After years of uncertainty and restraint on the growth of digital assets in the United States, the Securities and Exchange Commission (SEC) issued a significant interpretive release on March 17, 2026 providing new guidance on how the federal securities laws apply to various types of crypto assets and transactions. The Commodity Futures Trading Commission (CFTC) joined in issuing this release to affirm that it will administer the Commodity Exchange Act consistent with this interpretation. The guidance establishes a structured framework based on the characteristics, uses and functions of crypto assets and transactions and clarifies the types of crypto assets that are not inherently securities. It does not supplant the Howey test, but analyzes how certain aspects of the Howey test apply to crypto assets and their transactions. The release groups crypto assets into five distinct categories, each with specific implications for their regulatory treatment and status as a security. The release offers the following examples of digital commodities: 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).
The release characterizes a digital commodity as a crypto asset that is intrinsically linked to, and derives its value from, the operation of a functional crypto system as well as supply and demand dynamics and does not involve the expectation of profits from the essential managerial efforts of others. A digital commodity is necessary to participate in or use certain aspects of its associated functional crypto system. A crypto system is considered functional if the crypto asset native to the system can be used on the system in accordance with its utility. Digital commodities are not securities because they do not have intrinsic economic properties or rights, such as generating a passive yield or conveying rights to future income, profits or assets of a business enterprise or other entity.
The release characterizes a digital collectible as a crypto asset that is designed to be collected and 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. Similar to a physical collectible, a digital collectible does not have intrinsic economic properties or rights, such as generating a passive yield or conveying rights to future income, profits or assets of a business enterprise or other entity. However, the release notes that the offer and sale of a digital collectible that either is fractionalized or otherwise enables individuals to acquire a fractional ownership interest of a single digital collectible may constitute the offer or sale of a security under the Howey test.
A digital tool is characterized by the release as a crypto asset that performs a practical function, such as a membership, ticket, credential, title instrument or identity badge. Digital tools are commonly issued for use in connection with crypto systems and are designed to perform practical functions within those systems. Persons acquire digital tools for their functional utility and do not have any rights or interest in or with respect to a business enterprise. The price at which the digital tool may be resold, if it may be resold at all, is based upon its functional utility rather than any expectation of profits from any essential managerial efforts of its developer.
A stablecoin is characterized in the release as a crypto asset that is designed to maintain a stable value relative to a reference asset, like the U.S. dollar. The release recognizes two types of stablecoins that are not securities – Payment stablecoins issued by a permitted payment stablecoin issuer, as those terms are defined in section 2 of the GENIUS Act. Covered Stablecoins, as that term is defined in the Statement on Stablecoins issued by the SEC’s Division of Corporation Finance on April 4, 2025. A digital security (commonly known as a “tokenized” security) is a financial instrument included in the definition of “security” in Section 2(a)(1) of the Securities Act of 1933 that is formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks.
Tokenized securities generally fall into two categories: (1) securities tokenized by or on behalf of the issuers of such securities; and (2) securities tokenized by third parties unaffiliated with the issuers of such securities, which may involve the third party issuing a separate security that derives its value from or is otherwise linked to the subject security. The release observes that many digital securities convey the same legal rights with respect to a business enterprise or other entity as offchain securities and that some don’t, but instead entitle a holder to receive economic distributions from a central party that manages a business enterprise or other entity, promisor or obligor on behalf of digital security holders. While many crypto assets are not securities, they can transition into securities if their issuer offers them by “inducing an investment of money in a common enterprise with representations or promises to undertake managerial efforts from which a purchaser would reasonably expect to derive profits.” This aligns with the criteria outlined in the Howey test. However, it is important to note that such classification is not necessarily permanent; the status of an investment contract persists only as long as investors reasonably expect profits derived from the efforts of the issuer or third parties.
The guidance also addresses the regulatory treatment of protocol mining activities, specifically Proof of Work (PoW) and Proof of Stake (PoS). PoW involves miners competing to solve complex computational puzzles to validate transactions and add new blocks to the blockchain. Under SEC interpretation, activities conducted through PoW do not constitute securities, and they do not satisfy the criteria of an investment contract under the Howey test. Similarly, PoS involves validators or node operators staking digital tokens to participate in network validation and security. When conducted in accordance with SEC guidance, PoS activities are generally not considered securities since participants stake their own tokens without an expectation of profits derived from managerial efforts.
Wrapping: The SEC’s release also discusses the “wrapping” of crypto assets. As described by the SEC, wrapping involves depositing a crypto asset with a custodian or cross-chain bridge to receive an equivalent “Redeemable Wrapped Token” on a one-for-one basis. The deposited crypto asset is securely held and cannot be transferred or used for other purposes, and that holders can redeem the wrapped tokens for the original asset at any time through a process that involves burning the tokens. The release concludes that wrapped tokens for non-security crypto assets that are not subject to an investment contract do not constitute securities, as they simply evidence ownership of the deposited asset without offering any return, profit, or additional benefit. However, if the wrapped tokens represent a non-security crypto asset that is subject to an investment contract, such tokens could be considered securities, as they involve an expectation of profits derived from managerial efforts.
Airdrops: The SEC’s guidance also clarifies the regulatory treatment of airdrops—covering crypto assets to recipients. Specifically, it addresses whether certain non-security crypto assets distributed through airdrops qualify as investment contracts under Section 2(a)(1) of the Securities Act. When recipients do not provide money, goods, services, or other consideration in exchange for the assets, the SEC clarifies that the first element of the Howey test, an “investment of money,” is not satisfied. Consequently, such airdrops are not considered securities, and issuers are not required to register these transactions. It is important to note that this exemption applies solely to non-security crypto assets distributed without consideration and does not extend to situations involving securities or prior exchanges of value.
Conclusion: In summary, the SEC’s guidance represents a pivotal initial step toward providing clarity and certainty in the regulation of crypto assets and a sea change in the SEC’s approach. By establishing five distinct categories—ranging from digital commodities and collectibles to securities—the framework offers a clearer understanding of how various crypto assets will be treated under existing laws. Furthermore, the guidance reassures participants in protocol mining and airdrops that these activities are generally not securities when conducted within specified parameters. Overall, this development aims to foster innovation within the crypto space while ensuring investor protection and regulatory compliance, and SEC Chairman Atkins has emphasized that the release is the beginning, not the end, of the agency’s efforts to address crypto assets, with a Regulation Crypto Assets safe harbor being developed to govern this area.
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