SEC Issues Crypto Asset Interpretation: What Is and Is Not a Security
For over a decade, the SEC applied a case-by-case test to determine whether any given crypto asset was a security, often doing so through enforcement actions rather than clear rules. That approach left the industry with significant uncertainty about what was allowed and what was not. On March 20, 2026, the SEC issued a formal interpretation aimed at changing that, establishing for the first time a clear framework for how federal securities laws apply to crypto assets. The CFTC joined the interpretation, aligning its own oversight framework with the SEC’s guidance.
A Simple Breakdown of the New Categories
The interpretation sorts crypto assets into five categories:
- Digital Commodities are not securities. These are assets whose value comes from how they function within a crypto network and from supply and demand, not from the efforts of a management team. Bitcoin is the clearest example.
- Digital Collectibles are not securities. These include NFTs and similar assets representing rights to art, music, videos, trading cards, in-game items, and similar content.
- Digital Tools are not securities. These are assets that function like a membership, ticket, credential, or access key rather than an investment.
- Stablecoins qualifying under the GENIUS Act are not securities. Payment stablecoins issued by permitted issuers under the GENIUS Act fall outside the definition of a security.
- Digital Securities, or tokenized securities, are securities. These are traditional financial instruments, such as stocks or bonds, that have been formatted or represented as a crypto asset. They remain fully subject to federal securities laws.
When Crypto Becomes a Security, and When It Stops Being One
One of the more significant clarifications in the interpretation involves investment contracts. A non-security crypto asset can become subject to an investment contract when an issuer promotes it with promises of profits tied to the issuer’s own efforts. But the interpretation also makes clear that this status is not permanent. Once an issuer has fulfilled its promises, or failed to do so, the investment contract can end and the asset may no longer be a security. This is a meaningful change from the prior view that a crypto asset, once deemed a security, would remain one forever.
The interpretation also settles several questions that had been open for years. Protocol mining, protocol staking, and the wrapping of a non-security crypto asset do not constitute securities offerings. Certain airdrops similarly do not meet the definition of an investment of money under the Howey test.
Takeaways
- The SEC has established a clear five-category taxonomy for crypto assets. Whether a given asset is a security depends on which category it falls into, not just on a case-by-case Howey analysis.
- Most crypto assets are not securities under the new framework. Tokenized securities are the primary category that remains fully subject to federal securities laws.
- A crypto asset’s status can change over time. Advisers and clients involved in crypto issuances should understand that regulatory classification is not necessarily permanent.
- Advisers holding or recommending crypto assets should review their current positions and policies against the new taxonomy and update disclosures and client communications as needed.
- Protocol mining, staking, wrapping, and certain airdrops have been confirmed as outside the definition of a securities offering, providing useful clarity for advisers with clients involved in those activities.