SEC and CFTC joint approval? From "How to regulate" to "What to regulate"

Written by: KarenZ, Foresight News

On March 18, 2026, Beijing time, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly released a milestone explanatory guide. This 68-page document marks the end of a decade-long “regulatory chaos period.”

In the past, cryptocurrency developers feared SEC’s “raids” because the Howey Test was like a Damocles sword, risking almost all tokens being classified as securities.

The test determines whether a transaction constitutes an “investment contract,” i.e., a security, based on three criteria: someone invests money, in a common enterprise, expecting profits from the efforts of others. Theoretically, this standard is clear, but with crypto assets, problems arise: Is Bitcoin a security? Do mining activities count as issuing securities? How should airdrops be classified? Different courts have different interpretations, and SEC’s enforcement stance has been inconsistent.

However, after the SEC’s Crypto Task Force was established in 2025 and the “Project Crypto” initiative was launched, regulators finally provided clear classifications.

Crypto Asset Classifications: Who Is a Security, Who Is Not?

The SEC categorizes crypto assets into five major types based on their features, uses, and functions, and defines their legal attributes:

1. Digital Commodities: Not Securities

Their value derives from the functional operation of cryptosystems and supply-demand dynamics, not from profit expectations based on others’ management efforts.

The guide lists some representative tokens: APT, AVAX, BTC, BCH, ADA, LINK, DOGE, ETH, HBAR, LTC, DOT, SHIB, SOL, Stellar, Tezos, XRP.

2. Digital Collectibles: Mostly Non-Securities

Digital collectibles are crypto assets designed for collection or use, representing or granting rights related to art, music, videos, trading cards, in-game items, or digital content like memes, characters, current events, and trends.

They lack intrinsic economic attributes or related rights, such as passive income, rights to future earnings, profits, or assets from entities or debtors. Creator royalties do not change their non-security status.

Examples include CryptoPunks, Chromie Squiggles, fan tokens, WIF (meme tokens), and VCOIN. VCOIN is the official digital currency of the 3D avatar social metaverse platform IMVU, used for purchases, earning, and trading within IMVU.

The document specifically mentions that “Meme Coins” also fall into this category. Memes, often born from internet culture, derive their value from supply and demand rather than management efforts, mainly used for art, entertainment, social, or cultural purposes. The original text notes that Meme Coins could evolve into “Digital Commodities” if they develop actual utility within a functional cryptosystem.

An exception exists: if a digital collectible is fractionalized and sold, giving people partial ownership of a single item, it may involve an investment contract and be regulated as a security.

3. Digital Tools — Not Securities

Digital tools refer to crypto assets with practical functions, such as memberships, tickets, credentials, or identity tokens, usually non-transferable or tied to a specific individual.

Examples include Ethereum Name Service (ENS) domains and CoinDesk’s “Microcosms’ NFT Consensus Ticket” event tickets. Their value comes from utility, not investment returns.

4. Stablecoins: Context-Dependent

The GENIUS Act defines “permitted payment stablecoins” as not securities. These are issued by compliant issuers for payments or settlements, and the issuer is prohibited from paying interest to holders.

Whether other types of stablecoins are securities depends on specific circumstances.

5. Digital Securities: Securities

Digital securities, often called “tokenized securities,” are traditional financial instruments (stocks, bonds, etc.) represented in crypto form, with ownership records maintained on-chain. Regardless of format, they remain under securities law jurisdiction.

The guide further divides tokenized securities into two categories: those led by the issuer (or its agents) and those led by third parties unrelated to the issuer. It emphasizes that due to diverse implementation methods, rights of on-chain token holders may differ substantially from those of underlying securities, including economic and voting rights. This serves as a clear warning to investors.

How Do Non-Securities Assets Relate to Securities Laws?

After classification, the document addresses a long-standing industry debate: if a token is not a security, does securities law still apply?

The answer is: possibly yes, or possibly no.

The core concept is the “investment contract.” The guide explains that a non-security crypto asset, if the issuer, during sale or before, makes promises or statements that lead buyers to expect profits from the issuer’s “key managerial efforts,” then it constitutes an investment contract and must be registered under securities law or qualify for an exemption.

What are “key managerial efforts”? The document discusses what kinds of promises or statements can create a reasonable profit expectation. The key is that such expectations must be shaped by the issuer’s statements, not arise spontaneously, and must involve “substantially influential management activities” rather than routine administrative or auxiliary work. For example, developers stating “we will build this chain, implement these features, meet milestones on schedule” constitutes a promise of key managerial efforts. The more specific and clear the promise, the easier it is to establish a reasonable expectation.

Importantly, promises made after the initial sale do not retroactively turn previous sales into investment contracts.

Once a non-security crypto asset is classified as an investment contract in the primary market, it can be transferred in secondary markets, passing the contract to subsequent buyers, provided those buyers still reasonably believe the issuer’s promises are related to the asset. If that belief disappears, the contract terminates.

When can this restriction be lifted? The guide provides two paths:

1. The issuer fulfills the promise. If the issuer publicly discloses that it has completed its key managerial efforts, buyers no longer have a reasonable profit expectation, and the investment contract ends. This means that once a project is completed and fully decentralized, subsequent token circulation is no longer considered a security transaction.

2. The issuer explicitly abandons previous promises. If the issuer publicly states it will no longer fulfill its managerial efforts (e.g., abandoning development of a chain), and this statement is widely disseminated and clear, reasonable buyers will no longer expect those promises to be fulfilled, and the contract ends.

However, the guide emphasizes that even if the investment contract terminates, any violations during the contract period (such as unregistered issuance or false statements) may still result in securities law liabilities.

How Are Mining, Staking, and Airdrops Evaluated?

The guide specifically addresses mining, staking, and airdrops, uniformly ruling that these activities do not constitute securities offerings:

1. Protocol Mining: Mining rewards earned in PoW networks do not involve securities issuance. Whether solo mining, pool mining, or other forms, providing computational power and verifying transactions are administrative or auxiliary activities, not dependent on others’ managerial efforts, thus not securities.

2. Protocol Staking: Under the described methods, solo staking, self-custody delegated staking, custodial staking, and liquidity staking do not constitute securities issuance. Participants lock digital commodities to maintain PoS network security, with returns derived from protocol-based distribution. Service providers’ activities are purely administrative support, not core management efforts.

Regarding asset use restrictions in custodial staking, the original states three strict constraints: staked assets cannot be used for the operator’s own business, cannot be lent or re-staked, and must be held in a way that third-party claims are not possible. The operator cannot leverage, trade, speculate, or make autonomous decisions with these assets.

For liquid staking, if the issued staking receipts (Staking Receipt Tokens) represent non-security crypto assets not bound by investment contracts, they are not securities. However, if the underlying assets are securities or are part of an investment contract, the staking tokens may be considered securities.

3. Asset Wrapping: Wrapping an asset into a compatible token on another chain, on a one-to-one redeemable basis, with no additional yield provided, does not trigger securities laws, provided the underlying asset is non-security. During wrapping, the original asset is “locked” and cannot be transferred, lent, pledged, or used for other purposes.

4. Airdrops: If the issuer distributes non-security crypto assets free of charge, and recipients do not provide money, goods, or services in exchange, it does not meet the Howey Test’s “money invested” element and is not a securities offering.

The document’s logic is as follows:

• Non-investment contract scenarios: The issuer directly airdrops to eligible addresses, with recipients unaware beforehand, not required to complete tasks, and no consideration exchanged. Prior usage (e.g., testnet activity) can qualify, provided it occurred before the airdrop announcement and was not done specifically to qualify for the airdrop.

• Potential investment contract scenarios: The issuer announces an airdrop and requires recipients to perform specific tasks (e.g., follow, retweet, write articles, refer) after the announcement to receive assets. In this case, recipients are actively providing labor for assets, establishing a consideration relationship.

The significance and boundaries of this guide

The guide concludes by emphasizing that SEC and CFTC will act jointly. CFTC states it will enforce the Commodity Exchange Act accordingly and recognizes some non-security crypto assets as commodities under law.

It is important to note that this guide does not replace the Howey Test but clarifies how the SEC will apply it to crypto assets. It also supersedes the 2019 SEC staff framework for digital asset investment contracts, becoming the new regulatory reference.

Its limitations are clear: it is an interpretive document, not formal legislation, and does not protect issuers from private lawsuits. It is based on the SEC’s current understanding of the market and may be adjusted based on feedback. Broader legislative work on crypto regulation is still underway in Congress.

Undoubtedly, this document provides a clearer roadmap for industry development. How new tokens can be designed from the outset to avoid being classified as securities, and how existing projects can transition to compliance, remain complex issues for further exploration by regulators and industry.

Once rules are clarified, those attempting to exploit “gray areas” to defraud will find it harder to hide. For genuine developers and long-term investors, 2026 may mark the true beginning of a compliant era.