The Securities and Exchange Commission, with aligned guidance from the Commodity Futures Trading Commission, issued a comprehensive interpretation clarifying how federal securities laws apply to crypto assets and certain crypto transactions. The release introduces a functional taxonomy, explains when non‑security crypto assets can become subject to an investment contract under Howey, and addresses the securities status of protocol mining, protocol staking, wrapping, and airdrops. The agencies intend to administer their statutes consistent with this interpretation and are soliciting public comment. The interpretation is effective upon publication.

A Practical Taxonomy: Five Buckets

• Digital commodities: Native assets of functional crypto systems whose value is tied to programmatic operation and supply/demand—not to expected profits from others’ essential managerial efforts. They may enable staking, governance, and pay “gas” fees. The assets themselves are not securities.
• Digital collectibles: Assets designed for collection or use (e.g., art, music, in‑game items, memes). They may carry limited IP licenses or creator royalties, but do not convey rights to income, profits, or assets of an enterprise. Fractionalization can introduce securities issues.
• Digital tools: Functional utilities (e.g., membership, ticket, credential, title, identity badges), often non‑transferable. Value is in utility; the tools themselves are not securities.
• Stablecoins: A broad category designed for price stability. By statute, a “payment stablecoin” issued by a permitted issuer under the GENIUS Act will be excluded from the securities definition when the Act becomes effective. Prior to effectiveness, the SEC interprets “Covered Stablecoins,” as described in the staff’s 2025 statement, as not securities. Other stablecoins may be securities depending on facts and circumstances.
• Digital securities: Tokenized versions of instruments enumerated in the securities definition, or structured rights to distributions from a centrally managed enterprise. Format does not affect substance—securities remain securities whether onchain or offchain.

When a Non‑Security Crypto Asset Becomes a Security via Howey

• Creation of an investment contract: A non‑security crypto asset becomes subject to an investment contract when an issuer induces an investment of money in a common enterprise by making representations or promises to undertake essential managerial efforts from which purchasers would reasonably expect profits.
• What matters: The source, content, timing, and channel of issuer communications. Explicit, detailed promises (e.g., milestones, resourcing, timelines, how profits may arise) conveyed through formal channels (agreements, website, official social media, whitepaper, regulatory filings) are more likely to create reasonable profit expectations. Vague statements or post‑sale promises do not.
• Secondary market implications and “separation”: The asset does not transform into a security. But the associated investment contract can “travel” with the asset in secondary trades if purchasers would reasonably expect the issuer’s promised essential managerial efforts to remain connected. The connection can cease—separating the asset from the investment contract—when:
  • Fulfillment: The issuer completes the promised essential efforts (e.g., achieves stated functionality, decentralization, or open‑sources code), and publicly discloses completion.
  • Abandonment/failure: The issuer clearly and publicly announces it will no longer perform the promised essential efforts, or sufficient time has passed without performance and investors would no longer reasonably expect those efforts.
• Continuing obligations: The offer and sale of an investment contract must be registered or exempt, regardless of later separation. Anti‑fraud liabilities for misstatements or omissions remain.

Airdrops: When No “Investment of Money,” No Investment Contract

• Covered airdrops: Disseminations of non‑security crypto assets where recipients provide no money, goods, services, or other consideration in exchange for the airdropped assets.
• Examples within the interpretation:
• Unannounced airdrops to holders of a specified asset.
• Post‑facto airdrops to users of a testing environment for a prior period, with no prior announcement or conditioning.
• Unannounced, free airdrops to users based solely on prior use of a related application.
• Exclusions: If recipients must provide consideration (e.g., purchases, services, tasks) in exchange for the airdropped asset, the interpretation does not apply. The analysis addresses only the “investment of money” prong of Howey.
• Note: Even if an airdropped asset is not subject to an investment contract at dissemination, later transactions could create an investment contract (e.g., subsequent offers/sales).