SEC and CFTC Release Landmark Crypto Rules Defining US Regulatory Boundaries

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly issued a 68-page interpretation clarifying how federal securities laws apply to crypto assets. This establishes a formal taxonomy for digital assets, especially cryptocurrencies, under federal securities law for the first time. 

Finally, a Clarity for Regulatory Ambiguity 

SEC Chairman Paul Atkins considers this rule to be a turning point after going through more than a decade of regulatory ambiguity.  According to Atkins, “This interpretation acknowledges that what the former administration refused to recognize – the most crypto assets are not themselves securities.” He also added that this is the thing regulatory agencies are supposed to do: draw clear lines in clear terms. 

CFCT Chairman Michael Selig also shared a similar thought. Selig stated, “For far too long, American builders and entrepreneurs have awaited clear guidance. With today’s interpretation, the wait is over.”

The Five Category Taxonomy 

The 68-page interpretation classified a five-category taxonomy based on asset characteristics, uses, and functions, providing a clear classification standard for the first time. 

Digital commodities 

In digital commodities, the asset’s value originates from the programmatic operation and supply and demand dynamics of a functional cryptographic system. The document explicitly names major tokens, including BTC, ETH, SOL, XRP, ADA, DOT, AVAX, and LINK, as digital commodities. 

Digital securities 

“Tokenized securities” refer to traditional securities represented in the form of crypto assets or digital assets that possess the economic substance of securities. 

Whether on-chain or off-chain, as long as it meets the economic standard, it falls under the regulatory scope of the SEC. 

Regulated payment stablecoins 

Stablecoins issued by authorized institutions that meet the definition of the GENIUS Act 2025. The stablecoins are explicitly excluded from the definition of “securities” and are primarily subject to specific legal constraints as payment instruments. 

Digital tools 

Tokens that have only a utility function within a specific crypto system are not considered securities. 

Digital collectibles 

Assets intended for collection and/or use, representing works of art, music, videos, in-game items, or internet memes. 

The CFTC’s associated guidance confirms that the assets could qualify as commodities under the Commodity Exchange Act. It outlines a jurisdictional split between the two agencies going forward. The CFCT would oversee digital commodity spot markets, and the SEC would retain authority over digital securities. 

Additionally, the document provides a clear definition of “security” as applied to crypto assets and transactions involving crypto assets. Both the SEC and CFTC also aim to address how a “non-security crypto asset” acting as a crypto asset but not a security may become subject to and how it is viewed as an investment contract.

Industry Activities: Staking, Mining, Wrapping, and Airdrops 

The rule emphasizes that protocol mining and protocol staking are not securities transactions. This includes solo staking, custodial staking, and liquid staking. The SEC characterizes all these activities as administrative or ministerial rather than essential managerial efforts. 

The SEC and CFTC distinguish between investments requiring human managerial efforts – securities, and those operating on automated, preset protocols – commodities. Profits generated by a manager will come under the SEC regulation; however, rewards derived strictly from decentralized computer code, such as mining or staking, are considered administrative or commodity-based. 

On the other hand, liquid staking tokens act as receipts for non-security assets, while one-to-one backed wrapped tokens assume the legal status of the underlying asset. Airdrops distributed without consideration of the recipients fail to meet the requirement of the Howey test – an investment of money.  

Conclusion 

The Commission sees this interpretation as its first step towards a clearer regulatory framework. It is currently open for public comment, and the SEC is refining and expanding its positions. Market participants, from innovators and issuers, and investors, must review this interpretation to understand the regulatory jurisdiction between the SEC and the CFTC.