A Policy Analysis of the SEC-CFTC Joint Interpretation on the Securities Status of Crypto Assets
I. INTRODUCTION
On March 17, 2026, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly issued an interpretive release titled “Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets” (the “Interpretation”).[1] The release is the most significant regulatory action on the securities classification of digital assets since the SEC’s 2017 report on The DAO[2] and the most structurally comprehensive articulation of the Commission’s views under the Howey test in the agency’s decade-long engagement with crypto asset markets. It introduces a five-category taxonomy, a “separation doctrine” for non-security assets subject to investment contracts, and detailed guidance on the securities law status of protocol mining, protocol staking, wrapping, and airdrops.
The Interpretation arrives after a sustained period of market demand for regulatory clarity. Critics including Commissioner Hester M. Peirce had characterized the Commission’s prior approach as “regulation by enforcement” rather than a coherent, prospective framework.[3] The Commission’s 2019 Staff Framework for investment contract analysis of digital assets provided guidance but remained non-binding work product without formal Commission endorsement.[4] The regulatory landscape shifted materially beginning in
2025 with the enactment of the GENIUS Act,[5] the President’s Working Group on Digital
Asset Markets’ taxonomy report,[6] and the January 2026 announcement that Project Crypto would proceed as a joint SEC-CFTC initiative.[7]
This paper provides a balanced policy analysis of the Interpretation. Part II surveys the regulatory background and the transition from enforcement to interpretation. Part III examines the five-category taxonomy. Part IV analyzes the investment contract framework, including the separation doctrine. Part V addresses the specific guidance on protocol activities and ancillary transactions. Parts VI and VII assess, respectively, the genuine advances and the unresolved challenges of the Interpretation. Part VIII provides concluding comments.
II. FROM ENFORCEMENT TO INTERPRETATION: THE REGULATORY ARC
The SEC’s engagement with digital assets spans more than a decade. The first registration statement for a crypto asset exchange-traded product was filed in 2013. For much of the following period, the Commission’s primary mode of engagement was enforcement not rulemaking. Critics argued that this approach created compliance uncertainty without providing the framework market participants needed to structure offerings and transactions lawfully. The critique was not merely rhetorical: the absence of clear classification criteria meant that similarly structured digital asset transactions could receive different regulatory treatment, and participants had no reliable method of predicting ex ante whether a proposed transaction would trigger securities law obligations.
The 2017 DAO Report established that crypto assets could constitute investment contracts under the Howey test [8] but did not produce a general classification system. The Howey test, which defines an “investment contract” as any scheme involving an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others, was developed in the context of citrus grove sales and is an adaptable standard rather than a determinate rule.[9] Its application to the diverse landscape of digital assets spanning decentralized protocols, enterprise blockchain
networks, speculative collectibles, and complex defi instruments requires analytical judgment of the kind difficult to exercise consistently in an enforcement-only environment.
The courts, for their part, addressed the securities status of specific digital assets in litigation but did not produce a coherent classification framework. The Telegram decision[10] and related cases addressed specific transactional structures but left open the broader question of when a non-security crypto asset crosses back from the investment contract context into commodity or other non-security status. The Supreme Court’s foundational securities law precedents, Howey, Forman, Edwards, and Marine Bank [11] articulate principles that are textually broad but contextually rooted in investment instruments different from digital assets.
The 2025 and 2026 regulatory developments represent a structural shift. The GENIUS Act’s categorical exclusion of qualified payment stablecoins from the definition of a security resolved one disputed category by statute. The PWG Report’s call for SEC-CFTC coordination and the Project Crypto initiative established an interagency framework. The Interpretation is, as the Commission describes it, a “first step” in developing a clearer framework, and its characterization signals that further rulemaking is anticipated.
III. THE FIVE-CATEGORY TAXONOMY
The Interpretation classifies crypto assets into five categories based on characteristics, uses, and functions: (1) digital commodities (2) digital collectibles (3) digital tools (4) stablecoins and (5) digital securities. Though the taxonomy is explicitly meant to be nonexhaustive, it states that digital securities are in fact securities, digital commodities, collectibles, and tools are not themselves securities, though they may be subject to investment contracts while whether stablecoins are securities depends on their characteristics.
A. Digital Commodities
The Interpretation defines a digital commodity as a crypto asset whose value is derived from the programmatic operation of a functional crypto system and from ordinary supply and demand dynamics, rather than from any expectation of profits attributable to the essential managerial efforts of others.[12] The Interpretation provides a notable list of named examples such as Bitcoin, Ether, Solana, XRP, and thirteen others establishing
that these major digital assets are, as a matter of current Commission policy, digital commodities rather than securities.
The category rests on two foundational definitional concepts. Functionality requires that the native crypto asset of a given system be usable on that system in accordance with its programmatic design. Decentralization requires the absence of any single person, entity, or coordinated group holding operational, economic, or voting control over the system’s operation. These definitions carry significant practical weight because they link classification to the operational and governance characteristics of the underlying network, creating a pathway by which assets initially offered as securities can transition to nonsecurity commodity status as their networks mature.[13]
The inclusion of XRP is particularly consequential given the multi-year litigation between Ripple Labs and the SEC.[14] By designating XRP a digital commodity, the Commission resolves a high-profile classification dispute, at least as a matter of current interpretive position.
B. Digital Collectibles
A digital collectible is a crypto asset whose value is rooted in cultural, artistic or entertainment utility rather than the economic output of a centrally managed enterprise. The category is broad enough to encompass traditional digital art and gaming assets as well as meme coins, which the Interpretation treats as culturally motivated acquisitions whose pricing reflects market sentiment and scarcity rather than issuer-driven development activity.15
The Interpretation carves out fractionalized collectibles from the general non-security treatment with structurally sound reason. Subdividing a single digital collectible into fractional interests introduces centralized management dependency over the pooled asset and its monetization from which purchasers might reasonably derive profit expectations, satisfying the essential managerial efforts prong of the Howey test even where the whole collectible would not.[15] This echoes the Howey citrus grove analysis,
where the subdivision of an asset combined with centralized management transforms a real estate transaction into an investment contract.[16]
C. Digital Tools
Digital tools perform practical functions like memberships, tickets, credentials, title instruments, identity badges and are commonly non-transferable or “soul-bound.” Their value is derived from functional utility rather than investment return. The category is the most narrowly defined, and the examples provided (Ethereum Name Service domain names and a conference ticket NFT) reflect its limited scope.
D. Stablecoins
The stablecoin analysis operates on two tracks. First, GENIUS Act payment stablecoins issued by permitted payment stablecoin issuers are categorically excluded from the definition of security by statute.[17] Second, for pre-GENIUS Act effective date and nonqualifying stablecoins, the Interpretation adopts the April 2025 Staff Stablecoin Statement’s conclusion that “Covered Stablecoins,” i.e. fiat-backed instruments redeemable at par, do not involve the offer and sale of securities. Stablecoins other than Covered Stablecoins or GENIUS Act payment stablecoins may or may not be securities depending on facts and circumstances, preserving analytical flexibility for algorithmic and yield-bearing instruments.
E. Digital Securities
Digital securities (“tokenized” securities) are financial instruments enumerated in the definition of security formatted as or represented by crypto assets.[18] The Interpretation acknowledges structural variations in tokenization models and notes that the rights of a crypto asset holder may differ materially from those of the holder of the underlying offchain security. The category functions as a catch-all for instruments that meet the economic and legal characteristics of securities regardless of their digital format.
IV. THE INVESTMENT CONTRACT FRAMEWORK
A. Creating an Investment Contract
The Interpretation adopts a representation-and-promise framework for determining when a non-security crypto asset becomes subject to an investment contract.[19] The analytical elements are: (1) whether the issuer made representations or promises to undertake essential managerial efforts; (2) whether those representations were conveyed to purchasers through appropriate channels prior to or contemporaneously with the offer or sale; (3) the timing and specificity of those representations; and (4) whether they create a reasonable expectation of profit.
This framework narrows secondary market liability significantly. Representations by unaffiliated third parties do not satisfy the “efforts of others” element unless authorized by the issuer. Post-sale issuer representations likewise cannot retroactively convert a prior sale into an investment contract. The Interpretation also addresses what might be termed a “business plan threshold” or representations containing detailed milestones, timelines, and funding information create reasonable profit expectations, while vague promises lacking actionable substance generally do not.[20]
B. The Separation Doctrine
The Interpretation’s most analytically novel contribution is the separation doctrine which states that a non-security crypto asset offered and sold subject to an investment contract does not remain subject to that contract indefinitely.[21] Separation occurs in two circumstances: (1) when the issuer has fulfilled its representations or promises regarding essential managerial efforts; or (2) when purchasers could no longer reasonably expect the issuer to fulfill those efforts – for example, upon public project abandonment.
The doctrine has important secondary market implications. Once a non-security crypto asset separates from the associated investment contract, secondary market transactions in that asset are not securities transactions. The Interpretation addresses the lingering liability question directly: an issuer’s liability for pre-separation violations (including registration failures and anti-fraud violations) survives the separation event.[22] This is consistent with the principle articulated in Telegram[23] that the investment contract analysis focuses on the transactional relationship between issuer and investor, not an inherent property of the underlying asset.
V. PROTOCOL ACTIVITIES AND ANCILLARY TRANSACTIONS
A. Protocol Mining and Protocol Staking
The Interpretation concludes that protocol mining on proof-of-work networks and protocol staking on proof-of-stake networks do not involve the offer and sale of securities.[24] The analytical logic characterizes these activities as “administrative or ministerial” rather than transactions involving essential managerial efforts of others. Miners and stakers contribute their own computational or economic resources and receive protocoldetermined rewards in exchange for services performed to the network, not profits derived from a third party’s managerial activities.
For staking, the Interpretation addresses four modalities: self-staking, self-custodial staking with third parties, custodial arrangements, and liquid staking. In each case, the service provider relationship is characterized as ministerial rather than managerial, provided the service provider does not exercise discretion over whether, when, or how much to stake, and does not guarantee or fix reward amounts.[25] The treatment of the five ancillary services, namely slashing coverage, early unbonding, alternate reward payment schedules, aggregation, and related activities as non-essential managerial activities is practically significant for the growing institutional staking market.
For Staking Receipt Tokens issued in liquid staking arrangements, the Interpretation distinguishes based on the underlying asset: receipts for non-security crypto assets not subject to investment contracts are not themselves securities, while receipts for digital securities or investment contract-subject assets are securities.[26]
B. Wrapping
Redeemable Wrapped Tokens issued on a one-for-one basis against a deposited crypto asset with the deposited asset locked and the wrapped token redeemable at a fixed one-
for-one ratio are receipts for the underlying asset.[27] Where the underlying asset is a nonsecurity not subject to an investment contract, the wrapped token is not a security. The wrapping process is characterized as administrative or ministerial because it facilitates cross-chain interoperability without creating financial incentives beyond the underlying asset’s value and involves no discretionary deployment of deposited assets.
C. Airdrops
The airdrop analysis turns on the first element of the Howey test: investment of money. Where recipients do not provide money, goods, services, or any other form of consideration in exchange for airdropped non-security crypto assets, the criteria of the Howey test are not met. [28] The Interpretation draws a careful temporal distinction: consideration provided before the airdrop announcement, without being bargained for in connection with the airdrop, does not constitute investment of money. Postannouncement conditionality such as requiring performance of tasks to qualify takes the airdrop outside the scope of the interpretation.
VI. ASSESSMENT: WHAT THE INTERPRETATION GETS RIGHT
A. Named Asset Clarity
The decision to name specific crypto assets as digital commodities represents a meaningful departure from the traditional regulatory approach of providing only analytical frameworks. By explicitly classifying Bitcoin, Ether, XRP, and thirteen other major digital assets, the Commission provides immediate, actionable certainty for the largest and most liquid segments of the crypto asset market. Scholars including Brummer and Yadav have observed that fintech regulation faces an “innovation trilemma” in which regulatory efficiency, market integrity, and financial stability goals operate in tension.[29] The namedasset approach reduces one dimension of that tension by eliminating classificationrelated compliance costs for a defined set of high-capitalization assets.[30]
The market uncertainty surrounding Ether’s classification following the Ethereum network’s September 2022 transition from proof-of-work to proof-of-stake consensus, and the multi-year litigation over XRP, represented genuine regulatory uncertainty with concrete market costs. The Interpretation resolves both, at least as a matter of current Commission position.
B. The Separation Doctrine’s Analytical Soundness
The separation doctrine addresses a genuinely difficult doctrinal question that prior guidance had left unresolved: whether the investment contract wrapper follows the underlying asset indefinitely. The doctrine’s clear answer that once the issuer has fulfilled or demonstrably failed to fulfill its represented essential managerial efforts, it does not is legally sound under Howey’s analytical structure. The investment contract analysis in Howey was always about the transactional relationship between issuer and investor, not an inherent property of the underlying asset.32 Citrus grove land sold without a management contract is not a security; the same land sold with one is. The separation doctrine operationalizes this insight, providing a coherent pathway from regulated offering to commodity market status as a project matures toward decentralization and functional operation.
C. Interagency Coordination and Statutory Integration
The joint SEC-CFTC character of the release, and the CFTC’s explicit guidance that it will administer the Commodity Exchange Act consistently with the Interpretation meaningfully advances regulatory coordination. The persistent jurisdictional ambiguity between the two agencies over digital assets has been documented extensively as one of the central structural impediments to coherent U.S. digital asset regulation.[31] Project Crypto represents the most substantive step toward formal harmonization in the agencies’ shared history with digital assets.
The Interpretation’s integration with the GENIUS Act including its explicit crossreferencing of GENIUS Act definitions and the statutory exclusion of payment stablecoins from the definition of security reflects a more sophisticated legislative-regulatory coordination than prior guidance approaches. The acknowledgment that the GENIUS Act’s payment stablecoin framework will become operative prior to the Interpretation’s anticipated rulemaking follow-on reflects genuine attention to sequencing.
D. Practical Guidance for Emerging Activities
The treatment of protocol staking, mining, wrapping, and airdrops provides guidance on activities that have generated material compliance uncertainty for market participants,
exchanges, and institutional investors. The staking analysis is particularly valuable. It covers four distinct operational modalities and identifies specific conditions under which custodial and liquid staking services fall outside the securities laws and gives institutional staking service providers a workable compliance framework for the first time. The airdrop analysis similarly resolves a question that has deterred some distributions and created structuring uncertainty for founders.[32][33]
VII. CHALLENGES AND UNRESOLVED QUESTIONS
A. The Interpretive Rule Limitation
The Interpretation is adopted as an interpretive rule, not a substantive notice-andcomment rule, and takes effect immediately pursuant to 5 U.S.C. § 808(2).35 While this structure enables rapid implementation, it also means that the Interpretation does not have the legal force of notice-and-comment rules. Following the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo[34], which overruled Chevron deference, courts are required to exercise independent judgment on questions of statutory interpretation and are not obligated to defer to agency interpretations. The five-category taxonomy, the separation doctrine, and the named-asset classifications represent the Commission’s current views, but they are susceptible to judicial challenge on the ground that they mischaracterize the requirements of the Howey test or the statutory definition of “security.”
The OMB’s designation of the Interpretation as a “major rule” under the Congressional Review Act[35] creates additional exposure. While the APA exemption for interpretive rules permits immediate effectiveness notwithstanding the major rule designation,[36] the designation signals that formal rulemaking with the procedural protections and accompanying legal durability should be the next step for the core analytical concepts introduced in the Interpretation.
B. The Taxonomy’s Boundary Cases
The five-category taxonomy, while analytically useful, creates difficult boundary cases that the Interpretation acknowledges but does not fully resolve.[37] Crypto assets with “hybrid characteristics” that “may fall within more than one category” will inevitably generate further guidance requests, no-action letters, and potentially litigation. Several specific boundary difficulties warrant particular attention.
The meme coin analysis is a case in point. The Interpretation characterizes meme coins as digital collectibles with value driven by supply and demand.[38] However, many meme coin launches involve substantial issuer promotion, coordinated marketing through official channels, and in some cases structured allocation schemes bearing characteristics closer to an investment contract. The analytical framework for distinguishing an issuer-promoted meme coin from a digital collectible marketed through identical channels requires a level of factual nuance that the Interpretation does not fully supply. The decision to resolve this category in favor of non-security status, while commercially sensible given the clear absence of enterprise economics in most meme coin contexts, risks creating a classification gap for projects that structure their marketing to resemble meme coin issuances while retaining economically meaningful representations about future development.
Governance tokens present related difficulties. The Interpretation classifies such tokens as digital commodities that convey voting rights on technical or governance matters within an associated functional crypto system. However, governance token configurations vary considerably with some generating yield-like returns from treasury management activities, while others convey economic rights analogous to equity in the protocol’s fee revenue, and some more operate within systems where the governance vote set is effectively controlled by a small group of insiders. The classification of governance tokens as presumptively digital commodities may not adequately address hybrid configurations where the economic substance more closely resembles a security.
C. The Separation Doctrine’s Operationalization Challenges
While the separation doctrine is analytically sound, its operationalization presents practical difficulties. The standard for “fulfillment” of essential managerial efforts depends on how the issuer defined or described those efforts which is a subjective and potentially
manipulable standard.[39] An issuer could theoretically define its obligations narrowly in advance, complete a minimal subset of represented activities, and assert separation from the investment contract. The Interpretation encourages issuers to clearly outline their essential managerial efforts and publicly disclose completion, but this guidance is advocative rather than mandatory. The absence of an affirmative disclosure obligation triggered by the separation event creates information asymmetry between issuers and secondary market investors.
The “abandonment” pathway to separation also creates structural complexity. An issuer that publicly announces project abandonment through a widely disseminated communication arguably terminates the investment contract and thereby limits ongoing regulatory obligations. While the Interpretation preserves anti-fraud liability for preabandonment misstatements and omissions,[40] the practical enforcement implications for investors holding effectively worthless assets following a well-publicized abandonment are less favorable than under a regime where the investment contract analysis continues to apply. The balance between providing project founders a clean exit path and protecting late-stage investors in failed projects is not easily resolved, and the Interpretation does not fully address it.
D. Secondary Market Information Asymmetry
The Interpretation’s focus on issuer representations as the trigger for investment contract status creates a gap in secondary market investor protection.[41] Investment contract status in secondary markets depends on whether purchasers would reasonably expect the issuer’s representations to remain connected to the non-security crypto asset; a determination that requires access to information about the original representations and their fulfillment status. Secondary market participants, particularly retail investors operating in markets characterized by high velocity and limited issuer disclosure, may have materially incomplete information about whether a separation event has occurred.
The Interpretation does not establish a positive obligation on issuers to notify the market when the separation threshold is crossed, relying instead on market participants to monitor issuer communications through established channels. For markets operating at the scale and pace of current crypto trading this approach may produce material and
systematic information gaps for secondary market investors who cannot practically monitor every issuer’s fulfillment disclosures.
E. AML, Tax, and Cross-Regulatory Coherence
The Interpretation expressly disclaims any effect on Federal tax law or the Bank Secrecy Act and Anti-Money Laundering Act of 2020.[42] This disclaimer is appropriate as a jurisdictional matter, but the asset classification decisions in the Interpretation have direct implications for cross-regulatory compliance that the Commission does not address.
On the tax side, the broker reporting obligations established under IRC § 6045 apply to “digital asset” transactions, a category that extends to digital commodities as defined in the Interpretation. The OECD’s Crypto-Asset Reporting Framework (CARF),[43] to which the United States is (and has been) engaged for future exchange of information applies to assets that can be transferred and exchanged in a decentralized manner, a category that does not map precisely onto the five-part taxonomy. The interaction between CARF’s asset coverage scope and the investment contract analysis for assets in transition between taxonomy categories is not addressed in the Interpretation and will generate practical compliance uncertainty for reporting entities.
On the AML side, the FATF Travel Rule guidance for virtual asset service providers[44] and the FinCEN money services business framework are organized around functional activities rather than asset classifications. An asset’s designation as a digital commodity rather than a digital security does not affect Travel Rule obligations for transfers of that asset above applicable thresholds. The regulatory uncertainty surrounding custodial staking arrangements and liquid staking tokens under the Bank Secrecy Act framework, particularly the question of whether liquid staking providers are money transmitters, is not resolved by the Interpretation and warrants separate FinCEN guidance.
F. International Regulatory Alignment
The Interpretation operates within the U.S. legal framework and does not address international regulatory alignment. The European Union’s Markets in Crypto-Assets Regulation (MiCA)[45] establishes a different taxonomy and classification approach. MiCA’s three primary categories (asset-referenced tokens, e-money tokens, and other cryptoassets) do not map directly onto the Commission’s five-category system. The treatment of utility tokens and asset-referenced tokens under MiCA differs substantially from the digital commodity and stablecoin classifications under the Interpretation, creating compliance complexity for globally operating entities and potential jurisdictional arbitrage opportunities.
The GENIUS Act’s “permitted payment stablecoin issuer” framework, requiring U.S. formation and federal or state authorization, has no direct counterpart in MiCA’s e-money token authorization structure.[46] Entities authorized under MiCA may or may not qualify as permitted payment stablecoin issuers under GENIUS Act criteria, and the Interpretation does not provide guidance on this question. A more fully developed international coordination framework would strengthen the Interpretation’s practical utility for crossborder compliance planning.
VIII. CONCLUSION
The SEC-CFTC Joint Interpretation on the application of Federal securities laws to crypto assets represents a genuine and meaningful advance in U.S. digital asset regulatory policy. The five-category taxonomy, the separation doctrine, the named-asset classifications, and the explicit treatment of staking, mining, wrapping, and airdrops address real regulatory uncertainty that has constrained market development and compliance planning for years. The joint character of the release, and its integration with the GENIUS Act framework, reflects the kind of interagency coordination that the market has long sought.
At the same time, the Interpretation is not a complete regulatory framework. As an interpretive release rather than a notice-and-comment rulemaking, its positions are subject to judicial review without the deference historically accorded to substantive agency rules, and the Supreme Court’s decision in Loper Bright49 confirms that courts will exercise independent judgment on the statutory questions the Interpretation addresses.
The taxonomy’s boundary cases, particularly meme coin launches with issuer involvement and hybrid governance tokens, will generate further guidance requests. The separation doctrine’s operationalization challenges, the information asymmetry issues in secondary markets, and the absence of cross-regulatory coordination guidance on tax and AML dimensions represent areas requiring further development.
The Commission’s characterization of the Interpretation as a “first step” is accurate and appropriately modest. The tasks ahead include formal notice-and-comment rulemaking to embed the taxonomy’s core concepts in binding regulations, development of disclosure frameworks tailored to the lifecycle of digital asset offerings from initial coin offering to separation and sustained engagement with FinCEN, the IRS, and international counterparts to produce the coherent, harmonized compliance architecture that globally active market participants require.
The Interpretation provides a solid foundation for that work. Whether it becomes a durable framework or a transitional document will depend largely on the pace and quality of the rulemaking that follows.
[1] Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Securities Act Release No. 33-11412, Exchange Act Release No. 34-105020 (Mar. 17, 2026) [hereinafter “Project Crypto Interpretation”].
[2] Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO, Exchange Act Release No. 34-81207 (July 25, 2017) [hereinafter “DAO Report”].
[3] Commissioner Hester M. Peirce, Outdated: Remarks Before the Digital Assets at Duke Conference (Jan.
20, 2023), https://www.sec.gov/newsroom/speeches-statements/peirce-remarks-duke-conference012023.
[4] SEC Staff, Framework for “Investment Contract” Analysis of Digital Assets (Apr. 3, 2019),
https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets, superseded by Project Crypto Interpretation, supra note 1.
[5] Guiding and Establishing National Innovation for U.S. Stablecoins Act, Pub. L. No. 119-27, 139 Stat. 419 (2025) [hereinafter “GENIUS Act”].
[6] Strengthening American Leadership in Digital Financial Technology (July 30, 2025) [hereinafter “PWG Report”], https://www.whitehouse.gov/wp-content/uploads/2025/07/Digital-Assets-Report-EO14178.pdf.
[7] Chairman Paul S. Atkins, Opening Remarks at Joint SEC-CFTC Harmonization Event – Project Crypto (Jan. 29, 2026), https://www.sec.gov/newsroom/speeches-statements/atkins-remarks-joint-sec-cftcharmonization-event-project-crypto-012926.
[8] SEC v. W.J. Howey Co., 328 U.S. 293, 298–99 (1946) (defining an “investment contract” as a contract, transaction, or scheme whereby a person invests money in a common enterprise and reasonably expects profits to be derived from the efforts of others).
[9] United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 849 (1975) (holding that the application of the securities laws turns on “economic realities” rather than the name appended to an instrument).
[10] SEC v. Telegram Grp. Inc., 448 F. Supp. 3d 352 (S.D.N.Y. 2020) (finding that tokens sold pursuant to a simple agreement for future tokens were securities notwithstanding that the tokens themselves might eventually function as commodities upon delivery).
[11] Marine Bank v. Weaver, 455 U.S. 551, 556 (1982) (holding that Congress, in enacting the securities laws, “did not intend to provide a broad federal remedy for all fraud”).
[12] Project Crypto Interpretation, supra note 1, § III.A. The Commission notes that the named examples include assets underlying CFTC-regulated futures contracts, though that characteristic is illustrative rather than definitional.
[13] Primavera De Filippi & Aaron Wright, Blockchain and the Law: The Rule of Code 72–95 (2018) (Harvard University Press) (analyzing the governance implications of decentralized autonomous organizations and the tension between code-based rules and legal frameworks).
[14] The SEC’s multi-year enforcement action against Ripple Labs, including SEC v. Ripple Labs, Inc., No. 1:20-cv-10832 (S.D.N.Y.), generated substantial litigation over XRP’s classification. The Interpretation resolves that question, at least as a matter of current Commission policy, by designating XRP a digital commodity. 15Project Crypto Interpretation, supra note 1, § III.B (characterizing meme coins as typically acquired for “artistic, entertainment, social, and cultural purposes” with value driven by supply and demand).
[15] Project Crypto Interpretation, supra note 1, § III.B (noting that the fractionalization analysis parallels Howey‘s treatment of subdivided citrus grove parcels subject to centralized management).
[16] Howey, 328 U.S. at 300 (noting that purchasers subject to an investment contract “have no desire to occupy the land or develop it themselves; they are attracted solely by the prospects of a return on their investment”).
[17] GENIUS Act, supra note 5, § 17 (excluding “payment stablecoin issued by a permitted payment stablecoin issuer” from the definition of “security”). The GENIUS Act will become effective on the earlier of eighteen months after July 18, 2025, or 120 days after final implementing regulations are issued.
[18] Project Crypto Interpretation, supra note 1, § III.E. The Interpretation notes that some digital securities do not convey the same legal rights as offchain counterparts, instead entitling holders to economic distributions managed by a central party.
[19] 20Project Crypto Interpretation, supra note 1, § IV.A. The Interpretation cites Forman, 421 U.S. at 854, for the proposition that issuer marketing is relevant to determining whether a security is being offered.
[20] Project Crypto Interpretation, supra note 1, § IV.A (providing that explicit, detailed representations containing milestones, timelines, funding information, and an explanation of holder profits “likely would reasonably create an expectation of profit,” while vague representations lacking actionable business plan substance likely would not).
[21] Project Crypto Interpretation, supra note 1, § IV.B.1 (providing that the investment contract ceases to exist upon fulfillment and that “the issuer is no longer offering or selling an investment contract”).
[22] Project Crypto Interpretation, supra note 1, § IV.B.3 (noting that the interpretation only applies after an investment contract is created and that violations occurring during the investment contract’s existence remain actionable even after separation).
[23] Telegram, 448 F. Supp. 3d at 368–80 (analyzing how the overall scheme of the SAFT offering, including issuer representations about future functionality, rendered the tokens securities notwithstanding potential future commodity status).
[24] Project Crypto Interpretation, supra note 1, § V.A.3 (characterizing protocol mining as an “administrative or ministerial activity” to secure the network and validate transactions, distinguishing managerial efforts from computational contribution).
[25] Project Crypto Interpretation, supra note 1, § V.B.3 (noting that a Custodian’s taking custody of deposited digital commodities and selecting a Node Operator are “administrative or ministerial in nature” and do not constitute essential managerial efforts).
[26] Project Crypto Interpretation, supra note 1, § V.B.4 (distinguishing Staking Receipt Tokens that are receipts for non-security crypto assets not subject to investment contracts, which are not themselves securities, from those that are receipts for digital securities or investment contract-subject assets, which are securities).
[27] Project Crypto Interpretation, supra note 1, § VI (characterizing wrapping as “administrative or ministerial” and noting that no financial incentive is derived from the wrapping process itself given the fixed one-for-one redemption ratio).
[28] Project Crypto Interpretation, supra note 1, § VII.C (explaining that the “investment of money” element of the Howey test is not satisfied where recipients provide no money, goods, services, or other consideration in exchange for airdropped non-security crypto assets).
[29] Chris Brummer & Yesha Yadav, Fintech and the Innovation Trilemma, 107 Geo. L.J. 235, 256–70 (2019) (analyzing the structural tension between regulatory efficiency, market integrity, and financial stability in fintech governance and the difficulty of simultaneously optimizing across all three objectives).
[30] Brummer & Yadav, supra note 19, at 256–70 (noting that regulatory approaches providing bright-line classifications reduce the compliance burden for established market participants while enabling more predictable innovation cycles).
[31] J. Christopher Giancarlo, CryptoDad: The Fight for the Future of Money 187–210 (2021) (documenting the jurisdictional contest between the SEC and CFTC over digital asset oversight and arguing for legislative resolution).
[32] Project Crypto Interpretation, supra note 1, at § IX (Commission Economic Considerations) (projecting that the Interpretation will reduce compliance costs, enhance pricing efficiency, and spur innovation, with the caveat that some issuers may need to revise business practices).
[33] U.S.C. § 808(2) (2018) (permitting an interpretive rule to take effect immediately, exempt from the notice-and-comment requirements of 5 U.S.C. § 553).
[34] Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024) (overruling Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), and eliminating mandatory judicial deference to agency statutory interpretations).
[35] Congressional Review Act, 5 U.S.C. §§ 801–808 (2018). The OMB’s designation of the Interpretation as a “major rule” under 5 U.S.C. § 804(2) creates potential review exposure; however, the APA exemption for interpretive rules under 5 U.S.C. § 808(2) permits immediate effectiveness.
[36] Congressional Review Act, 5 U.S.C. § 804(2) (2018) (defining a “major rule” as one that is likely to result in an annual effect on the economy of $100 million or more, a major increase in costs or prices, or significant adverse effects on competition, employment, or innovation).
[37] Project Crypto Interpretation, supra note 1, at 13–14 (acknowledging that “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”).
[38] Loper Bright, 603 U.S. at 412-17 (holding that courts must exercise independent judgment on questions of statutory interpretation and may no longer defer to agency interpretations of ambiguous statutes under the Chevron framework).
[39] Project Crypto Interpretation, supra note 1, § IV.B.1 n.96 (noting that “whether an issuer fulfills its representations or promises to engage in essential managerial efforts depends on how the issuer defines or otherwise describes such efforts in marketing and promoting the investment contract”).
[40] Project Crypto Interpretation, supra note 1, § IV.B.2 (specifying that a public announcement of project abandonment must be “widely disseminated to market participants and unambiguous” to terminate the investment contract).
[41] Project Crypto Interpretation, supra note 1, § IV.A (providing that the timing and channel of representations are relevant to reasonable profit expectations, but not establishing a mandatory disclosure obligation upon fulfillment for secondary market notification purposes).
[42] Project Crypto Interpretation, supra note 1, at § VIII (“No interference is intended with respect to any other legal regime, including the Federal tax laws under the Internal Revenue Code or the Bank Secrecy
Act of 1970 and the Anti-Money Laundering Act of 2020, which are outside the scope of the interpretation in this release.”).
[43] OECD, Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard (Aug. 8, 2022), https://www.oecd.org/tax/exchange-of-tax-information/crypto-asset-reporting-frameworkand-amendments-to-the-common-reporting-standard.htm. The CARF applies to “Crypto-Assets” that can be transferred and exchanged in a decentralized manner, a category that includes digital commodities as defined in the Interpretation but does not map precisely onto the five-category taxonomy.
[44] FATF, Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service
Providers 14–26 (Oct. 2021), https://www.fatf-
gafi.org/publications/fatfrecommendations/documents/guidance-rba-virtual-assets-2021.html (defining “virtual asset service providers” by reference to functional activities including exchange, transfer, and safekeeping, without regard to the securities law classification of the underlying asset).
[45] Regulation (EU) 2023/1114 of the European Parliament and of the Council on Markets in Crypto-Assets (MiCA), 2023 O.J. (L 150) 40 (classifying crypto-assets into asset-referenced tokens, e-money tokens, and a residual “other crypto-assets” category, with different regulatory treatments for each).
[46] GENIUS Act, supra note 5, § 18 (addressing payment stablecoins issued by foreign permitted stablecoin issuers registered with the Comptroller of the Currency, which generally will not meet the definition of “security” as Covered Stablecoins). The GENIUS Act’s “permitted payment stablecoin issuer” framework, requiring U.S. formation and federal or state authorization, has no direct counterpart in MiCA’s e-money token authorization framework.
