A Long-Awaited Step: SEC and CFTC Provide Interpretation for Crypto Asset Taxonomy

The Significance of the Interpretation

The interpretive guidance marks the first effort by the SEC (as opposed to prior staff interpretations that were not statements of the Commission itself) to define the types of crypto assets that are securities and those that are not. The CFTC joined the interpretation, providing guidance that it will administer the Commodity Exchange Act in a manner consistent with the interpretation. Accordingly, the interpretive guidance serves as an example of the joint effort between the SEC and CFTC to harmonize federal oversight of crypto asset markets. On January 29, 2026, SEC Chairman Atkins and CFTC Chairman Selig announced that the previously SEC-led "Project Crypto" (an initiative to modernize rules and regulations under federal securities laws to enable U.S. markets to move onchain) would proceed as a joint effort between the SEC and CFTC.

The interpretation is the product of public input the SEC received through its Crypto Task Force. The SEC's release styles it as an effort to "complement Congressional endeavors to codify a comprehensive market structure framework into statute," a reference to the CLARITY Act and market structure bills pending in Congress. However, given ongoing Congressional debates about a crypto market structure bill, it is possible that the interpretation will become the primary source of guidance for industry participants for the time being.

The Token Taxonomy: Five-Categories, Only One Clear Security

The SEC recognizes that nearly "any type of security, good, service, right, or interest can be represented in a digital format as a crypto asset." The guidance attempts to provide structure by classifying crypto assets into five categories based on their characteristics, uses, and functions: (i) digital commodities; (ii) digital collectibles; (iii) digital tools; (iv) stablecoins; and (v) digital securities.

Notably, the interpretative guidance defines "digital commodity" 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 and demand dynamics, rather than from the expectation of profits from the essential managerial efforts of others" and confirms that digital assets such as Bitcoin, Ether, Solana, and Dogecoin meet the definition. This broad definition of "digital commodity" parallels that was proposed in the CLARITY Act, which, according to Sen. John Boozman, Chairman of the Senate Agriculture Committee, includes approximately 70% of all digital assets traded. The CFTC will have the primary responsibility for policing misconduct in digital commodity markets.

Which Categories Are Not Securities?

The interpretative guidance provides that digital commodities, digital collectibles, and digital tools are not securities due to their: (a) intrinsic links to the programmatic operation of their crypto systems; (b) their value as a unique collectible or representation of a right; or (c) their practical functions.

These considerations largely align with the Howey test, which is applied to determine whether an instrument is an "investment contract," one of the instruments listed in the definition of 'security' under the federal securities laws. The interpretation notes, however, that these types of crypto assets could constitute securities if they become subject to investment contracts due to their features and how they are marketed. For example, a fractionalized interest in a collectible could be a security depending on how the collectible will be managed.

The interpretative guidance recognizes that the Guiding and Establishing National Innovation for U.S. Stablecoins ("GENIUS") Act excludes payment stablecoins, as defined in that Act, from the scope of the federal securities laws, but also notes that other stablecoins not fitting within the GENIUS Act's definition may or may not be securities depending on the applicable facts and circumstances.

Which Category Is a Security?

The interpretation makes clear that traditional financial instruments (e.g., stocks, bonds, notes) formatted as or represented by a crypto asset on a blockchain are securities regardless of format, medium, or label. This is the only category of crypto assets that the SEC deems to be a security outright. Otherwise, whether a crypto asset is or is not a security should be  analyzed under Howey's investment contract test and will depend on how an issuer markets and promotes it. Consequently, there will still be some ambiguity as to whether a specific crypto asset is a security based on particular facts-and-circumstances, and industry participants who had advocated that Howey be abandoned will be disappointed.

Investment Contract "On-Ramp" and "Off-Ramp": Factors That Might Make a Crypto Asset Sale a Security Sale

The interpretative guidance clarifies that, while underlying non-security crypto assets themselves are not securities, they may become subject to an investment contract (and therefore become securities) when an issuer offers the assets with representations or promises to undertake essential managerial efforts from which a purchaser would reasonably expect to derive profits.

However, a non-security crypto asset ceases to be subject to an investment contract—and thus ceases to be a security—when the issuer has fulfilled its representations or promises, or has clearly and publicly failed to satisfy its representations or promises and purchasers no longer have a reasonable expectation of profit from the efforts of the issuer. This guidance will have significant implications for more mature crypto networks.

Notably, the interpretation reflects an alignment with the view first articulated by then-Director of the SEC's Division of Corporation Finance William Hinman in 2018—that as a crypto network becomes sufficiently decentralized, the federal securities disclosure regime becomes less relevant because purchasers can no longer reasonably expect profits to derive from the managerial or entrepreneurial efforts of an identifiable person or group, and material information asymmetries diminish accordingly.

Certain Common Crypto Asset-Adjacent Activities Are Not Securities Transactions

The Commission specifically addressed certain mining and staking activities, and non-security crypto asset wrapping, and clarified that these activities do not constitute the offer and sale of securities. Additionally, certain airdrops fall outside the federal securities laws because they do not involve an "investment of money" under the Howey test.

Implications for CFTC Enforcement

The interpretation's definition of "digital commodity" clarifies the CFTC's ability to pursue fraud and manipulation cases in digital asset markets. This should help the CFTC simplify case selection and bolster confidence in the scope of its jurisdiction. Accordingly, the interpretative guidance will enable the CFTC to pursue more aggressive actions in digital commodity markets—particularly involving volatile meme coins.

The clearer demarcation between securities and commodities should also reduce parallel SEC/CFTC investigations and resolutions. In recent years, both agencies brought overlapping cases, including dual actions against Binance (with the CFTC alleging unregistered futures commission merchant activity and the SEC alleging unregistered broker-dealer activity), and against Avraham Eisenberg in the Mango Markets manipulation matter. Going forward, a single agency is likely to take the lead, giving market participants greater confidence that resolution with a single regulator will address their regulatory exposure.

Implications for Department of Justice Prosecutions

Although the guidance does not bind the Department of Justice ("DOJ"), it will likely inform DOJ's assessment of whether a digital asset is a security. The narrow view of the Howey test's scope provided by the interpretative guidance should discourage DOJ from relying on Section 10(b) and Rule 10(b)-5 of the Securities Exchange Act, which require proof of a security, when prosecuting digital asset offenses involving assets that the taxonomy categorizes as non-securities. Instead, the interpretation will likely reinforce DOJ's recent trend of favoring wire fraud and commodities fraud charges when prosecuting digital asset matters, such as how it proceeded in United States v. Wahi, Case No. 1:22-cr-00392 (S.D.N.Y. 2023) (wire fraud) and United States v. Eisenberg, 784 F. Supp. 3d 579 (S.D.N.Y. 2025) (commodities fraud).