SEC and CFTC Clarify When Digital Assets Are—and Are Not—Securities

The Securities and Exchange Commission (SEC) issued an interpretation on March 17, 2026 (the Interpretation), which the Commodity Futures Trading Commission (CFTC) formally joined, marking the most coordinated federal effort to date to clarify the regulatory treatment of digital assets. In its accompanying fact sheet, the SEC explains that, in light of concerns raised by the SEC’s prior regulation of digital asset transactions through enforcement, it now seeks to articulate a more durable, technology‑neutral approach to determining when a digital asset is a security. The CFTC, in turn, states in its press release that it will administer the Commodity Exchange Act consistent with the SEC’s framework, signaling a unified federal posture toward crypto‑asset markets.

The Interpretation states its purpose plainly: to clarify how federal securities laws apply to digital assets and digital asset transactions by distinguishing which assets qualify as securities and which do not, and to explain how a non-security digital asset may be subject to an investment contract. It also positions this framework as a foundation for future rulemaking and potential Congressional action.

The New Digital‑Asset Taxonomy

The SEC organizes digital assets into five categories, each evaluated under the statutory definition of “security.” The taxonomy is not merely descriptive; it is intended to give market participants a clearer starting point for compliance analysis of digital assets while also complementing legislative efforts to create a comprehensive statutory framework for crypto markets and digital assets. The SEC, however, notes that the Interpretation contains the SEC’s views on the application of the Howey test to digital assets but does not supersede or replace the test. The Interpretation also makes clear that each taxonomy category is defined by specific conditions, and the SEC’s view that certain assets are not securities applies only when those assets meet the definitions and limitations set out in the Interpretation.

The Interpretation concludes that digital commodities, collectibles, and tools (each of which are defined in the Interpretation) should generally be treated as non‑securities because they do not have the economic characteristics of securities, including the fact that purchasers would not expect to profit from the essential managerial or entrepreneurial efforts of others. Payment-type stablecoins that meet certain conditions specified in the SEC’s prior statement on stablecoins are generally outside the securities definition, absent additional features that create an investment contract. By contrast, tokenized equity, debt, and similar instruments are classified as digital securities and remain securities regardless of the technology used to record ownership or whether such digital securities provide non-financial benefits to holders.

The taxonomy performs two important functions. First, it allows the SEC to acknowledge, more formally than before, that many crypto assets are not securities in their inherent form. Second, it clarifies how the SEC will evaluate transactions involving those assets, particularly where marketing, distribution, or ongoing development efforts may create investment‑contract expectations.

Application of Howey for Digital Assets

A central theme of the Interpretation is the SEC’s effort to clarify how the Howey test applies to digital assets.  The Interpretation explains that a non‑security crypto asset becomes subject to an investment contract when purchasers reasonably expect profits based on the issuer’s essential managerial efforts. That expectation can arise from explicit statements, marketing materials, technical roadmaps, or other communications that tie the asset’s value to the team’s future work. The SEC explains that crypto assets would cease to be subject to an investment contract when purchasers no longer reasonably rely on the issuer’s or promoter’s essential managerial efforts for the asset’s value or when an issuer fulfills its promised managerial efforts.

The analysis remains highly fact and circumstances specific, but, in practice, three considerations tend to shape the analysis:

• Nature of the issuer’s promises: How are representations conveyed? Via a written agreement? Public communications?
• Specificity of representations: How concrete, detailed, or forward‑looking the statements are.
• Source of the representations: Whether representations are made by an issuer or a third party.
• Timing: Whether the representations or promises conveyed prior to the issuer’s sale of crypto assets.

This transaction‑focused approach aligns with how courts have been analyzing recent crypto cases and reflects the SEC’s recognition that the asset/transaction distinction is essential for digital‑asset markets.

Operational Activities: Mining, Staking, Wrapping, and Airdrops

The Interpretation also addresses several recurring activities that have generated uncertainty in enforcement actions and private litigation. The SEC states that protocol‑level mining, or network validation activities, typically involves neither an investment of money nor reliance on managerial efforts and therefore does not constitute a securities transaction. While the SEC describes certain specific staking activities that would not involve a sale of securities, staking programs require a more nuanced analysis, depending on whether the program involves managerial or entrepreneurial efforts beyond routine technical functions.

Wrapping a non‑security crypto asset generally does not, by itself, involve a securities offering, and airdrops (i.e., distributions without consideration) of non-security crypto assets generally do not satisfy the “investment of money” prong of Howey. However, the SEC leaves room to challenge airdrops or wrapping arrangements that are embedded in broader promotional campaigns, tied to other forms of consideration or require recipients to perform other tasks. In other words, the legal risk lies in the surrounding structure, messaging and ultimately the specific circumstances of the issuance, not in the bare technical act.

CFTC Alignment and the Emerging Jurisdictional Map

The CFTC’s press release is brief but significant. The agency explicitly embraces the SEC’s framework and confirms that many non‑security crypto assets will be treated as “commodities” subject to its anti‑fraud and anti‑manipulation authority. The CFTC frames the joint Interpretation as a step toward a more coherent federal approach and signals openness to future Congressional action on broader market‑structure legislation.

For market participants, this alignment means the jurisdictional map is clearer, though not necessarily simpler. A single asset may simultaneously be:

• A non‑security crypto asset under the SEC’s taxonomy;
• A commodity under the Commodity Exchange Act; and
• The subject of a securities transaction if offered or sold as an investment contract.

This combination will shape how firms think about registration, disclosure, surveillance, and enforcement risk across both agencies.

Practical Implications for Market Participants

The Interpretation has immediate implications for issuers, trading platforms, and intermediaries, requiring each to reassess how their assets, programs, and public communications align with the SEC’s clarified framework. Issuers must evaluate whether their statements or development plans create investment‑contract expectations; trading platforms must revisit asset‑listing and surveillance practices; and intermediaries offering staking, tokenization, or similar services should expect closer scrutiny of how those activities are structured and marketed.

Three areas deserve particular attention:

• Communications risk: Marketing materials, white papers, and roadmaps may inadvertently create expectations of profit from the essential managerial efforts of others.
• Product mapping: Each asset should be classified under the taxonomy, with an overlay of the specific transactions and programs that might change the analysis. Careful attention should be paid to the definitions provided by the SEC for each category of digital asset.
• Exit conditions: Issuers should evaluate the promises and statements made in marketing and promotional materials, as those representations affect whether purchasers continue to rely on the issuer’s efforts and when the asset may fall outside an investment‑contract analysis.

The Interpretation does not resolve every open question as application of the securities laws remains highly fact specific.  That said, it provides a practical foundation for projects to as compared to the enforcement‑only landscape of the past decade. It also indicates that the SEC and CFTC will continue to apply existing securities and commodities laws while acknowledging that future legislative action may further define the regulatory landscape.

Ballard Spahr’s multidisciplinary Blockchain Technology and Cryptocurrency Team has considerable experience advising clients developing blockchain-based services and platforms on the opportunities, risks, and challenges in deploying these technologies. We are currently advising clients on a host of these topics. Please contact us if we can assist you with advice and counsel regarding such matters or in responding to active inquiries, investigations, or proceedings.

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