On Tuesday, the U.S. Securities and Exchange Commission (SEC) issued broad guidance to the crypto industry, excluding the vast majority of cryptocurrencies from being classified as securities.
The interpretive guidance, released alongside its sister agency, the Commodity Futures Trading Commission (CFTC), seeks to clearly define different types of crypto assets and how the regulators will approach them. It also provides the first-ever formal distinctions between which types of assets do not meet the definition of securities and what makes an asset meet that definition as an investment contract.
SEC: Most Utility-Based, Decentralized Assets and Activities Aren’t Securities
Under the new guidance, the SEC declared that most utility-based and decentralized crypto assets do not meet the criteria of an investment contract under the Howey Test. It also notes that blockchain-based activities like mining, airdrops, and staking do not constitute the offering of a security.
“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,” Atkins said in a statement.Â
Atkins was appointed by President Donald Trump in January 2025 to enact a pro-crypto regulatory regime in the country. After years of “regulation by enforcement” action by the SEC on major digital asset industry players under previous U.S. administrations, forcing many firms to move offshore, the change in Washington’s approach to the sector brings much-needed confidence and stability.
Gary Gensler, Atkin’s predecessor at the agency, appointed by President Joe Biden, had declined to commit to tailored policies for the digital assets market, despite being urged by industry lobby groups. His decision left a longstanding gap in the SEC’s regulatory certainty in the U.S. – the world’s most important financial markets.
The Biden-era SEC was classifying digital assets within the context of the Howey Test – a regulatory framework stemming from a Supreme Court case that was frequently cited in enforcement action against many crypto-native firms.
“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,” Atkin said.
SEC–CFTC Guidance Bridges U.S. Crypto Economy Under CLARITY Act
He said the effort serves as an “important bridge” for entrepreneurs and investors as Congress works towards advancing the bipartisan crypto market structure bill – the CLARITY Act. The SEC chief added that he is looking forward to implementing the market structure regulation with CFTC chairman Mike Selig “in the near future.”
In a statement released shortly after the SEC, the CFTC said that it would “administer” the Commodity Exchange Act consistent with the securities watchdog’s interpretation. The commodities regulator called the guidance a “major step” in its efforts to provide greater clarity regarding the treatment of crypto assets, and “complements Congressional endeavors to codify a comprehensive market structure framework into statute.”
Although the CLARITY Act has stalled in recent months, the SEC’s move shows that the agency is not waiting for laws essential to the crypto market’s structure to be enacted before it establishes clearer rules for the industry. Atkins pointed out that the agency’s overreliance on the Howey Test for classifying digital assets amounted to a persistent failure to provide clarity on whether certain cryptocurrencies should be regulated by different agencies.
While speaking at the Digital Chamber’s DC Blockchain Summit, he said the SEC is planning to launch a formal rulemaking process in a week or two, which will include further crypto proposals that the regulator will be addressing. That document is expected to be more than 400 pages, and will contain the chairman’s plans for an “innovation exemption” for crypto firms.
“We are not the Securities and Exchange Commission,” Atkins said at the summit, prompting a burst of applause from the audience of crypto industry professionals.
SEC Crypto Taxonomy Covers Commodities, Collectibles, Tools, Stablecoins & Securities
The SEC’s crypto taxonomy divides digital assets into five groups: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. Among them, digital securities are the only asset that the agency says falls squarely within its regulatory regime. This lot includes tokenized securities, which are digital representations of traditional investments like stocks and U.S. Treasury bills.
To be recognized as a digital commodity, both the SEC and CFTC plan to assess whether a digital asset derives its value from the programmatic operation of a “crypto system” – aka blockchain, as opposed to an expectation of profit that stems from the essential managerial efforts of others. Bitcoin (BTC) and Ethereum (ETH), which are widely considered digital commodities, play a foundational role in securing their respective blockchains.
Meanwhile, digital collectibles are linked to creative works like music and art, but the SEC said that they can also represent in-game items or references to internet memes. This definition suggests that most NFTs and memecoins would now fall under an umbrella distinct from digital tools, which function as a membership, event ticket, or digital identity.
The agency also said that non-security crypto assets may be classified as investment contracts under certain conditions, depending on representations that issuers make. However, the existence of an investment contract does not necessarily make a digital asset a security during transactions that take place on secondary marketplaces.
Moreover, non-security crypto assets tied to investment contracts may not be subject to federal securities laws if there is no longer a reasonable expectation from a purchaser that the issuer’s representations and promises are connected to the digital asset.
Atkins also announced a potential safe harbor exemption for certain crypto projects. The SEC chair said the exemptions could soon apply to crypto startups worth up to $5 million seeking to experiment with crypto assets in their first four years; to entrepreneurs raising up to $75 million via investment contracts involving certain digital assets; and to certain crypto assets once their creators have ceased all essential managerial efforts.
