SEC Provides Interpretive Guidance On The Application Of Federal Securities Laws To Certain Types Of Crypto Assets And Transactions

On March 17, 2026, the SEC and CFTC jointly issued interpretive guidance regarding the application of federal securities laws to certain types of crypto assets and transactions (the “Interpretive Guidance”). The Interpretive Guidance supersedes the SEC’s 2019 “Framework for ‘Investment Contract’ Analysis of Digital Assets.” This is a significant development in the federal regulatory landscape for digital assets, as it marks a shift from the SEC’s prior as-applied enforcement approach toward a more structured, taxonomy-based framework for determining whether crypto assets are securities. As discussed below, the Interpretive Guidance applies the Howey test to five categories of crypto assets and several common crypto asset activities. Notably, these changes in the federal crypto regulatory landscape are occurring in parallel with related efforts at the state level. We will continue to monitor and provide updates as these regulatory changes and others begin to take shape.

The Howey Test 

The Howey test is a common law framework used by courts to determine whether a transaction is an investment contract, which thus constitutes a security subject to federal regulation under the Securities Act of 1933. The three-part Howey test asks whether a transaction involves (1) an actual investment of money (or other consideration of value) from the investor, (2) made in a common enterprise, (3) with a reasonable expectation of profits derived from the efforts of others. 

Historical Regulatory Landscape of Crypto Assets 

The SEC has been reviewing transactions involving crypto assets from as early as 2013. Over the last decade, the agency utilized the Howey test in enforcement actions on an as-applied basis to determine whether certain crypto assets constituted investment contracts (and thus securities). During this period, various commentators and market participants expressed the view that this approach generated too much uncertainty and should be replaced by a crypto asset-specific regulatory framework. 

The Interpretive Guidance is a direct response to recent directives that resulted in the formation of the SEC’s Crypto Task Force and the launch of “Project Crypto,” which directed SEC staff to “work to develop clear guidelines that market participants can use to determine whether a crypto asset is a security or subject to an investment contract.”

New Guidance on Crypto Assets 

The Interpretive Guidance takes a taxonomical approach and applies the Howey test to five categories of crypto assets to determine whether these assets constitute securities. 

• Digital commodities (e.g., Bitcoin, Ether, Solana, and XRP) are not securities. The Interpretive Guidance defines “digital commodities” as “a crypto asset that is intrinsically linked to and derives its value from the programmatic operation of a crypto system that is ‘functional’ as well as supply demand dynamics, rather than from the expectation of profits from the essential managerial efforts of others.” Because these assets derive their value from a cryptocurrency system that functions based on supply and demand dynamics, rather than from the managerial efforts of others, the third element of the Howey test is not met.
• Digital collectibles are generally not securities. These are crypto assets that are “designed to be collected and/or used and may represent or convey rights to artwork, music, videos, trading cards, [and] in-game items.” Their value derives from artistic, entertainment, social, or cultural significance rather than any promoter’s managerial efforts, so the third element of the Howey test is not met. One exception worth noting is that fractional interests in a single digital collectible may constitute a security where purchasers would reasonably expect to derive profits from essential managerial efforts.
• Digital tools (e.g., credentials, memberships, and identity badges) are not securities. These are typically issued for use in connection with crypto systems and perform functions within the systems themselves. Because they are acquired for practical functionality rather than investment return, the third element of the Howey test is not met. 
• Stablecoins that constitute “Covered Stablecoins” under the Staff Stablecoin Statement and “payment stablecoins” under the GENIUS Act, once effective, are not securities. The Interpretive Guidance does not address the classification of stablecoins outside of these categories, which require a more nuanced analysis and may or may not be securities based on their characteristics. Stablecoins are crypto assets designed to maintain a stable value relative to a reference asset such as the U.S. dollar.
• Digital securities (also referred to as “tokenized” securities) are securities. Digital securities are financial instruments that typically fall under the definition of a “security” (e.g., stock, bonds, notes, etc.) but are formatted as or represented by a crypto asset. The Interpretive Guidance reflects the view that “a security is a security regardless of whether it is issued, or otherwise represented, offchain or onchain.”

Circumstances Where Non-Security Crypto Assets Can Become Securities 

The Interpretive Guidance indicates that a non-security crypto asset will become subject to an investment contract, and thereby become a security, when an issuer offers it by inducing an investment of money in a common enterprise with representations or promises to undertake essential managerial efforts from which a purchaser would reasonably expect to derive profits. Critically, it is the issuer’s marketing and promotion of the offering, rather than the crypto asset itself, that creates the investment contract. Whether the purchaser’s profit expectations are reasonable depends on the source, timing, and manner of the issuer’s representations, which must be conveyed before or at the same time as the issuer’s offer or sale. The purchaser’s reliance is reasonable when based on representations through specific channels, including the issuer’s website, official social media, whitepapers, regulatory filings or direct communications with the issuer prior to or contemporaneously with the sale. 

Importantly, a non-security crypto asset does not necessarily remain subject to an investment contract in perpetuity. A non-security crypto asset separates from the associated investment contract, and ceases to be subject to the federal securities laws, once purchasers can no longer reasonably expect the issuer’s promises of essential managerial effort to remain connected to the asset. This can occur through fulfillment of the issuer’s representations (e.g., achieving a stated degree of decentralization or completing a development roadmap), or through clear failure or abandonment of those representations. Issuers should note, however, that separation does not retroactively eliminate potential liability for failure to register the original offering or for material misstatements or omissions made during the life of the investment contract.

New Guidance on Certain Crypto Asset Activities 

The Interpretive Guidance also assesses several common crypto asset activities under the Howey test. 

• Protocol mining and protocol staking are not securities transactions. Protocol mining refers to mining on proof-of-work networks through the contribution of computational resources to solve cryptographic puzzles. Protocol staking refers to the commitment (or “locking up”) of a network’s native digital commodity to qualify for selection as a validator of new blocks. Because these activities are administrative or ministerial, they do not result in participants earning rewards through the managerial efforts of others. Accordingly, these activities do not meet the third element of the Howey test. 
• Wrapping (the process of depositing a crypto asset with a custodian or cross chain bridge in exchange for a one-for-one redeemable wrapped token) is generally not considered a securities transaction. The Interpretive Guidance concludes that wrapping fails elements two and three of the Howey test because there is no investment in a common enterprise and no economic benefits realized from the efforts of others. Importantly, however, if the underlying asset being “wrapped” is itself a security, then its status as a security is preserved. 
• Airdrops of crypto assets may or may not be considered investment contract activities. Airdrops are conducted by crypto system issuers and entail transferring crypto assets directly to specific crypto wallets or other addresses. The Interpretive Guidance treats airdrops of non-security crypto assets as non-securities transactions because there is no actual investment of money (or similar consideration). Accordingly, the first element of the Howey test is not met. This classification does not apply, however, where the recipient provides the issuer money, goods, services, or other consideration in exchange for the airdropped non-security crypto asset. 

Practical Takeaways

The Interpretive Guidance represents a meaningful step toward the regulatory clarity that market participants have long sought. By moving away from case-by-case enforcement and toward a taxonomy-based framework, the SEC and CFTC have given issuers, exchanges, and investors a more predictable basis for evaluating whether particular crypto assets and activities implicate the federal securities laws. Companies and individuals active in the digital asset space should review their existing crypto holdings and activities against the framework set forth in the Interpretive Guidance and assess whether any adjustments to compliance programs or offering structures may be warranted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.