Securities on a Sliding Scale: Inside "Project Crypto's" New Approach to Digital Assets
On November 12, 2025, Securities and Exchange Commission ("SEC") Chairman Paul S. Atkins spoke at the Federal Reserve Bank of Philadelphia regarding the SEC's "Project Crypto" initiative, which aims to create a clear and robust crypto asset regulatory framework to foster innovation, protect investors, increase capital formation, and bring crypto projects back onshore from foreign jurisdictions.
In his recent speech, Chairman Atkins sought to address the continued uncertainty over whether crypto assets are securities, emphasizing that: (i) most crypto assets are not securities, but some crypto assets are one part of investment contracts that are securities; (ii) the longstanding legal analysis under the Howey test will be maintained to focus on substance over form; and (iii) the security status of crypto assets may change as the facts and circumstances of the related investment contracts evolve. Chairman Atkins also expressed support for recent legislative efforts for market clarity and shared his perspective on the practical outcome of the SEC's shift in policy.
Chairman Atkins explained that his view on how to categorize various types of crypto assets is based on two principles: (i) securities remain securities, regardless of form, and (ii) "economic reality trumps labels," meaning that issuers of securities cannot masquerade true securities by using other names such as "NFTs." Flowing from these principles, Chairman Atkins identified the following four categories of crypto assets and indicated whether they are securities:
- Digital commodities and network tokens (that are functional and decentralized) are not securities;
- Digital collectibles are not securities;
- Digital tools performing practical functions (such as membership or credentialing) are not securities; and
- Tokenized securities are securities.
Chairman Atkins asserted that the key question should not be: "Is the crypto asset itself a security?" but rather: "Does the crypto asset form part of a security based on the promises underlying the related investment contract?" In his view, the promises or representations under an investment contract should be "explicit and unambiguous" (relating to the managerial efforts of the issuer) to constitute a security. He further seeks to avoid rigid application of the Howey test—in his view, the status of being a security should not be an "unremovable" stamp on a crypto asset. Crypto assets may move from being considered a security when a crypto project is launched, to not being considered a security upon changes to the project, such as sufficient decentralization.
Chairman Atkins hopes to create clear lines under forthcoming SEC guidance that would implement these characterizations and provide a package of exemptions for potential issuers. Envisioning a regime where crypto assets considered to be securities could trade on non-SEC regulated platforms, Chairman Atkins has instructed SEC staff to prepare recommendations to permit such activity on or through CFTC- and state-registered intermediaries.
