The SEC and CFTC on Tuesday issued a joint interpretation setting out how federal securities laws apply to crypto assets, providing a formal taxonomy for crypto assets.
The document establishes five categories for crypto assets: digital commodities, digital collectibles, digital tools, stablecoins and digital securities. It also addresses the regulatory treatment of airdrops, protocol mining, staking and the wrapping of non-security crypto assets.
The core distinction in the document is between a token’s intrinsic classification and the way it is offered, sold or promoted.
Token status versus offering conduct
A crypto asset that falls into a non-security category, such as a digital commodity or digital tool, does not automatically become a security. But the manner in which it is sold can still create an investment contract under the Howey test.
The agencies apply Howey with refined criteria focused on whether buyers expect profit from a common enterprise. What is new is the explicit acknowledgment that investment contract treatment dissipate. If the underlying project becomes sufficiently decentralized or the promises tied to the original offering have been fulfilled, the token reverts to its non-security status.
A fundraising event can be a securities transaction without the token being a security forever.
“After more than a decade of uncertainty, this interpretation will provide market participants with a clear understanding of how the Commission treats crypto assets under federal securities laws,” said SEC Chairman Paul S. Atkins. “It also acknowledges what the former administration refused to recognize, that most crypto assets are not themselves securities. And it reflects the reality that investment contracts can come to an end.”
Airdrops, staking and wrapping
The interpretation addresses several technical activities that had been left in regulatory limbo. For airdrops, the guidance focuses on whether a free token distribution involves an “investment of money” or a “common enterprise,” two conditions required for securities treatment. Mining rewards earned for securing a network are generally distinguished from investment contracts when performed for network maintenance rather than as a return on capital.
Staking, which had attracted enforcement activity under the previous SEC leadership, receives its own treatment. The wrapping of non-security assets, where a digital commodity is tokenized for use on a different blockchain, is clarified so the process does not inadvertently create a new security.
For exchanges, token issuers, staking operators and brokers, the practical result is a more usable basis for determining what sits under SEC jurisdiction, what leans CFTC and where residual ambiguity remains.
What comes next
The interpretation follows a new Memorandum of Understanding between the SEC and CFTC signed earlier this month, which formalized data sharing, cross-training and advance notification of enforcement actions and novel product reviews.
Beyond the joint guidance, the SEC has signalled further steps. Staff are working on an innovation exemption designed to let entrepreneurs operate for a defined period outside standard registration rules, according to Reuters. A crypto safe harbor proposal is also expected for public comment in the coming weeks. Both agencies have framed the interpretation as a bridge while Congress advances bipartisan market structure legislation.
