SEC Issues Interpretive Guidance on Crypto Asset Classification

New token taxonomy establishes that most crypto assets are not securities, while clarifying when investment contract status can begin and end.

Key Takeaways

• The U.S. Securities and Exchange Commission (the “SEC”) issued interpretive guidance regarding the definition of “security” as applied to certain types of crypto assets and transactions involving crypto assets.
• The SEC provides five categories of digital assets: (i) digital commodities, (ii) digital collectibles, (iii) digital tools, (iv) stablecoins, and (v) digital securities, only the last of which is deemed to be inherently a security.
• The Howey test continues to be binding legal precedent and may be used to determine when the sale of a digital asset may be deemed to create an investment contract.
• The Interpretive Release supersedes the SEC’s prior guidance, “Framework for ‘Investment Contract’ Analysis of Digital Assets” (April 3, 2019).

Background

On March 17, 2026, the SEC issued a 68-page interpretive release clarifying how federal securities laws apply to certain crypto assets related transactions. The CFTC joined the interpretation, providing guidance that it will administer the Commodity Exchange Act (“CEA”) consistently with the SEC’s framework. This joint action represents the most comprehensive regulatory clarity to date on the SEC’s interpretation of federal securities laws with respect to digital assets.

The interpretation follows an extended period in which the SEC relied primarily on enforcement actions, rather than formal guidance, to articulate its views on when crypto assets constitute securities. The interpretive release does not carry the same legal weight as a formal rulemaking, but it provides authoritative guidance on how the agencies will apply existing law.

New Token Taxonomy

The interpretation establishes a taxonomy to separate crypto assets into one of five categories, only one of which is deemed to be inherently a security under federal securities laws:

In determining that the first four categories of crypto assets do not constitute securities, the SEC repeatedly stated that they are not securities because they “[do] not have the economic characteristics of a security,” later stressing that categorization is not purely label-based—it will look to “economic reality” and that a token’s classification may shift over time as facts change.

Howey Test Analysis

The Howey test, established under SEC v. W.J. Howey Co., 328 U.S. 293 (1946), defines an investment contract (a type of security) as a contract, transaction, or scheme involving (i) an investment of money, (ii) in a common enterprise, (iii) with an expectation of profits derived from the efforts of others. In the release, the SEC emphasized that a crypto asset that falls into one of the first four categories, and therefore not inherently a security, can still be sold as part of an investment contract under Howey, thereby triggering registration obligations. In outlining how the Howey test might apply to crypto tokens, the SEC focused primarily on how an issuer of a crypto token markets and promotes the sale of that digital asset, stating that representations and promises made in connection with such sale are “more likely to create reasonable expectations of profit” (thereby satisfying the third prong of the Howey test) when such representations or promises:

1. Are explicit and unambiguous as to the essential managerial efforts to be undertaken by the issuer;
2. Contain sufficient details demonstrating the issuer’s ability to implement the proposed project (e.g. focusing on the credentials of the issuer’s team members); and
3. Explain how the issuer’s efforts will produce profits for purchasers.

The guidance expressly acknowledges that investment contract status is not perpetual and that a token sold as part of an investment contract does not necessarily carry that investment contract forward in secondary sales. An investment contract can come to an end if the issuer has fulfilled its representations or promises made at the time of the initial sale or if the issuer can no longer reasonably be expected to fulfill or continue to engage in essential managerial efforts outlined in its representations or promises, such that the sale of the related crypto token will not carry with it the prior investment contract. This explicit recognition of a dynamic investment contract status is a notable shift, responding to long-standing industry critiques of “security forever” theories for utility-style tokens.

Application to Certain Transactions Involving Crypto Assets

The interpretation directly addresses several common Web3 mechanisms that have generated significant regulatory uncertainty:

• Royalty payments through embedded code in NFTs;
• Protocol mining, including solo mining as well as mining pools;
• Protocol Staking, including solo staking, self-custodial staking with third parties, custodial arrangements, and liquid staking;
• Wrapping (redeemable wrapped tokens that are receipts for non-security crypto assets); and
• Airdrops that are distributions of tokens to recipients who do not provide any money, goods, services, or other consideration in exchange for the airdropped non-security crypto asset.

In each case, the guidance provides that the activities outlined above, to the extent they comply with the description set forth in the guidance, do not involve the offer and sale of securities under federal securities laws.

Practical Implications and Action Items

Given the interpretive release and related public statements, token issuers and other market participants should consider the following:

• Reassess token classifications. Review existing and planned token offerings using the SEC’s taxonomy, focusing on current—not just historical—facts and circumstances.
• Assess and reassess Howey application. In connection with the issuance of any crypto token, determine whether the Howey test indicates that the sale of such digital assets might be deemed to create an investment contract. For projects that may have initially been subject to an investment contract under Howey, evaluate whether changes since the initial issuance (fulfillment of promise, etc.) may support a position that the investment contract has terminated.
• Strengthen documentation. Enhance documentation and disclosure around token design, distribution, governance, and marketing to support classification decisions under the new framework. The SEC’s emphasis on explicit and unambiguous representations increases the importance of careful drafting of marketing materials.
• Evaluate platform listings. For platforms listing or facilitating trading of non-security tokens, assess whether tokens could be the subject of an investment contract based on how they were or are being offered and marketed.
• Review Crypto Transactions. With respect to activities involving crypto asset transactions that generally fall outside the scope of the federal securities laws as outlined above (royalties, mining, staking, wrapping, airdrops, etc.) review such transactions to confirm they are consistent with the guidance offered in the interpretive release.
• Attend to other Regulatory Restrictions. While the SEC has added needed clarification on the application of federal securities laws in the sale and issuance of crypto tokens, it is important to remember that other federal and state regulations may also apply to such tokens and related transactions, including regulations covering anti-money laundering, money transmission, consumer protections, etc.

Looking Ahead

The interpretive release is intended as a bridge while Congress advances broader digital asset market structure legislation. The coordinated SEC-CFTC approach represents a meaningful step toward regulatory clarity, but the facts-and-circumstances nature of the framework means that careful, ongoing analysis of individual token programs and trading activities will remain essential.

In addition, in a statement delivered at the DC Blockchain Summit on March 17, 2026, Chairman Atkins stated that the interpretive release was part of a “broader framework” for providing clarity in the crypto asset markets. He previewed that the SEC would like to release a proposed safe harbor rule for public comment within the coming weeks, suggesting two exemptions from registration—a startup exemption and fundraising exemption—for offerings of investment contracts involving certain crypto assets, as well as an “investment contract safe harbor” from the definition of “security” for certain crypto assets. Any such safe harbors would provide additional color and context into how the SEC intends to interpret federal securities laws and their application to digital securities.