SEC/CFTC Issue Joint Interpretation on Crypto Assets

The release is also notable because it clarifies that the common enterprise element must be satisfied under Howey, while placing greater weight on issuer representations or promises in assessing whether purchasers reasonably expect profits from the efforts of others. In that respect, the release offers additional clarity on how a non-security crypto asset may become subject to, and later separate from, an investment contract depending on the surrounding facts and circumstances.

In the release, the SEC also invites interested parties to file public comments.

The Release: A Closer Look

• The release adopts a five-category functional taxonomy: digital commodities, digital collectibles, digital tools, stablecoins and digital securities. Using these categories, the agencies distinguish whether a crypto asset is itself a security from whether a particular offer, sale or dissemination of that asset occurs as part of an investment contract, concluding that many tokens that were the subject of previous SEC enforcement efforts are not in and of themselves securities.
• The release places greater emphasis on issuer representations and promises in assessing purchaser expectations under Howey.
• Covered protocol mining and protocol staking activities, certain staking receipt tokens, certain redeemable wrapped tokens and certain no-consideration airdrops are treated as outside the securities laws under the specified fact patterns, whereas arrangements involving the staking of third-party assets with a promised or guaranteed yield, or involving discretionary management, may be more likely to be analyzed as an investment contract.
• Important questions remain for synthetic or security-linked tokenized exposure, mixed distribution models and arrangements outside the covered fact patterns discussed in the release.

Practical Implications
Issuers, foundations, protocol developers and intermediaries should reassess public statements, roadmaps, development milestones and other communications that could be characterized as representations or promises of essential managerial efforts. In light of the release, disclosure and communications practices may materially affect whether a non-security crypto asset is viewed as being offered or sold subject to an investment contract.

Market participants involved in staking, liquid staking, wrapping and token distributions should also test whether their arrangements fit the fact patterns the release actually addresses, rather than assuming the guidance applies categorically. The release is helpful, but much of its comfort is expressly tied to covered structures and circumstances.

Howey: From Decentralization to Representations
Although the agencies emphasize that Howey remains binding authority, the interpretation reflects a shift in how the test is applied. A central feature of this interpretation is the agencies’ increased emphasis on the role of issuer promises and representations in shaping purchaser expectations under the “efforts of others” prong of the Howey “investment contract” analysis. Under the approach reflected in prior SEC statements and enforcement actions, as well as in recent legislative proposals for crypto asset market structure such as the Digital Assets Market Clarity Act (CLARITY Act), the analysis often turned on whether a network had become sufficiently “decentralized,” that is, whether a core development team continued to play a significant role in maintaining or enhancing the network, whether governance and validation had dispersed across unaffiliated participants, and whether token value continued to depend on the efforts of identifiable actors.

The interpretation reframes that inquiry by placing greater weight on what the issuer has said and done. Under this framework, a non-security crypto asset becomes subject to an investment contract when it is offered with representations or promises to undertake essential managerial efforts from which purchasers would reasonably expect to derive profits, and it may cease to be subject to such an investment contract when those representations are fulfilled, abandoned or no longer reasonably relied upon. The notion that an investment contract could cease to exist upon the fulfillment of representations may require issuers to evaluate the risk of creating an investment contract each time members of an issuer’s management team provide, for example, new strategic plans with respect to a particular crypto asset. On the Commission’s view, explicit representations or promises are more likely (and more reasonably from the perspective of an investor) to create legally effective expectations. Relatedly, there may be a practical gap between seasoned issuers not making any representations and the expectations of investors relying on the track record of such issuers, and explicit representations that result in investors reasonably expecting to derive profits from the efforts of these issuers. The analysis thus turns less on the structural state of the network and more on the expectations created by issuer conduct and communications.

In this respect, the interpretation introduces a more dynamic model in which the application of the securities laws may vary over the life cycle of a token. A crypto asset may not itself be a security, but may be offered or sold as part of an investment contract at one stage and not at another, depending on whether purchasers reasonably continue to rely on the issuer’s promises and representations. The release thus suggests that, while the existence of an investment contract ultimately turns on reasonable purchaser expectations, issuers may influence the timing of when those expectations dissipate through their own communications and disclosures.

The Release’s Functional Taxonomy of Crypto Assets

Naming Digital Commodities
The interpretation provides, for the first time in an official Commission-level release, an affirmative classification of certain widely traded crypto assets as “digital commodities” that are not themselves securities. The agencies define digital commodities as crypto assets that derive their value from the programmatic operation of a functional crypto system and from supply and demand dynamics, rather than from the expectation of profits based on the essential managerial efforts of others. They further take the position that such assets are not themselves securities, but may be offered or sold as part of an investment contract depending on the surrounding facts and circumstances, thereby separating the characterization of the asset from that of the transaction.

Consistent with this approach, the agencies expressly identify a number of widely traded tokens—including Bitcoin (BTC), Ether (ETH), Solana (SOL), XRP, Cardano (ADA), Avalanche (AVAX), Polkadot (DOT), Chainlink (LINK), Dogecoin (DOGE), Shiba Inu (SHIB), Aptos (APT), Bitcoin Cash (BCH), Hedera (HBAR), Litecoin (LTC), Stellar (XLM) and Tezos (XTZ) as digital commodities. The Release further notes that other crypto assets, including Algorand (ALGO) and LBRY Credits (LBC), may qualify as digital commodities based on their characteristics, even though they are not included among the principal examples identified in the Release. This formally codifies the Atkins SEC’s much-expected departure from positions taken under prior leadership, including both statements and enforcement actions positing that many of these tokens (other than BTC) could be considered securities under Howey, bringing their issuance and sale within the SEC’s jurisdiction.

Digital Collectibles: Appreciation Without Howey
The agencies describe digital collectibles as crypto assets designed to be collected or used, including assets representing artwork, music, gaming items, memes, or other cultural or social content. These assets do not convey economic rights such as a claim on income, profits or assets of an enterprise and are instead analogized to physical collectibles. The agencies emphasize that, like traditional collectibles, digital collectibles derive their value from supply and demand dynamics, including factors such as popularity, subject matter and scarcity, rather than from the expectation of profits based on the essential managerial efforts of others. In particular, purchasing a digital collectible (or collectors’ series) with the hope that its value will increase due to such market forces is likened to purchasing artwork with the expectation that demand may increase its price and does not, standing alone, give rise to an investment contract.

The analysis turns on issuer conduct. A digital collectible remains outside the securities regime where its creator does not make representations or promises to undertake essential managerial efforts from which purchasers would reasonably expect to derive profits. By contrast, the introduction of financial features—most notably fractionalization or other arrangements that create shared economic exposure—may reengage securities analysis. In an illustrative passage with direct implications for real estate and other “real world asset” tokenization, the agencies note that in Howey itself, the sale of subdivided parcels of a citrus grove, combined with centralized management and profit-sharing arrangements, constituted an investment contract rather than a simple real estate sale because purchasers depended on the seller’s essential managerial efforts for profits. This suggests an artist’s promotional statements or other works that increase the value of an already existing digital collectible may not be enough to bring digital collectibles into the securities regime.

Digital Tools
The release treats digital tools as a separate category. It describes them as on-chain analogues to utilities that users acquire for functional use, rather than for investment return. Examples given in the release include Ethereum Name Service domain names and CoinDesk’s “Microcosms” NFT Consensus Ticket. The agencies explain that a digital tool generally is not a security because it does not represent a financial interest in a business enterprise or other obligor and is acquired for utility rather than profit expectation.

Stablecoins and Regulatory Channeling
The interpretation reinforces the GENIUS Act’s emerging framework by distinguishing between permitted stablecoins, which are treated as regulated payment instruments and not securities, and other stablecoins, which remain subject to case-by-case securities analysis.

This creates a bifurcated regime in which regulatory certainty is effectively conditioned on participation in the statutory framework. While non-compliant stablecoins are not categorically prohibited, they are left without interpretive protection and exposed to traditional securities analysis.

Digital Securities: Mere Representations or Synthetics
The interpretation makes clear that tokenization does not alter the legal character of a security. A “digital security” is a financial instrument represented as a crypto asset, and a security remains a security regardless of whether it is issued or recorded onchain or offchain. The interpretation distinguishes between securities tokenized by or on behalf of the issuer and crypto assets created by third parties that provide exposure to an underlying security, a framework that builds on a recent staff statement issued by the Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets, Statement on Tokenized Securities (January 28, 2026). In the former case, the token represents the security itself and is subject to the existing securities law framework. In the latter case, however, the token may not represent the underlying security at all, but instead provide economic exposure created by the third party, and may be subject to a different regulatory analysis.

The Staff Statement further distinguished among third-party tokenization models, including custodial structures that represent an interest in an underlying security held in custody and synthetic structures that provide economic exposure to a referenced security, including in the form of linked securities or security-based swaps. In these synthetic arrangements, the token does not convey ownership of the underlying security but instead reflects a contractual exposure created by the third party and may fall within the regulatory framework applicable to derivatives.

Notably, while the Staff Statement addresses the potential treatment of synthetic tokenized securities as security-based swaps, the interpretation itself does not. By adopting a similar taxonomy while declining to resolve the derivatives characterization of third-party tokenized securities, the interpretation leaves open whether such instruments should be analyzed as securities, investment contracts or derivatives. The result is a clear distinction between representation and transformation: Where tokenization merely represents an existing security, the analysis is straightforward, but where it creates synthetic exposure, the appropriate regulatory classification remains unresolved.

Mining and Protocol Staking
The interpretation provides significant comfort that certain mining and staking activities do not involve securities transactions, particularly protocol-level activity to validate transactions on the blockchain. This conclusion rests on the agencies’ characterization of validation activities as administrative or ministerial rather than managerial, even though such staking can still yield a reward or fee. Many aspects of validation, such as infrastructure operation, performance and governance participation, could plausibly be framed as non-trivial, value-affecting efforts; indeed, the SEC has previously taken the position in enforcement actions that certain staking as a service functionality fell within the SEC’s jurisdiction, see SEC v. Kraken (2023). The agencies nevertheless treat these activities as protocol-driven infrastructure functions in this revised interpretation, thereby removing them from the scope of Howey.

This conclusion appears most persuasive in public, permissionless networks, where participation is open, validators are interchangeable and no identifiable actor is responsible for driving value. In permissioned or coordinated systems, however, this characterization may be less clear. Where validation depends on curated participants, governance structures or identifiable entities responsible for network development and adoption, the analysis may shift back toward reliance on the efforts of others. In this respect, the interpretation’s comfort for staking should be understood as context-dependent rather than universally applicable.

Wrapped Tokens and the “Hat Check” Theory
The agencies take a straightforward and intuitive position on one-to-one wrapped tokens, treating them as non-securities and non-derivatives where they simply represent an underlying asset without altering economic exposure. This approach is analogous to the “hat check theory” familiar from analysis under the Investment Company Act of 1940, under which a token that functions as a custodial receipt for an underlying asset does not create a new investment instrument.

The key boundary is economic transformation. So long as the token remains a one-to-one representation, the analysis is relatively straightforward. However, where tokenization introduces fractionalization, pooling or synthetic exposure, securities or derivatives analysis may be reintroduced. Notably, the interpretation does not directly address non-custodial or trustless cross-chain mechanisms, such as atomic swaps—an emerging technology that has gained attention in part as a response to the significant security vulnerabilities and high-profile hacks associated with custodial bridging models—leaving open how the framework applies in the absence of a traditional issuer or custodian.

Airdrops and Mixed-Distribution Models
The interpretation provides comfort that airdrops involving no consideration do not satisfy the investment of the money prong of Howey. The release further explains that the interpretation does not apply where recipients, after announcement of the airdrop, must buy a crypto asset, buy a good or service, or perform a specific task in order to receive the airdropped asset.

For example, the release refers to “retweeting” a post sent by the issuer as service. The release further provides that the performance of a “specific task” is a form of service. In prior guidance and relevant caselaw, services were considered a form of consideration in large part because there is an exchange of value. The interpretation does not explicitly state (and courts have not held) that utilizing one’s digital name and likeness through a retweet in exchange for an airdrop rises to the level of an exchange of value, but the reference to such activity—without including it in one of the three safe harbors—suggests the SEC may believe it does.

The guidance does not, however, directly address scenarios in which some tokens are airdropped, others are sold and all tokens are fungible. In such mixed-distribution models, the fungibility of tokens and the presence of a broader distribution scheme may complicate the analysis. Market expectations may be shaped by the issuer’s overall conduct, including paid distributions, rather than the method by which any particular holder acquired tokens.

Conclusion
The interpretation leaves Howey fully intact but reshapes its application for digital assets. By recentering the analysis on issuer promises and representations and the expectations they create, the SEC and CFTC move away from decentralization as the primary organizing principle and toward a framework grounded in reliance and economic reality. The result is greater clarity at the asset level, cementing the treatment of many tokens as commodities, and certain network activities as non-securities, but continued uncertainty at the edges—particularly where tokenization creates synthetic exposure rather than merely representing an existing asset. For market participants, the takeaway is straightforward: labels and technology matter less than structure and communication, and those choices will increasingly determine where securities law in the crypto sector begins and ends.