On March 17, 2026, the U.S. Securities and Exchange Commission (“SEC”) issued an interpretation that clarifies when and how federal securities laws govern crypto assets and related transactions. (Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, SEC Release Nos. 33-11412; 34-105020 (hereinafter, the “Release”)) Notably, the Commodity Futures Trading Commission (“CFTC”) participated in the Release, signaling its intent to apply the Commodity Exchange Act in accordance with the SEC’s interpretation and confirming that crypto assets falling outside the definition of a security—referred to as “non-security crypto assets”—may qualify as “commodities” subject to CFTC oversight. The SEC interpretation aims to (1) provide a coherent token taxonomy, (2) address how a non-security crypto asset may become subject to, and how it may cease to be subject to, an investment contract (and thus subject to Federal securities law), and (3) clarify the application of the Federal securities laws to protocol mining, protocol staking, the wrapping of a non-security crypto asset, and airdrops.
Background
Although the SEC has grappled with digital asset questions for over ten years, it had never offered official, holistic guidance tailored to the distinctive features of crypto markets. Instead, the Commission leaned heavily on the investment-contract framework articulated by the U.S. Supreme Court in SEC v. W.J. Howey Co. (the “Howey test”) as its principal tool for assessing whether digital tokens and associated transactions triggered securities-law obligations. But before 2025, the SEC had not crafted a purpose-built regulatory regime for digital assets and instead carried out numerous enforcement proceedings—a strategy that has drawn criticism (including from Commissioners) as “regulation by enforcement.”
Responding to those criticisms and drawing on public feedback gathered by the SEC’s Crypto Task Force, the SEC released this interpretive guidance to accompany ongoing Congressional work on comprehensive digital-asset market-structure legislation and bring predictability to the space.
Key Highlights of the Interpretation
Token Taxonomy
Perhaps the most consequential element of the release is a new classification system for digital tokens. The SEC categorized crypto assets based on their characteristics, uses, and functions, then evaluated each category against the statutory meaning of “security.”
- Digital Commodities (not securities). Crypto assets whose value stems principally from the automated mechanics of a “functional” blockchain network and from ordinary market supply-and-demand forces, rather than from expected profits and reliance on management’s entrepreneurial efforts.
- Digital Collectibles (not securities). Crypto assets intended primarily for collection or personal enjoyment, such as digital artwork, music, video clips, trading cards, in-game items, or tokenized representations of memes, characters, and cultural moments.
- Digital Tools (not securities). Crypto assets that serve a utilitarian purpose, functioning as memberships, event tickets, credentials, title instruments, or identity badges.
- Payment Stablecoins (not securities). Stablecoins issued by a “permitted payment stablecoin issuer” in accordance with the GENIUS Act and “Covered Stablecoins”—specifically, those described in the SEC’s Staff Statement on Stablecoins (Apr. 4, 2025) for certain stablecoins issued before the Genius Acts becomes effective.
- Digital Securities (“Tokenized Securities”). Traditional financial instruments enumerated in the definition of “security” in securities laws (e.g., a stock, bond, or note) that is simply re-packaged as a crypto asset with ownership records maintained through a crypto network will be treated as securities.
Investment Contract Analysis: When a Non-Security Crypto Asset Becomes a Security
The release also addresses how and when a non-security crypto asset becomes part of an investment contract and how and when it stops being part of an investment contract. On the entry side, the SEC explains that an investment contract arises when an issuer solicits funds into a pooled venture by making commitments about future managerial efforts that lead purchasers to reasonably anticipate earning a return. The guidance further details what kinds of representations or promises can give rise to an investment contract, addressing who must make them, through what channels, with what degree of specificity, and when. Critically, the guidance states that post-sale representations or promises and third-party representations would not cause a token to become part of an investment contract.
On the exit side, the SEC articulated that a token sheds its investment-contract status once the underlying arrangement concludes. This could be because the issuer has delivered on its commitments or because it has plainly failed to do so (for example, because the technology could not be made to work).
Protocol Mining, Staking, Wrapping, and Airdrops
The SEC also carved out several common on-chain activities from the reach of the securities laws. Specifically, participating in protocol mining or staking and wrapping non-security crypto assets do not constitute offers or sales of securities under the guidance. Similarly, the SEC determined that certain crypto asset distributions—commonly known as “airdrops”—lack the requisite “investment of money” element of the Howey test and therefore do not trigger securities-law requirements.
Looking Ahead
The Release is the long-anticipated culmination of this Administration and the current SEC’s stated views towards crypto regulation. It further puts in the rear-view the era of enforcement-first posture and drives firmly towards a more transparent, guidance-oriented model designed to give industry participants greater certainty and incentives to work in the US and with US regulators. Although the Release is final and constitutes an interpretive rule exempt from the Administrative Procedure Act’s notice-and-comment requirements, the SEC is still “soliciting public comment on the views set forth in the interpretation” and may “refine, revise, or expand” it in response to such comments. Accordingly, market participants should monitor developments closely, as the SEC may revise its interpretive position or use the Release as a basis for future rulemaking.
