SEC and CFTC issue interpretive release on crypto: Top points

On March 17, 2026, the United States Securities and Exchange Commission (SEC) issued an interpretive release (Release) addressing how federal securities laws apply to crypto assets and transactions involving them.

The Commodity Futures Trading Commission (CFTC) joined the Release to provide guidance that it will administer the Commodity Exchange Act consistent with the SEC’s interpretation. The Release was issued as part of an initiative of the President’s Working Group on Digital Asset Markets.

The interpretation reflects extensive feedback received by the SEC, including through the SEC’s Crypto Task Force. Specifically, the Release uses the investment contract test under SEC v. W.J. Howey Co. to address:

• The classification of crypto assets
• How non-security crypto assets may become subject to an investment contract
• The treatment of protocol mining, protocol staking, and wrapping under US securities laws
• The treatment of certain airdrops

The Release is one of the most comprehensive statements issued by the SEC on the treatment of crypto assets.

The definition of security

In the Release, the SEC reiterates that the statutory definition of “security” is broad and turns on economic reality rather than labels, but it is not unlimited, and it does not generally apply to items purchased for use or consumption. The SEC confirms that there is no single, universal test for “security,” and each enumerated instrument (e.g., note, stock, or investment contract) must be analyzed under relevant case law.

The Release states that the SEC and federal courts have applied the investment contract framework established under Howey. This analysis determines that an instrument – such as a contract, transaction, or scheme – may qualify as a security under the federal securities laws when an individual invests funds in a common enterprise and has a reasonable expectation of profits from the efforts of others.

Classification of crypto assets

Noting that crypto assets include a broad range of instruments with different characteristics, uses, and functions (collectively, Factors), the SEC classifies crypto assets into the following categories based on their Factors:

Digital commodities

Crypto assets are considered digital commodities when they are intrinsically linked to and derive their value from the programmatic operation of a crypto system and from supply and demand dynamics, rather than from the expectations of profits from the essential managerial efforts. Digital commodities are not classified as securities. These assets typically convey technical rights to the holder, including the ability to stake, and may also convey governance rights, including voting on software upgrades and treasury expenditures.

The SEC has cited several examples of digital commodities, including: Aptos (APT), Avalanche (AVAX), Bitcoin (BTC), Bitcoin Cash (BCH), Cardano (ADA), Chainlink (LINK), Dogecoin (DOGE), Ether (ETH), Hedera (HBAR), Litecoin (LTC), Polkadot (DOT), Shiba Inu (SHIB), Solana (SOL), Stellar (XLM), Tezos (XTZ), and XRP (XRP).

Digital collectibles

Digital collectibles are crypto assets that are designed to be collected and/or used and may represent or convey rights to artwork, music, videos, trading cards, in-game items, or digital representations or references to internet memes, characters, current events, or trends, among other things. Holders do not gain legal rights or interests in a business enterprise, but may have limited intellectual property rights. Meme coins are examples of digital collectibles. Digital collectibles are not considered to be securities. However, the offer and sale of a fractional ownership interest in a digital commodity could constitute the offer and sale of a security if offered and sold as an investment contract.

Digital tools

Digital tools are crypto assets that perform practical functions, such as memberships, tickets, credentials, title instruments, or identity badges, and do not have intrinsic properties or rights. Digital tools are not considered securities.

Stablecoins

Crypto assets known as stablecoins are designed to maintain a stable value relative to a reference asset, such as the US dollar. Payment stablecoins – digital assets designed to be used for payment – are excluded from the definition of “security” under the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act. However, a stablecoin that is not a payment stablecoin may be classified as a security under certain circumstances.

As highlighted in the SEC’s Statement on Stablecoins, the offer and sale of certain stablecoins used for making payments, transmitting money, or storing value and are backed by the US dollar (covered stablecoins), are not considered the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act of 1933 (Securities Act). Covered stablecoins do not include yield-bearing stablecoins, which may be classified as securities.

Digital (tokenized) securities

Digital securities are financial instruments enumerated in the definition of “security” that are formatted as or represented by crypto assets, where the record of ownership is maintained in whole or in part on or through one or more crypto networks. The rights of holders of the crypto assets may be materially different from those of the holders of the underlying securities. As discussed in our prior blog, titled “SEC issues guidance on tokenized securities and related developments,” digital securities may be tokenized by the issuers of the underlying securities or by unaffiliated third parties.

See Appendix A for a summary and examples of the assets noted above.

How crypto assets become subject to investment contracts

The SEC emphasizes that, as with other non‑security assets, non‑security crypto assets may nonetheless be offered and sold pursuant to investment contracts. A non‑security crypto asset becomes subject to an investment contract when an issuer:

• Induces an investment of money in a common enterprise, and
• Makes representations or promises to undertake essential managerial efforts from which a purchaser would reasonably expect to derive profits.

The focus is on what the issuer (including affiliates, agents, and authorized promoters) represents or promises, and how it markets the asset. Representations and promises that may create a reasonable expectation of profits must be:

• Made by or on behalf of the issuer and attributable to it
• Conveyed before or contemporaneously with the offer or sale, and
• Sufficiently specific and detailed regarding planned essential managerial efforts, milestones, timelines, resources, and the link between those efforts and potential profits.

Vague, non‑actionable statements or generalized enthusiasm are less likely to create a reasonable expectation of profits.

The Release notes that the fact that a non-security crypto asset is subject to an investment contract does not, in itself, convert the non-security crypto asset into a security. Accordingly, such assets would not continue to be subject to an investment contract in a secondary market transaction.

Separation of a non-security crypto asset from the associated investment contract

A non-security crypto asset that has been offered and sold subject to an investment contract does not remain subject to the associated investment contract in perpetuity. Once buyers can no longer reasonably expect profits based on the issuer’s essential managerial efforts, the asset is no longer subject to the investment contract, and secondary trading ceases to be a securities transaction.

The SEC identifies two non-exclusive “indicia of separation”:

1. Fulfillment of the issuer’s representations or promises

When the issuer has completed the essential managerial efforts it promised (e.g., delivering specified functionality, software development milestones, decentralization, open sourcing code, among others) and this is publicly disclosed, purchasers can no longer reasonably expect profits from further issuer efforts. In such a case, the associated investment contract then ceases to exist, and subsequent offers or sales of the non-security crypto asset are not securities transactions, unless a new investment contract is created.

2. Failure or abandonment of the issuer’s promised efforts

If the issuer is unable or unwilling to perform or complete promised essential managerial efforts (e.g., due to technical, financial, or market failures) and publicly, clearly, and widely announces that it will no longer pursue those efforts, purchasers may no longer reasonably expect profits from the issuer’s efforts. At this point, the asset would separate from the investment contract, which would cease to exist.

Even when a non-security crypto asset separates from an investment contract, the issuer would remain liable for any unregistered offers and sales of the earlier investment contract and material misstatements or omissions regarding promised essential managerial efforts.

The interpretation applies only after an investment contract has been created under Howey. It does not alter the legal standards for creating an investment contract, nor does a later “separation” cure past registration or antifraud violations.

Application to initial coin offerings

The Release indicates that initial coin offerings (ICOs) and related simple agreements for future tokens (SAFT) offerings are securities offerings and must be registered with the SEC under the Securities Act or qualify for an exemption from registration even if they relate to non-security crypto assets.

However, if the promoters’ efforts terminate after the ICO or SAFT offering, and purchasers can no longer reasonably expect profits from promoters’ or issuer’s efforts, then the assets subject to offering are no longer subject to the securities laws and may be freely traded without SEC oversight.

Similarly, the platform on which they trade would not be deemed a securities exchange or an alternative trading system.

Other activities

The Release also addresses the treatment of the following activities under securities laws:

Protocol mining

The SEC applies the Howey test to assess protocol mining activities, including the mining of digital commodities on a proof-of-work (PoW) network. It has determined that, under the conditions described in the Release, such activities do not involve the offer and sale of a security as defined by Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Securities Exchange Act of 1934 (Exchange Act).

As a result, participants in the protocol mining activities described in the Release are not required to register transactions with the SEC or to seek an exemption from registration under the Securities Act.

Protocol staking

The SEC also reviews protocol-stake activities on proof-of-stake (PoS) networks, where node operators stake digital commodities to qualify as validators and receive protocol rewards.

The Release discusses various staking activities, including self (solo) staking, self-custodial staking directly with a third party, custodial arrangements, and liquid staking, as well as related ancillary services. It concludes that these activities do not involve the offer and sale of securities and therefore do not require registration or an exemption from registration.

Similarly, the SEC concludes that the offer and sale of staking receipt tokens that are receipts for non-security crypto assets that are not subject to an investment contract do not require registration (or an exemption from registration) under the Securities Act.

Wrapping

The SEC addresses the concept of “wrapping” crypto assets, which involves depositing a crypto asset with a custodian or cross-chain bridge (the wrapped token provider) and issuing a new token on another network or token standard. This process occurs on a strict one-for-one basis, redeemable at par for the original asset. The underlying deposited crypto asset is held for the benefit of wrapped token holders, and not used for lending, pledging, rehypothecation, trading, or other purposes. The wrapped token provider offers no additional yield, returns, or rights beyond the one-for-one redemption of the deposited asset.

The determination regarding whether the offer and sale of a redeemable wrapped token, as described in the Release, constitutes an offer and sale of a security under Section 2(a)(1) of the Securities Act depends on the nature of the underlying asset. For example, if the redeemable wrapped token is a receipt for a non-security crypto asset that is not subject to an investment contract, then its offer and sale are not subject to Securities Act registration requirements.

Conversely, the offer or sale of a redeemable wrapped token that is a receipt for a digital security or a non-security crypto asset that is subject to an investment contract would be an offer or sale of a security within the meaning of Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act.

Covered airdrops

The SEC addresses the application of Howey to airdrops of non-security crypto assets where recipients do not provide the airdrop issuer with money, goods, services, or other consideration in exchange for the airdropped asset and any consideration that was provided to the issuer was not bargained for in exchange for the airdropped asset (e.g., prior unrelated activity or usage before any airdrop is announced).

Examples include:

• An unannounced airdrop of non-security crypto assets to holders of a specified crypto asset
• An airdrop to users of a testing environment of a new crypto system for activity occurring before the issuer later decides to reward that prior usage, provided the airdrop was not pre-announced to induce that usage
• An unannounced airdrop to application users meeting usage criteria measured solely before the airdrop date

In these circumstances, the SEC concludes the first element of Howey – investment of money (or other consideration) – is not met, because recipients do not “give up tangible and definable consideration in return for” the airdropped asset. Accordingly, the non-security crypto asset does not become subject to an investment contract because of the airdrop alone, and the airdrop need not be registered under the Securities Act or rely on an exemption.

The SEC states that its interpretation does not address airdrops of digital securities or change its views regarding what constitutes a “sale” under Section 2(a)(3) of the Securities Act and Section 3(a)(14) of the Exchange Act, which do not apply to non-security crypto assets that are not subject to investment contracts.

See Appendix B for a summary of the SEC’s application of securities laws to the activities above.

Key takeaways

With this Release, the SEC emphasizes several key federal securities principles:

• An instrument’s economic characteristics determine its status as a security, regardless of whether it is in digital form
• The Release clarifies how federal securities laws apply to key aspects of the digital assets industry
• Its guidance aims to provide greater clarity for industry participants and advisers in initiating or structuring transactions or activities involving digital assets

Next steps

The Release is an interpretive rule and is exempt from the Administrative Procedure Act’s notice and comment requirements. It is effective immediately upon publication in the Federal Register.

The SEC is soliciting public comments on the interpretations contained in the Release. Based on feedback, the SEC may refine, revise, or expand its guidance.

Issuers and investors in crypto assets are encouraged to consider how the SEC’s interpretation may affect the development and issuance of crypto assets, as well as related business practices.

Learn more

For more information, please contact the authors.

 

Appendix A: Asset classifications

Crypto asset	Description	Classified as a security?
Digital commodities (e.g., APT, AVAX, BTC, BCH, ADA, LINK, DOGE, ETH, HBAR, LTC, DOT, SHIB, SOL, XLM, XTZ, XRP)	Crypto assets that are intrinsically linked to and derive their value from the programmatic operation of a crypto system that is functional, as well as supply and demand dynamics, rather than from the expectation of profits from the essential managerial efforts of others.	No
Digital collectibles (e.g., meme coins, CryptoPunks, Chromie Squiggles, Fan Tokens, WIF, and VCOIN)	Crypto assets designed to be collected and/or used and may represent or convey rights to artwork, music, videos, trading cards, in-game items, or digital representations or references to internet memes, characters, current events, or trends, among other things.	No
Digital tools (e.g., Ethereum Name Service domain names, and CoinDesk’s Microcosms NFT Consensus Ticket)	Crypto assets that perform practical functions within a digital system, such as memberships, tickets, credentials, a title instrument, or identity badge.	No
Payment stablecoins or covered stablecoins	Crypto assets that are designed to maintain a stable value relative to a reference asset like the US dollar. Payment stablecoins, which are digital assets designed for payment, are excluded from the definition of “security” under the GENIUS Act.	No
Digital (tokenized) securities	Financial instruments enumerated in the definition of “security” that are formatted as or represented by crypto assets, where the record of ownership is maintained in whole or in part on or through one or more crypto networks.	Yes

 

Appendix B: Activities and registration requirements

Transaction	Is the asset a digital security or subject to an investment contract?	Is SEC registration required?	Analysis
Sale of crypto assets	Yes	Yes	A digital or “tokenized” security is subject to the same registration requirements under the Securities Act. If the crypto asset is not a financial instrument enumerated under the definition of “security,” the Howey test may be applied to determine whether it is subject to an investment contract.
	No	No	If the asset is not a financial instrument enumerated under the definition of security or does not satisfy the Howey test, then it is not an offer or sale under Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act.
Protocol mining activities (PoW networks)
Self (solo) mining	No	No	A miner’s self (or solo) mining is not undertaken with a reasonable expectation of profits to be derived from the essential managerial efforts of others under the Howey test.
Mining pool	No	No	The miners in a pool do not expect profit derived from the essential managerial efforts of others under the Howey test.
Protocol staking (PoS networks)
Self (solo) staking	No	No	Rewards are payments to the node operator in exchange for the services it provides to the PoS network, rather than profits derived from the essential managerial efforts of others.
Self-custodial with a third party	No	No	The owner has no expectation of profit derived from the essential managerial efforts of others.
Custodial arrangements	No	No	The custodian does not provide essential managerial efforts to depositors for whom it provides the service.
Liquid staking	No	No	Liquid staking providers taking custody of deposited digital commodities and, in some cases, selecting a node operator do not constitute essential managerial efforts because these activities are administrative or ministerial in nature.
Ancillary services (e.g., slashing coverage, early unbonding, alternative rewards, aggregation)	No	No	Ancillary services are merely administrative or ministerial in nature and do not involve essential managerial efforts.
The offer or sale of staking receipt tokens	Yes	Yes	If the underlying asset is a digital security or is subject to an investment contract, it is an offer or sale under Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act
	No	No	The receipt is for an asset that is not a security, and the parties involved in generating, issuing, and redeeming the receipts do not provide essential managerial efforts.
Offer or sale of redeemable wrapped tokens	No	No	The receipt is for an asset that is not a security, so it does not involve the offer and sale of a security within the meaning of Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act.
	Yes	Yes	The receipt is for an asset that is a security within the meaning of Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act.
Covered airdrops (non-security crypto assets to recipients who do not provide the issuer with money, goods, services, or other consideration)	No	No	The first Howey element (investment of money) is not met because recipients do not give up tangible consideration. Must not be pre-announced to induce usage.