digital tool may impact the tool’s value, absent explicit promises to undertake essential managerial efforts to produce profit, a digital tool does not have the economic characteristics of a security.

Stablecoins

Congress created a comprehensive framework for “payment stablecoins” in the Guiding and Establishing National Innovation for US Stablecoins Act (the “GENIUS Act”). The GENIUS Act defines a “payment stablecoin” as a digital asset that is, or is designed to be, used as a means of payment or settlement, and the issuer of which generally is obligated to convert, redeem, or repurchase the digital asset for a fixed amount of monetary value, and represents that it will maintain a stable value relative to a fixed amount of monetary value. The Commission confirms that payment stablecoins issued by a “permitted payment stablecoin issuer” will be excluded from the definition of “security” by statute when the GENIUS Act becomes effective. A “permitted payment stablecoin issuer” is defined as a person formed in the United States that is: (1) a subsidiary of an insured depository institution that has been approved to issue payment stablecoins under section 5 of the GENIUS Act; (2) a Federal qualified payment stablecoin issuer; or (3) a State qualified payment stablecoin issuer. Notably, a permitted payment stablecoin issuer is prohibited from paying any form of interest or yield to stablecoin holders solely in connection with holding, using, or retaining the payment stablecoin. In the interim before the GENIUS Act becomes effective, stablecoins that are considered “Covered Stablecoins” pursuant to the April 2025 “Staff Statement on Stablecoins” are not securities. Covered Stablecoins are stablecoins that: (i) are designed to maintain a stable value relative to the US dollar on a one-for-one basis; (ii) are backed by reserves consisting of US dollars and/or certain low-risk, liquid assets; (iii) are redeemable for US dollars at par on a one-for-one basis; and (iv) do not offer or provide any interest, profit, or yield to holders. Stablecoins that do not fit squarely within those parameters remain subject to facts-and-circumstances analysis under the Howey test.

Digital Securities

A digital security, also known as a “tokenized” security, is an enumerated financial instrument that remains a security regardless of the fact that the instrument is represented by a crypto asset. Onchain representation does not displace the economic characteristics of stock, notes, or other enumerated instruments. Tokenization models vary, and the rights conveyed by digital securities may diverge from traditional certificates; however, instruments with economic characteristics of a security are considered securities, regardless of whether they are issued onchain or offchain.

Investment Contracts: When Promises Create, and Cease to Create, Securities Transactions

The Transaction, Not the Token

Consistent with the case law discussed above, the Interpretation confirms that a crypto asset is not itself an investment contract: the token remains a “thing.” Rather, an investment contract arises from the transaction, scheme, or set of promises surrounding the sale of the asset. A non-security crypto asset becomes subject to an investment contract when an issuer induces an investment of money in a common enterprise through representations or promises to undertake essential managerial efforts from which purchasers would reasonably expect profits.

The Role of Issuer Promises

Whether an expectation of profits is reasonable depends on a facts-and-circumstances analysis, with particular emphasis on:

• Timing: Only representations conveyed before or at the time of sale can shape a purchaser’s reasonable expectations. Post-sale statements cannot retroactively convert a completed sale into an investment contract.
• Source: Representations by third parties generally do not give rise to reasonable profit expectations. However, the Commission recognizes that where an issuer and a third party collude to convey representations or promises, purchasers may reasonably expect profits based on those communications. This “collusion” concept could capture activities by foundations that support a crypto asset or system, even where the labs entity is nominally separate from the issuer/foundation. The collusion analysis raises important questions about how it interacts with the Interpretation’s treatment of decentralization: if a crypto system is genuinely “decentralized” under the Interpretation’s definition (such that no person or entity has control), can ecosystem participants’ promises still create investment contracts through collusion?
• Medium: The Interpretation identifies specific channels through which issuer representations may be conveyed, including written or oral agreements, public communications through established patterns (such as the issuer’s website or official social media accounts), direct private communications, regulatory filings, and documents clearly attributable to the issuer (such as whitepapers). Representations made outside these channels are less likely to create reasonable profit expectations.
• Specificity: The more explicit and detailed the representation, the more likely the Howey test’s reasonable expectations prong is satisfied. This is particularly true where detailed business plans are shared, including information on timelines, personnel, funding sources, and paths to profit.

The “Vague Promises” Standard

Significantly, the Interpretation states that “representations or promises that are vague or contain no semblance of an actionable business plan, such as those lacking milestones, funding, or other plans for needed resources, likely would not create reasonable expectations of profit.” This creates an inverse Howey carve-out: absent specific, actionable commitments, no investment contract may form at all.

This standard raises significant open questions. The Consensys complaint,¹⁰ filed under the prior administration, alleged that founder tweets, blog posts about fundraising, statements about token burns, and general ecosystem development plans constituted sufficient “promises” to create securities status. Under the Interpretation’s framework, it is unclear whether such representations would satisfy the “actionable business plan” standard. What level of specificity is required? Is a whitepaper describing technical architecture enough, or must it include specific timelines and funding allocations? These questions will likely be the subject of future litigation.

Termination of the Investment Contract

An investment contract does not last forever. SEC Chairman Paul Atkins reiterated this point in a statement acknowledging “the reality that investment contracts can come to an end.” The Interpretation provides that an investment contract ends when:

• The issuer fulfills the essential managerial efforts it promised; or
• Circumstances make it unreasonable to expect the issuer to perform those efforts, including express abandonment of the project.

Critically, whether an issuer has fulfilled its promises is measured against the issuer’s own definitions, not any objective market standard. The Interpretation explicitly provides that if an issuer promises to achieve “decentralization,” whether it has done so “would be based on how the issuer defined or otherwise described decentralization, not a general market conception of what constitutes decentralization.” The same applies to “functionality” or any other milestone. This issuer-defined approach to separation allows sophisticated issuers to define their milestones narrowly and achievably.

Secondary Market Transactions

When a non-security crypto asset is resold on the secondary market, it does not by default carry the terms of any investment contract from its original sale. However, if a non-security crypto asset is subject to an investment contract in a primary sale, the associated investment contract can follow the asset into secondary market transactions as long as purchasers would reasonably to expect the issuer’s promises to continue to apply (i.e., the secondary market purchaser believes they are buying the promises as well as the crypto asset). In such circumstances, secondary market trades are securities transactions that must be registered or subject to an exemption.

Once the issuer has delivered what it promised, or has unambiguously ceased pursuit of those promises, purchasers can no longer reasonably expect profits from the issuer’s efforts, and the investment contract ceases to exist. Even then, any earlier violations of securities laws remain actionable. Importantly, the Interpretation’s framework addresses when investment contracts exist under the Securities Act, but does not affect the application of anti-fraud provisions, which continue to apply to material misstatements or omissions regardless of whether an investment contract exists.

Crypto Asset Activities: Federal Securities Law Status

Protocol Mining, Staking, and Staking Receipt Tokens

• Protocol Mining and Protocol Staking Are Not Securities Transactions
  • Proof-of-work mining and proof-of-stake validation on public, permissionless networks involve economic mechanisms embedded in software protocols, not investments in an enterprise managed by a promoter. The Commission concludes that these activities, as described in the Interpretation, do not involve the offer or sale of a security. This conclusion reflects the view that rewards are programmatic outputs of the crypto asset network’s consensus mechanism rather than profits generated by the essential managerial efforts of others. The Interpretation specifically addresses four types of Protocol Staking activities, each of which the Commission concludes does not involve a securities transaction: (1) Self (or Solo) Staking, where a Node Operator stakes digital commodities it owns and controls using its own resources; (2) Self-Custodial Staking Directly with a Third Party, where an Owner grants its validation rights to a third-party Node Operator while retaining ownership and control of its digital commodities and private keys; (3) Custodial Arrangement, where a Custodian takes custody of an Owner’s digital commodities and stakes them on the Owner’s behalf; and (4) Liquid Staking, where a Liquid Staking Provider stakes on behalf of Depositors who receive a “Staking Receipt Token” evidencing their ownership of the deposited digital commodities and any accrued rewards (discussed further below). In each case, the Commission views the activities of service providers-including Node Operators, Validators, Custodians, Delegates, Nominators, and Liquid Staking Providers-as administrative or ministerial in nature, not essential managerial efforts.
• Ministerial Services Around Staking
  • Staking service providers may offer administrative conveniences (e.g., early unbonding windows, alternative reward remittance schedules aligned with but not exceeding protocol rewards, and aggregation to meet staking minimums) without turning staking into a securities transaction. The Interpretation draws a bright line at guarantees, fixed yields, or amounts that exceed protocol-defined rewards, which would indicate a separate profit promise by an intermediary rather than programmatic, protocol-governed returns.
• Staking Receipt Tokens
  • A staking receipt token that merely evidences the depositor’s claim to a staked, non-security crypto asset that is not subject to an investment contract is not a security. Its value derives from the underlying digital commodity and protocol-governed rewards, and it is not an option, swap, or other derivative enumerated in the securities definition. By contrast, a receipt representing a digital security or a non-security asset that is subject to an investment contract is itself a security. The Interpretation also cautions that if a provider layers on additional return features or other activities outside the ministerial scope described, the analysis can change.

Wrapping and Redeemable Wrapped Tokens

• What “Wrapping” Means and Why it Matters
  • Wrapping refers to the one-for-one representation of a crypto asset on another network or standard by depositing the original asset with a custodian or cross-chain bridge and receiving a corresponding redeemable wrapped token. The deposited assets are held for the sole benefit of wrapped token holders, are effectively locked up and are not transferred, lent, pledged, rehypothecated or otherwise deployed. The wrapped token is redeemable at a fixed one-to-one ratio for the underlying asset.
• When Wrapped Tokens Are Securities
  • A redeemable wrapped token that is a receipt for a non-security crypto asset that is not subject to an investment contract is not a security. The fact that a crypto asset is “wrapped” neither changes the rights, obligations, or benefits of the underlying asset nor introduces a separate profit promise. The wrapping process is administrative, facilitating interoperability across networks and token standards. If, however, the wrapped token represents a digital security or a non-security asset that is the subject of an investment contract, then the wrapped instrument is a security. As with staking receipts, adding yield, leverage, or other financial features can alter the analysis.

Airdrops and the “Investment of Money” Prong

• Covered Airdrops and Absence of Consideration
  • An airdrop is a mechanism for the dissemination of crypto assets for no or nominal consideration. Issuers choose the recipients and all other terms of their airdrop, including whether to airdrop crypto assets to recipients that meet certain criteria or whether to airdrop crypto assets to recipients in exchange for the provision of a service. Where recipients provide no money, goods, services, or other consideration to the issuer in exchange for the airdropped non-security crypto asset, the first element of the Howey test, an “investment of money,” is not met. The Interpretation provides scenarios illustrating this principle, including unannounced airdrops keyed to prior wallet holdings, retrospective distributions to testers of a pre-launch environment, or distributions based solely on past use of a related application without prior announcement of conditions.
• Limits and Subsequent Transactions
  • If an issuer announces conditions in advance and a recipient chooses to provide consideration in exchange for the airdropped non-security crypto asset, an airdrop falls outside the scope of the Interpretation because the “investment of money” element of the Howey test may be satisfied. Moreover, even when an airdrop itself does not involve a securities transaction, later transactions in the same asset can give rise to an investment contract. For example, the “investment of money” element would be satisfied if the issuer subsequently markets the asset with explicit, detailed profit-driven promises. Secondary sales involving an investment contract must be registered or subject to an exemption.

Practical Implications for Funds, Issuers, and Intermediaries

Implications for Investment Funds and Managers

The taxonomy and securities transaction guidance in the Interpretation provide necessary clarity for investment policies, compliance programs, and product structuring. ETF sponsors and market participants should carefully assess the degree of decentralization and functional utility of the underlying asset to ensure compliance with applicable regulatory frameworks and to avoid inadvertent classification as a security. Classifying portfolio holdings as digital commodities, digital collectibles, digital tools, stablecoins, or digital securities will inform offering document disclosures, concentration limits, custody frameworks, valuation policies, and liquidity risk management considerations. For example, a crypto asset linked exchange-traded product that intends to engage in protocol staking can rely on the Commission’s view that staking, as described in the Interpretation, is not a securities transaction. The issuer of such exchange-traded product has actionable guidance regarding the structuring of service-provider arrangements (i.e., that they must remain ministerial) the negotiation of staking yields (i.e., that guaranteed or above-protocol yields should be avoided), and how to approach the implementation of wrapping or liquid staking programs (i.e., the importance of maintaining clear beneficial ownership of staked assets and any staking receipt tokens).

Managers should review marketing materials, statements by portfolio companies, and governance participation to avoid creating or amplifying issuer promises or representations that could support a conclusion that a non-security crypto asset is subject to an investment contract. Once a non-security crypto asset has completed its roadmap or otherwise delivered what it promised consistent with its original representations, managers should consider prompting public disclosures of completion to support separation of the non-security crypto asset from an investment contract. Conversely, if an issuer abandons its plans to develop a crypto asset, managers should treat that as a potential separation event for securities-law purposes while continuing to assess any residual anti-fraud exposure tied to earlier statements.

Implications for Issuers and Developers

Issuers planning to raise capital through token sales must calibrate disclosures with care. The Interpretation creates a framework where the specificity of an issuer’s promises largely determines whether a transaction constitutes an investment contract, and, if so, when that investment contract terminates.

Managing the Specificity of Promises. Issuers face a strategic tension under the Interpretation. On one hand, the more explicit the roadmap, milestones, resources, and link to tokenholder profit, the more likely the Howey test is satisfied, and the transaction constitutes an investment contract. On the other hand, the Interpretation suggests that “vague” promises lacking “milestones, funding, or other plans for needed resources” may not create reasonable profit expectations at all. Issuers should not, however, assume that vague aspirations categorically avoid securities status; the Commission’s analysis emphasizes facts and circumstances over form and labels, and what constitutes an “actionable business plan” sufficient to create an investment contract remains an open question.

Structuring Private and Public Offerings. Issuers utilizing Simple Agreements for Future Tokens (SAFTs) or similar structures should recognize that detailed promises made to private investors may create investment contracts with those purchasers, even if the subsequent public launch involves minimal representations. Under the Interpretation’s framework, the investment contract exists between the issuer and the private purchasers based on the specific promises made to them, promises that may include detailed roadmaps, use-of-proceeds disclosures, and development milestones. If the issuer makes no similar promises in connection with the public launch, the public sale may not constitute an investment contract. When private investors later sell their allocations into the secondary market, the analysis turns on whether secondary purchasers would reasonably continue to expect the issuer’s promises to apply. Absent public dissemination of those promises, secondary purchasers may have no basis for such expectations. Issuers should carefully segregate private offering materials from public communications and consider how the “separation” analysis applies to each investor cohort.

Defining the Path to Separation. If an issuer does make public promises and intends for the crypto asset to trade free of investment contract status after delivery, the issuer should clearly define the conditions for fulfillment in its offering materials. Because the Interpretation measures fulfillment against the issuer’s own definitions, not any objective market standard, issuers have significant flexibility to define achievable milestones. Issuers should publicly document when they have fulfilled their stated promises, as this documentation supports the conclusion that purchasers can no longer reasonably expect profits from the issuer’s efforts. Conversely, if an issuer abandons its development plans, it should publicly announce that abandonment through widely disseminated communications, recognizing that anti-fraud liability may attach to any prior misstatements.

Third-Party Statements. Issuers should also consider the risk that third-party statements, particularly by labs entities, could be attributed to the issuer under the Interpretation’s “collusion” framework. Where an issuer and a third-party coordinate to convey representations or promises, purchasers may reasonably rely on those communications for purposes of the Howey analysis. Issuers should establish clear boundaries between their own communications and those of nominally independent ecosystem participants.

Airdrops and Wrapping. For specific token distribution mechanisms, issuers should note: (1) airdrop strategies should avoid pre-announced, quid-pro-quo conditions if the goal is to fall within the Interpretation’s safe harbor for distributions without consideration; and (2) wrapping initiatives should ensure strict one-for-one backing, clear redemption rights, segregation of underlying assets, and prohibitions on rehypothecation. Any features that add yield, leverage, or profit-sharing may alter the securities analysis.

Implications For Trading Platforms and Custodians

Listing frameworks should incorporate the Commission’s taxonomy and investment-contract rubric, including a process to assess whether a non-security crypto asset is subject to an attached investment contract that may follow the crypto asset into secondary trading. For staking services, platforms should segregate ministerial functions from any activities that could be construed as guaranteeing yields or pooling proceeds in a managed enterprise. Wrapping services should maintain auditable, one-for-one backing and redemption mechanisms and should avoid deploying pledging, lending, or rehypothecating assets. Custodians and bridges should ensure programmatic or contractual controls that keep deposited assets locked up solely for the benefit of wrapped token holders.

Platforms should also be mindful that coordinated communications with issuers regarding listed assets could be viewed as “collusion” under the Interpretation, potentially causing the platform’s statements to be attributed to the issuer for purposes of the investment contract analysis.

Uncertainties, Open Questions, and What Comes Next

• Facts-and-Circumstances Remain Decisive
  • Although the Interpretation draws clearer lines, the Commission reiterates that the Howey test remains a facts-and-circumstances inquiry. Several significant interpretive questions remain open:
    • What constitutes an “actionable business plan”? The Interpretation states that “vague” promises lacking milestones or funding plans may not create reasonable profit expectations but does not define the threshold. Whether founder tweets, blog posts, or general ecosystem development statements constitute sufficient “promises” to create an investment contract, as the SEC alleged under the prior administration, remains untested under this framework.
    • How do the objective and subjective standards for decentralization interact? The Interpretation provides an objective definition of “decentralized” (no person or entity having operational, economic, or voting control) but separately states that whether an issuer has achieved “decentralization” for purposes of separation is measured against the issuer’s own definition, not a general market conception. How these standards interact, and whether objective decentralization provides an independent safe harbor, is unclear.
    • Can ecosystem participants in a decentralized system create investment contracts? If a crypto system is genuinely decentralized under the Interpretation’s objective definition, can any single participant’s promises create an investment contract? Or would such promises constitute mere “third-party” statements that do not give rise to reasonable profit expectations? The Interpretation’s “collusion” framework suggests that coordinated communications could still create investment contracts, but the boundaries remain undefined.
    • How do private and public offerings interact? Issuers using SAFT structures may make detailed promises to private investors while making minimal representations publicly. Whether secondary purchasers can rely on promises they never received—and whether Ripple’s holding that programmatic buyers could not rely on issuer statements they did not receive survives judicial scrutiny—remains an open question.

Activities Not Fully Addressed

The Interpretation does not address every stablecoin model outside the scope of the Commission’s previously announced “Covered Stablecoins” analysis or the GENIUS Act’s specified categories. Features such as interest payments, reserve investments, or profit-sharing may reintroduce securities law considerations. Similarly, staking or wrapping providers that move beyond ministerial functions, by pooling proceeds, guaranteeing returns, or pledging assets, may alter the analysis and trigger additional regulatory requirements.

Forthcoming Safe Harbors

In public comments following the release of the Interpretation, SEC Chairman Paul S. Atkins discussed the Commission’s plans for three potential safe harbors:¹¹

• A startup exemption providing developers with a time-limited exemption for offerings of investment contracts involving certain crypto assets, intended to allow assets to reach maturity before full compliance is required.
• A fundraising exemption allowing entrepreneurs to raise up to a defined amount during any 12-month period while retaining the ability to rely on other registration exemptions.
• An investment contract safe harbor providing a rules-based standard to determine whether an issuer has fulfilled or abandoned the essential managerial efforts it promised, giving issuers greater certainty as to when separation occurs.

Both the startup and fundraising exemptions would require “principles-based disclosure” about the investment contract and crypto asset, similar to existing whitepaper practices. The timing and form of any safe harbor proposals remain uncertain.

Anti-Fraud Liability and Further Rulemaking

The Interpretation explicitly preserves the application of anti-fraud provisions regardless of whether an investment contract exists at any point in time. The Commission invites comment on all aspects of the Interpretation and may refine or expand its views. Given the joint SEC–CFTC posture and ongoing Congressional activity, further rulemaking addressing market infrastructure, disclosure requirements, and registration pathways is likely.

Scope and Legal Posture of the Interpretation

The Interpretation applies, but does not replace, the Supreme Court’s Howey test for investment contracts. The Commission reaffirms Howey’s focus on economic reality over labels and expressly clarifies that the “common enterprise” element is a required component of the analysis, addressing historical ambiguity stemming from the Commission’s 2004 opinion in In re Barkate, Securities Act Release No. 8519 (Dec. 22, 2004).

The Interpretation has been designated a “major rule” but takes effect immediately as an interpretive release. It supersedes the SEC staff’s April 2019 “Framework for ‘Investment Contract’ Analysis of Digital Assets.” The CFTC has confirmed it will administer the Commodity Exchange Act consistently with the Interpretation, including recognizing that certain non-security crypto assets may be “commodities” under that statute.

The Interpretation does not alter tax law, anti-money laundering regimes, or bank regulatory frameworks. It does not address all stablecoin models or services by staking or wrapping providers that exceed the ministerial functions described in the release. Notably, in light of the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo (2024), which eliminated Chevron deference, courts are not bound by the Commission’s interpretive views and may reach different conclusions when applying the federal securities laws to crypto assets. The Interpretation represents the Commission’s current enforcement posture rather than a definitive legal determination. The Commission is seeking public comment and may revise its views accordingly.

Conclusion

The Interpretation, reinforced by CFTC alignment, marks a significant departure from the prior administration’s enforcement-first approach toward a workable regulatory framework for crypto assets. Most fundamentally, it confirms what courts have consistently held: crypto assets are not themselves securities. Rather, they are “things” that may be sold as part of investment contracts depending on the circumstances of the transaction.

What Is Now Clear. Digital commodities, digital collectibles, and digital tools are not securities. Payment stablecoins issued by permitted issuers will be excluded by statute when the GENIUS Act takes effect, while Covered Stablecoins are not securities in the interim. Tokenized securities remain securities onchain. Protocol mining, protocol staking, ministerial staking services, staking receipt tokens for non-security assets, one-for-one wrapped tokens, and specified airdrops do not involve securities transactions. Investment contracts arise from issuer promises, and terminate when those promises are fulfilled or abandoned, as measured against the issuer’s own definitions.

What Remains Uncertain. Significant interpretive questions remain: the threshold distinguishing “actionable” from “vague” promises; the interaction between objective and issuer-defined standards for decentralization; whether ecosystem participants in a genuinely decentralized system can create investment contracts; and the treatment of secondary market transactions where buyers did not receive the issuer’s promises directly. In a post-Loper Bright environment, courts will apply independent judgment and may reach different conclusions than the Commission.

Practical Next Steps. For funds and managers, the immediate priorities are updating classification frameworks, revising product disclosures and custody policies, ensuring staking and wrapping arrangements remain ministerial, and documenting separation events. For issuers and developers, the guidance is clear: define milestones precisely, keep services ministerial, maintain strict one-for-one backing where applicable, and avoid features that alter the economic reality of transactions. For trading platforms and custodians, the focus should be on incorporating the taxonomy into listing frameworks and avoiding coordinated communications that could be characterized as “collusion” under the Interpretation.

The Interpretation does not resolve every question, but it provides, for the first time, a coherent framework for understanding when crypto asset transactions do and do not implicate the federal securities laws. Market participants now have a clearer set of boundaries within which to operate, and a roadmap for engaging with the Commission as it continues to refine its approach.

1. The Interpretation supersedes the Commission’s 2019 “Framework for ‘Investment Contract’ Analysis of Digital Assets”.

2. Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO, Exchange Act Release No. 81207 (July 25, 2017).

3. SEC v. Telegram Grp. Inc., 448 F. Supp. 3d 352, 379 (S.D.N.Y. 2020).

4. SEC v. Ripple Labs, Inc., 682 F. Supp. 3d 308, 323 (S.D.N.Y. 2023)

5. SEC v. Coinbase, Inc., No. 23 Civ. 4738 (KPF), 2024 WL 1304037, at *12 (S.D.N.Y. Mar. 27, 2024)

6. Joint Statement of the Staff of the Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets, Statement on Tokenized Securities (Jan. 28, 2026), https://www.sec.gov/newsroom/speeches-statements/corp-fin-statement-tokenized-securities-012826-statement-tokenized-securities

7. For further reading on this, please see our prior client alert, available here: https://www.chapman.com/publication-substance-over-syntax-three-sec-divisions-align-on-tokenized-securities

8. The Commission expressly identified the following crypto assets as digital commodities: Aptos (APT), Avalanche (AVAX), Bitcoin (BTC), BitcoinCash (BCH), Cardano (ADA), Chainlink (LINK), Dogecoin (DOGE), Ether (ETH), Hedera (HBAR), Litecoin (LTC), Polkadot (DOT), Shiba Inu(SHIB), Solana (SOL), Stellar (XLM), Tezos (XTZ), XRP (XRP), Algorand (ALGO), and LBRY Credits (LBC).

9. The relationship between this definition and the Interpretation’s treatment of issuer-defined milestones for “separation” from investment contractstatus raises additional questions. See infra Section [X] (discussing footnote 96).

10. Complaint, SEC v. Consensys Software Inc., No. 1:24-cv-04578 (E.D.N.Y. June 28, 2024), dismissed (Mar. 27, 2025).

11. Paul S. Atkins, Chairman, US Sec. & Exch. Comm’n, Remarks on the Regulation of Crypto Assets (Mar. 17, 2026), https://www.sec.gov/newsroom/speeches-statements/atkins-remarks-regulation-crypto-assets-031726.

Relevant Documents