When a Crypto Asset Is (and Isn't) Subject to an Investment Contract: The SEC's New Separation Framework

If you issued a token, or you trade, custody, or make markets in one, the SEC’s March 17, 2026 interpretive release answers a question that has hung over your business for a decade: when is a crypto asset that is not itself a security nonetheless part of a securities transaction that subjects the parties to U.S. federal securities laws?

The release (the “Release”) contains an interpretation by the U.S. Securities and Exchange Commission (the “Commission”) of how the federal securities laws apply to crypto assets, together with guidance from the U.S. Commodity Futures Trading Commission (the “CFTC”) that it will administer the Commodity Exchange Act consistent with that interpretation.^[1] The Release is the Commission’s most significant statement on crypto assets since The DAO Report in 2017.

This article focuses on the most original guidance in the Release: the framework under which a non-security token becomes subject to an investment contract through the issuer’s representations and promises, and later separates from it through fulfillment or failure. That framework determines whether a transaction must be registered with the SEC or comply with an exemption, and whether an intermediary handling digital assets needs to comply with securities laws.

This article begins with a brief overview of the Release and its five-category taxonomy. It then walks through the first half of the framework: how a crypto asset that is not itself a security becomes subject to an investment contract, who counts as the "issuer," which representations and promises matter, and how the analysis plays out in a detailed hypothetical token launch, Project PhoFi, that illustrates both a clean case and a contested one that the Release's rules do not cleanly resolve. From there it turns to secondary markets, where the Release's approach determines whether everyday trading in a token is a securities transaction.

The second half of the framework follows: how and when an asset separates from an investment contract, because the issuer either fulfilled its promises or abandoned them. It also takes up a problem the Release leaves unsolved.

The article continues with practical steps for issuers and intermediaries and concludes with an assessment of the framework's durability along three axes: whether the courts will follow it, whether a future Commission will keep it, and whether the CLARITY Act will supersede it.

The Release in Brief

The Release organizes crypto assets into five categories: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities.^[2] The first three categories, as described in the Release, are not themselves securities.^[3] Stablecoins may be securities depending on their characteristics.^[4] Digital securities are always securities.^[5] The Commission acknowledged that some crypto assets may exist outside these categories.^[6] The Release also provides guidance on protocol mining and staking, wrapping, and airdrops.^[7]

While all that guidance is welcome, much of it appeared in some form in earlier staff statements.^[8] The primary benefit of its rearticulation here is greater detail and the weight of a Commission-level interpretation.

The exception is Section IV. No prior staff statement explained how a non-security crypto asset becomes subject to an investment contract, or, more importantly, how it later breaks free of one.

That process matters for two reasons. First, when a non-security crypto asset is subject to an investment contract, its offer and sale must comply with the requirements applicable to offers and sales of securities, including the registration and antifraud provisions. For purposes of determining whose representations and promises count in that analysis, the Release defines "issuer" broadly to include affiliates and agents of the issuer or a promoter^[9]. Second, the framework has wide-ranging implications for the persons and entities that trade, custody, and otherwise facilitate transactions in crypto assets in secondary markets, many of whom currently operate outside the federal securities laws on the assumption that the assets they handle are not securities.

How Crypto Assets Become Subject to an Investment Contract

Section 2(a)(1) of the Securities Act of 1933 includes "investment contract" in its enumerated list of instruments defined as a "security."^[10] The term "investment contract" is not itself defined by statute or Commission rule, and the seminal case on its meaning is of course the Supreme Court's decision in SEC v. W.J. Howey Co., 328 U.S. 293 (1946). As the Release restates the test, an investment contract is a "contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with an expectation of profits derived from the efforts of others."^[11] Every element must be satisfied. It is applied based on the economic realities of the transaction rather than on the labels the parties attach to it.^[12]

In a typical crypto offering, the first two prongs are usually, though not always, uncontested. Purchasers pay money (or other consideration) for the asset, and the proceeds are pooled and deployed by the issuer to develop a network or product whose success is shared across token holders. The bulk of the analytical work is done with the third prong: whether a purchaser had a reasonable expectation of profits derived from the efforts of others. That inquiry is fact-intensive and asks what a hypothetical reasonable purchaser would have understood at the time of the offer or sale.

Section IV.A’s contribution is to specify, for crypto offerings, where that reasonable expectation comes from. The answer is: from the issuer's representations and promises. How an issuer markets and promotes a contract, transaction, or scheme is what creates (or fails to create) the reasonable expectation that supplies the third Howey prong.^[13]

One preliminary point. The Release is emphatic on the asset/transaction distinction: the fact that a non-security crypto asset is subject to an investment contract does not transform the asset itself into a security.^[14] What is or is not a security is the transaction (the contract, transaction, or scheme) not the token. A digital commodity remains a digital commodity even when it is the subject of an investment contract. This distinction is what makes the separation analysis in Section IV.B possible, and what drives the secondary-market analysis that follows from it.

With that in mind, the Release’s formulation is this:

“A non-security crypto asset becomes subject to an investment contract when an issuer offers it by inducing an investment of money in a common enterprise with representations or promises to undertake essential managerial efforts from which a purchaser would reasonably expect to derive profits.”^[15]

A few things worth flagging:

First, for the expectation-of-profits element, what matters is the issuer's representations and promises rather than the technical attributes of the token or the structure of the offering vehicle. (The asset's characteristics, uses, and functions remain controlling for the antecedent classification question under Section III of the Release.)

Second, those representations and promises must concern "those essential managerial efforts which affect the failure or success of the enterprise," as distinguished from administrative or ministerial activities, which the Release notes are insufficient under Howey's third prong.^[16] The line between the two is also reflected in the Release's digital commodity analysis in Section III.A and its protocol mining and staking analyses in Section V, which treat activities such as node operation, transaction validation, and the facilitation of network effects as administrative or ministerial rather than essential managerial efforts.

Third, the expectation of profit must be one that a reasonable purchaser would form on the basis of the issuer's representations, which means the inquiry is objective in form even where the inputs are issuer-specific.

Fourth, the universe of communications relevant to the analysis is much broader than the offering documents proper: roadmap announcements, the issuer's own exchange-listing communications, statements about anticipated token-value growth, plans for future ecosystem buildout, planned protocol upgrades, and descriptions of the team's intended development work all potentially enter the analysis if they would create a reasonable expectation that purchasers will profit from the team's efforts. The legal analysis of an offering can no longer be confined to the four corners of a whitepaper or SAFT; it must encompass the full set of communications the issuer (broadly defined) has put into the market.

I examine the key concepts in this formulation below and then work through an example.

The "Issuer" Concept Is Broad

The Release defines "issuer" expansively. For purposes of Section IV, the term includes affiliates and agents of the issuer or a promoter.^[17] This means:

• A foundation or development company that creates and distributes a token is an issuer.

• A separate corporate affiliate of that foundation or development company that markets the token is an issuer.

• A promoter retained to publicize the offering is an issuer.

• An agent (for example, a marketing firm or an authorized spokesperson) is an issuer for these purposes.

In practice, the analysis cannot be sidestepped by inserting a layer of corporate separation between the entity that prints the token and the entity that does the talking. If a promoter or affiliate is making the representations, the Commission will treat those representations as the issuer's. Conversely, the Commission is also clear that representations by genuinely unaffiliated third parties (an enthusiastic community member, an independent commentator, a holder evangelizing on social media, etc) are not attributed to the issuer unless the issuer authorized them and they were conveyed to purchasers.^[18]

However, where a third party and the issuer collude to convey representations or promises, the third party's words are attributed to the issuer.^[19]

The Four Dimensions of "Representations or Promises"

The Release identifies four dimensions along which the reasonableness of a purchaser's profit expectations is assessed.^[20]

1. Source. The representations must come from (or be authorized by) the issuer.^[21] Statements by unaffiliated third parties ("DeFi influencers" with no relationship to the project, holders posting on Reddit, an exchange's own independent listing notice) generally do not count. The exception is collusion between the issuer and the third party: where the issuer is using a third party as a mouthpiece, the third party's statements bind the issuer.^[22] The drafting suggests the Commission has in mind both quiet co-marketing arrangements and more aggressive scenarios where issuers seed talking points through ostensibly independent voices.

2. Timing. Representations must be conveyed to the purchaser prior to or contemporaneously with the offer or sale.^[23] This is critical and clarifies a point that has bedeviled Howey analysis in crypto. Post-sale statements do not retroactively convert a prior sale into the sale of an investment contract.^[24] If the project team makes promises at t=10 about essential managerial efforts they intend to undertake, and a purchaser bought tokens at t=5, those promises do not transform the t=5 sale.

3. Manner. The Release identifies channels through which representations carry weight: written or oral agreements, public communications through which the issuer has established a regular pattern of communicating (the issuer's website, official social media accounts), direct private communications between the issuer and purchasers, regulatory filings publicly available to purchasers, and documents clearly attributable to the issuer (notably, a whitepaper).^[25] Outside those channels, the analysis turns on three sub-factors: how widely the representations were disseminated, the specific means used, and the issuer's established communication practices.^[26]

4. Specificity. Representations are more likely to create reasonable profit expectations when they are explicit and unambiguous about the essential managerial efforts to be undertaken, contain enough detail to demonstrate the issuer's ability to execute, and explain how the issuer's efforts will produce profits for token holders.^[27] The Release gives a concrete benchmark: a representation to develop functionality for a token (or its associated network) accompanied by a business plan with detailed milestones, a timeline, information about personnel, sources of funding, and other resources needed will likely create a reasonable expectation of profit.^[28] Vague aspirational statements without an actionable plan likely will not.^[29] The "explicit and unambiguous" formulation tightens the prior staff position. The Commission staff's superseded April 2019 Framework for "Investment Contract" Analysis of Digital Assets treated implied as well as explicit promises as probative of a reasonable expectation of profits, listing among the relevant characteristics "[t]he promise (implied or explicit) to build a business or operation.^"[30]

It is also worth flagging that the Release’s near-exclusive focus on the issuer’s representations and promises is, in my view, in tension not only with the 2019 Framework but with case law’s economic-realities mandate.^[31] The 2019 Framework identified, among many relevant considerations, whether an "Active Participant" was responsible for the development, improvement, operation, or promotion of the network, owned relevant intellectual property, or retained a stake giving it the ability to realize capital appreciation from the value of the digital asset.^[32] These factors were directed at the actual economic structure of the asset. The Release’s formulation subordinates those structural inquiries to a disclosure-based test. The practical risk is that courts applying Howey on economic-realities grounds may continue to find investment contracts in offerings where the issuer made no detailed representations at all. Issuers and counsel relying on the Release should be aware that the absence of milestone-level representations is not, by itself, a complete defense.

A Worked Example

Consider a hypothetical: Project PhoFi. A team incorporates PhoFi Labs Inc. ("PhoFi Labs") to build a decentralized photo-storage protocol. They form a Cayman foundation, the PhoFi Foundation (the "Foundation"), to issue the PhoFi token. PhoFi Labs is wholly owned by the same individuals who control the Foundation.

The Foundation publishes a whitepaper at t=0 describing:

• The technical architecture of the proposed PhoFi network,

• A roadmap with three discrete milestones (testnet by Q2, mainnet by Q4, on-chain governance the following year),

• The role PhoFi tokens will play (gas, staking, governance rights),

• A specified development budget of $25 million, sources of expected funding, and bios of named engineers.

PhoFi Labs runs an active account on X, has a website with a "roadmap" page that mirrors the whitepaper, and the Foundation's CEO gives podcast interviews discussing the same milestones. The Foundation conducts a SAFT-based pre-sale at t=1, with delivery of PhoFi tokens at network launch.

Applying the framework:

Issuer. Both the Foundation (the formal token issuer) and PhoFi Labs (its affiliate, controlled by the same principals, conducting the marketing) are issuers under the Release's definition. The CEO speaking on a podcast is an agent. Their statements are all attributed to the issuer.

Source. The whitepaper, the website, the X account, and the CEO interviews all come from the issuer or its agents.

Timing. All of the foregoing statements were made at or before t=1 (the SAFT pre-sale). They precede the offer and sale. They count toward the Howey analysis at the time of sale.

Manner. The whitepaper is a document attributable to the issuer. The website and the official X account are channels through which the issuer has established a regular pattern of communicating. The CEO interviews are oral statements by an agent. All four channels qualify.

Specificity. The roadmap has milestones, a timeline, a stated budget, identified personnel, and a clear theory for how the Foundation's efforts produce token-holder profits (build the network → drive adoption → drive utility demand for PhoFi). This is the paradigmatic case the Release flags as creating a reasonable expectation of profit.

Result: The SAFT pre-sale at t=1 offers and sells an investment contract. The PhoFi tokens are not themselves securities (PhoFi may, depending on its characteristics on launch, be a digital commodity within the meaning of Section III.A of the Release) but they are subject to the investment contract. The investment contract itself is a security under Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Exchange Act. The investment-contract status of the PhoFi tokens is then re-assessed at delivery and continually thereafter, under the framework in Section IV.B below. Whether the tokens remain subject to the investment contract upon and after delivery turns on whether the Foundation has fulfilled or failed its representations by the relevant moment.

The above presents a clean case. In practice, the analysis is rarely this tidy. Here is a variation where the framework produces a contestable outcome.

Variation: The Community Manager's Statement. At t=3, three months after the SAFT closes, the Foundation's community manager, hired on a part-time consulting contract to moderate the official Discord, posts in the Foundation's Discord server: "The team is targeting Q4 for mainnet. The ecosystem fund will be deployed to incentivize DeFi protocols to build on PhoFi. Big things ahead for price." The post stays up for two weeks before being deleted. The Foundation never publicly acknowledges or repudiates it. The post is screen-captured and widely circulated on X.

The Release defines "issuer" to include agents. Whether the community manager is a Section IV "agent" is not obvious, but the consulting contract's silence may not be a complete defense: under the Release, attribution turns on whether she is an agent of the issuer, whether her statements were authorized, or whether the Foundation effectively used her as a mouthpiece, not on the contract's formal grant of authority. The Foundation, moreover, chose to deploy a compensated contractor in a channel it controls, and the Release's "collusion" language covers deliberate coordination without clearly addressing negligent authorization.

The harder question is timing: the SAFT closed at t=1, and post-sale statements do not retroactively convert a prior sale. A secondary purchaser who bought SAFT rights at t=4, after reading the screen-captured post and relying on it, has a colorable argument that the statement was part of the relevant communications record for that later purchase. The practical point is which claim survives: a rescission theory against the Foundation is a poor fit, since it never sold to the t=4 buyer, but an antifraud claim (which does not depend on a direct sale between them) is a risk. The Foundation's two-week delay in removing the post, and its failure to repudiate it, strengthens that risk.

Practical upshot. Issuers should establish and enforce communications protocols covering all individuals who post in official channels, regardless of employment status. A prompt and unambiguous public repudiation (posted in the same channel, with the same visibility) is a good strategy for limiting attribution.

Secondary Market Transactions

Section IV.A closes with an interpretation that has significant market consequences. A non-security crypto asset that has been subject to an investment contract does not automatically remain subject to that contract in secondary market transactions.^[33] The test is whether purchasers in the secondary market would reasonably expect the issuer's representations or promises to engage in essential managerial efforts to remain connected to the non-security asset. If yes, the investment contract travels with the asset and secondary trades are securities transactions that must be registered under the Securities Act or conducted under an available exemption. If no, secondary trades are not securities transactions.^[34]

The investment contract is not magically severed by the act of resale; it is severed by the dissolution of the reasonable expectation that links the asset to the issuer's promises. Section IV.B explains how that dissolution occurs.

How Crypto Assets Separate from an Investment Contract

Section IV.B is the most novel piece of the Release. It identifies two non-exclusive paths to separation: fulfillment and failure.^[35] The idea that an investment contract can run its course and that subsequent transactions in the formerly-subject token are not securities transactions "simply by virtue of the token's origin story" was previewed in Chairman Atkins's November 12, 2025 speech^[36] and elaborated in his March 17, 2026 remarks delivered concurrently with the Release ("Regulation Crypto Assets: A Token Safe Harbor").^[37] More importantly for issuers and their counsel, the Token Safe Harbor proposal Chairman Atkins previewed contemplates a rule-based “investment contract safe harbor” that would operationalize separation upon completion or permanent cessation of the issuer’s essential managerial efforts.[38] Practitioners should be aware that the conditions under which the proposed safe harbor will treat separation as having occurred may diverge from the principles-based standards in Section IV.B.

The underlying principle is the Howey prong itself. A non-security crypto asset remains subject to an investment contract only so long as purchasers continue to have a reasonable expectation of profits to be derived from the issuer's essential managerial efforts.^[39] Once that expectation can no longer reasonably be held, the Howey analysis ends, the investment contract ceases to exist, and the asset is no longer subject to it.

Importantly, separation can occur at any point after the initial offer: immediately upon delivery, at a future date, or somewhere in between.^[40] There is no minimum period and no statutory waiting interval.

1. Fulfillment of the Issuer's Representations or Promises

The first path to separation is fulfillment. Once the issuer has fulfilled the essential managerial efforts it represented or promised it would undertake, the asset is no longer subject to the investment contract.^[41] Purchasers can no longer reasonably expect profits from those efforts because the efforts are complete. The investment contract, having served its purpose, ceases to exist.

The Release makes a number of subordinate points that are practically important:

• Continuing non-essential efforts are permitted. The issuer can continue providing efforts that are not essential managerial efforts with respect to the crypto asset or its associated network without re-creating an investment contract.^[42] The line between essential managerial efforts and ministerial or administrative work, drawn in Section V's protocol mining and staking analyses, and reflected in the digital commodity analysis in Section III.A, remains the operative distinction.

• Examples of fulfillable efforts. The Release lists three illustrative categories: developing certain functionalities or features for the crypto asset or associated network; achieving software development milestones on a roadmap; and open-sourcing related computer code.^[43]

• The issuer's own definitions control. Whether the issuer has fulfilled representations to "achieve decentralization" or "achieve functionality" is judged by how the issuer defined or otherwise described those concepts in marketing the offering, not by reference to a general market conception of decentralization or functionality.^[44] That places enormous practical weight on the issuer's drafting choices in the whitepaper, on the website, and in marketing materials. Vague aspirational language is not just less likely to create an investment contract at the front end; it also makes fulfillment harder to demonstrate at the back end.

The Release distinguishes between immediate-delivery offerings (typified by the classic ICO, where tokens are delivered to investors at the time of purchase) and delayed-delivery offerings (typified by the SAFT, where tokens are delivered later). In both cases, the sale occurs at the time of entry into the agreement, with settlement either contemporaneous or delayed.^[45] The investment-contract status of the asset, however, must be assessed at delivery and continually thereafter. The Release illustrates:

• If, at delivery, the issuer has publicly disclosed that it has completed the essential managerial efforts it represented or promised, the asset is no longer subject to the investment contract upon delivery.^[46]

• If, at delivery, the issuer has continued to perform essential managerial efforts in accordance with its representations or has not disclosed completion, the asset continues to be subject to the investment contract upon delivery.^[47]

The Fungibility Problem

One question the Release does not resolve concerns the interaction between fungibility and the transaction-based nature of the Howey test. Because crypto assets are typically fungible, there is no straightforward mechanism for distinguishing units sold as part of an investment contract from units that are not. ^[48] If an issuer makes new or renewed representations in connection with even a limited distribution of an otherwise widely circulating token, those representations may be relevant to the expectations of at least some subsequent purchasers. Yet neither purchasers nor intermediaries can identify which specific units, if any, are associated with those representations. The Release does not explain how this transaction-specific inquiry can be operationalized in markets where the asset itself is technically indistinguishable across units. Where market participants no longer reasonably rely on issuer efforts, this tension may have limited practical significance. But where issuer involvement is ongoing, ambiguous, or reintroduced, intermediaries cannot readily translate the Howey framework into unit-level determinations, and the Release’s secondary-market discussion does not provide a clear basis for resolving that uncertainty.^[49]

Practical upshot. Intermediaries handling assets with evolving or ambiguous fact patterns should adopt and maintain written policies and procedures for initial listing determinations, periodic reassessment as issuer conduct changes, and contemporaneous documentation of the factual bases for those judgments.

2. Failure to Satisfy the Issuer's Representations or Promises

The second path to separation is failure. A non-security crypto asset is no longer subject to an investment contract if a purchaser would not reasonably expect the issuer to be able to fulfill, or to continue to engage in, the essential managerial efforts it represented or promised.^[50]

Failure, in turn, can manifest in two forms:

• Implicit failure through passage of time and inaction. If a sufficiently long period has passed since the offer and sale, and during that period it has become clear that the issuer has neither performed the promised efforts nor indicated an intent to do so, purchasers can no longer reasonably expect the original representations to remain connected to the asset.^[51] The Release does not specify how long is "sufficient". That is necessarily fact-specific.

• Express abandonment. If the issuer publicly announces that it will no longer perform the essential managerial efforts it represented or promised (effectively abandoning the project), the connection is severed.^[52] The Release explains that such announcement must be widely disseminated to market participants and unambiguous.^[53] A buried tweet at 2:00 a.m. probably will not do; a press release, a website notice, and notification to known holders, all stating clearly that development will not continue, would. Abandonment does not insulate the issuer from liability, however. The Release notes that an issuer that fails to perform or complete the essential managerial efforts it represented or promised may face liability under the federal securities laws for those failures, including under the antifraud provisions.^[54] An abandonment announcement therefore operates as a forward-looking severance mechanism while simultaneously evidencing the non-performance on which backward-looking claims (for the unregistered offering, or for material misstatements or omissions) may rest.

The critical caveat in Section IV.B.2 is that failure terminates the investment contract going forward but does not absolve the issuer of liability for the original sale. Indeed, a failed issuer may face more liability, not less: the Release notes that an issuer that fails to perform or complete promised essential managerial efforts may face liability under the federal securities laws for those failures, including under the antifraud provisions.^[55] The investment contract terminating is a question about the asset's prospective status; it is not a release of claims.

3. Application of the Interpretation

Section IV.B.3 makes two important points:

Separation does not retroactively cleanse the original offering. This is one of the most consequential points in Section IV.B for issuers and their counsel, and bears repeating. If an issuer offered and sold an investment contract without registration and without an available exemption, the issuer violated Section 5^[56] at the time of that offering. That violation persists. Investors retain rights against the issuer under the federal securities laws, including Section 12(a)(1)^[57] rescission rights, subject to the limitations and repose periods of Section 13 of the Securities Act, and antifraud claims where the offering involved material misstatements or omissions, even if the asset has since separated from the investment contract and the investment contract no longer exists.^[58] The forward separation analysis in Section IV.B is not a Section 5 exoneration mechanism.

Antifraud liability survives the investment contract. Material misstatements or omissions made in connection with the creation of the investment contract, or at any time during its existence, can ground liability under Section 17(a) of the Securities Act,^[59] Section 10(b) of the Exchange Act,^[60] and Rule 10b-5^[61], even after the asset has separated and the investment contract has ceased to exist.^[62] Issuers should not assume that a successful pivot to "decentralization" or a clean fulfillment narrative inoculates against earlier antifraud exposure.

Practical Steps for Issuers and Intermediaries

The framework described above translates into a discrete set of diligence tasks.

For token issuers:

• Inventory all pre-sale and post-sale communications, including the whitepaper, website, official social channels, and statements by affiliates, agents, and compensated community personnel;
• Identify every representation or promise of essential managerial efforts;
• Determine whether each was fulfilled, abandoned, or remains live;
• Document the basis for any separation conclusion, including the public disclosures that support it; and
• Adopt written communications protocols covering everyone who posts in official channels, regardless of employment status.

For platforms, custodians, and other intermediaries:

• Build listing memoranda that address issuer communications and separation status, not just token functionality;
• Reassess listed assets when issuer conduct changes, including renewed roadmap statements, ecosystem-fund announcements, and completion or abandonment disclosures; and
• Document, at the time of each judgment, why secondary-market purchasers would or would not reasonably expect profits from the issuer's ongoing efforts.

How Durable Is the SEC’s Framework?

The framework's durability turns on three questions: whether the courts will follow it, whether a future Commission will keep it, and whether Congress will supersede it. Each answer is uncertain.

Why the Release May Not Be the Last Word in Court

Since the Release binds no court, its treatment of secondary-market transactions must ultimately answer to existing case law, which remains divided.

First, the Release’s position (according to which an associated investment contract can continue to travel with a non-security crypto asset if purchasers would reasonably expect the issuer’s representations or promises to remain connected to the asset) is in tension with case law on multiple axes.

In SEC v. Ripple Labs, Inc., 682 F. Supp. 3d 308 (S.D.N.Y. 2023), Judge Torres held that Ripple's "Programmatic Sales" of XRP through blind bid/ask transactions on digital asset exchanges did not satisfy Howey's third prong. Since programmatic buyers "could not have known if their payments of money went to Ripple, or any other seller of XRP," the court concluded, they "could not reasonably expect" profits derived from Ripple's particular efforts.[63] Importantly, Judge Torres treated XRP itself as not inherently a security (the asset was not "in and of itself a 'contract, transaction[,] or scheme' that embodies the Howey requirements") and located the securities analysis in the totality of circumstances surrounding each category of transaction.[64] The Release does not engage Ripple's manner-of-sale reasoning or explain how the Release's representation-focused framework applies to anonymous exchange transactions in which the buyer has no awareness of the issuer's role on the other side of the trade.[65]

Second, there is divergence in the opposite direction. In SEC v. Terraform Labs Pte. Ltd.[66], Judge Rakoff, denying a motion to dismiss, affirmatively rejected Ripple's manner-of-sale distinction, holding that Howey "makes no such distinction between purchasers" and that public representations by the issuer could reach secondary market purchasers as effectively as direct purchasers. Judge Failla adopted the same approach on a motion for judgment on the pleadings in SEC v. Coinbase, Inc., 726 F. Supp. 3d 260, 293 (S.D.N.Y. 2024). The Release nominally embraces the Terraform/Coinbase intuition that issuer representations can carry the Howey analysis, but it then imposes two doctrinal limits on that intuition that have no clear foothold in either Terraform or Coinbase and that a court following Judge Rakoff's or Failla's reasoning could decline to recognize.

The first limit is on the source of representations. The Release provides that representations from unaffiliated third parties do not factor into the Howey analysis unless authorized by the issuer and conveyed to purchasers. Neither Terraform nor Coinbase squarely addressed the Release's specific constraint on unaffiliated third-party statements; both focused principally on issuer, developer, or promoter communications.

The second limit is on the duration of representations. The Release recognizes a separation concept under which an investment contract can terminate when the issuer fulfills its promised essential managerial efforts or unambiguously abandons them, with fulfillment measured against the issuer's own definitions of what was promised. Neither Terraform nor Coinbase recognized any analogous termination concept, although neither case squarely presented the question.

The upshot is that the Release's framework may diverge from judicial outcomes in either direction. Courts following Ripple may hold that some secondary transactions the Release would treat as securities transactions are not, on the ground that the buyer never connected its capital to the issuer's efforts. Courts following Terraform and Coinbase may hold that some transactions the Release would exclude are nevertheless investment contracts.

That risk is compounded by Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024): courts owe the Release no controlling deference and will apply Howey according to their own best reading of the statute, treating the Release as, at most, persuasive authority whose weight depends on its power to persuade.

Commission Composition and Reversibility

The Release was adopted by an all-Republican, three-member Commission.^[67] Commissioner Crenshaw, the last Democratic commissioner, departed the SEC in early January 2026, and the President had not nominated a successor by the time the Release was issued.^[68] No dissenting statement accompanies the Release. A dissenting Commissioner's statement, had one existed, would have provided a formally published, institutionally credentialed counterargument that litigants challenging the Release's positions could invoke directly. Without it, challengers must reconstruct the opposing case from external sources. As an interpretive release, the Release is more susceptible to revision by a future Commission than a notice-and-comment rule would be; the absence of bipartisan buy-in makes such revision more likely if the Commission’s composition changes.^[69]

The Release is also the first major output of a Joint Harmonization Initiative (“JHI”) launched by the SEC and CFTC in conjunction with a Memorandum of Understanding (“MOU”) signed March 11, 2026 by SEC Chairman Atkins and CFTC Chairman Selig.^[70] The MOU commits both agencies to "clarify, coordinate, and harmonize" across six areas of shared regulatory interest, including, but not limited to, crypto assets, and supersedes the agencies' 2018 coordination MOU, while leaving the agencies' separate 2004 MOU on security futures products in force. The JHI operationalizes those commitments through designated staff from each agency. ^[71] The Release, issued six days after the MOU was signed, is a product of that structure, and the CFTC's decision to join it with guidance reflects the coordination framework the two instruments together establish. This inter-agency backing cuts against the reversibility just described: walking the framework back would now mean unwinding a coordinated SEC–CFTC commitment, not just a single Commission's interpretive view. But the MOU is itself an instrument a later Commission could renegotiate, so it supplies institutional momentum, not durable legal entrenchment.

The CLARITY Act and the Section IV Framework

The Release was issued against the backdrop of pending federal legislation that, if enacted, could substantially supplant the Section IV framework with a statutory regime structured around different operative concepts. The Digital Asset Market Clarity Act, H.R. 3633, 119th Cong. (the "CLARITY Act"), passed the House of Representatives on July 17, 2025 and remains pending in the Senate.[72] The Senate Banking Committee has advanced a substitute version that would materially revise the House-passed architecture, but the bill has not been passed by the full Senate or enacted.[73] The discussion below first addresses the House-passed version and then notes the different approach reflected in the Senate Banking substitute.

Two structural points of divergence between the Release's Section IV framework and the House-passed CLARITY Act are worth flagging.

First, the House-passed CLARITY Act resolves the secondary-market question by statutory design rather than by reasonable expectations. Section 201 provides that an "investment contract asset" (a digital commodity that can be exclusively possessed and transferred, person to person, without necessary reliance on an intermediary, that is recorded on a blockchain, and that is sold or transferred, or intended to be sold or transferred, pursuant to an investment contract) is not itself an investment contract.[74] Section 203 addresses secondary transactions in such digital commodities by persons other than the issuer, or an agent or underwriter of the issuer, with separate conditions in Section 204 governing sales by digital commodity affiliated persons and digital commodity related persons.[75] Under that architecture, whether a secondary transaction is subject to the securities laws turns in significant part on statutory seller categories and, for affiliated and related persons, on separate conditions tied to the maturity status of the blockchain system. It does not turn principally on whether secondary-market purchasers continue to expect profits from issuer efforts. Those provisions, if enacted in substantially similar form, would foreclose much of the Release's Section IV.A analysis under which an investment contract may remain connected to the asset in secondary trading.

Second, the House-passed CLARITY Act operationalizes separation through a "mature blockchain system" certification regime in lieu of the Release's principles-based fulfillment-or-failure inquiry. Section 205 would add a new Section 42 to the Securities Exchange Act establishing mature-blockchain-system requirements. Certification may be filed by the issuer, an affiliate or related person, a decentralized governance system, a registered digital commodity exchange, or any other person the Commission determines appropriate.[76] Even after certification, resales by affiliated and related persons remain subject to the separate conditions of Section 204.[77]

The Senate Banking substitute takes a different path. Rather than relying on the House bill's "investment contract asset" and "mature blockchain system" architecture, the Senate substitute uses concepts such as "network tokens" and "ancillary assets." Under that framework, a network token is rebuttably presumed to be an ancillary asset (an asset whose value depends on the entrepreneurial or managerial efforts of an ancillary-asset originator or related person) with originator-side disclosure obligations continuing while those efforts remain live. The substitute also provides a certification mechanism under which the originator or a digital asset intermediary may certify, supported by reasonable evidence and subject to Commission objection within a specified review period, that the relevant entrepreneurial or managerial efforts have ended (or that the network token is not an ancillary asset) and that the disclosure obligations therefore terminate.[78]

In substance, the Senate approach appears closer to the Release than the House text does in one important respect: it keys the classification question to whether the token's value remains dependent on entrepreneurial or managerial efforts, and, through certification, to whether those efforts have ended. But it differs from the Release in remedy and mechanics. Under the Release, the continued connection between a non-security crypto asset and issuer promises may cause secondary-market transactions to be treated as securities transactions requiring registration or an exemption. Under the Senate substitute, the network token itself is addressed through a statutory classification and disclosure regime: for ordinary secondary trades by unaffiliated holders, the investor-protection mechanism is continuing originator-side disclosure while entrepreneurial or managerial efforts remain ongoing, supplemented by statutory resale restrictions on related persons, rather than transaction-level securities treatment of the trades themselves. In that respect the two chambers converge more than their taxonomies suggest: each regulates insiders' resales by statute; they diverge on the treatment of everyone else's.

The Release is an interpretive release reflecting the current Commission's reading of existing statutory text and may be revised by a future Commission without ordinary notice-and-comment rulemaking. CLARITY, by contrast, would amend the underlying statutes themselves. Displacement of the Release's positions through CLARITY would therefore be statutory rather than interpretive, and would carry correspondingly greater durability than revision by a future Commission or the accretion of contrary case law.

Whether Congress ultimately adopts the House architecture, the Senate architecture, or a reconciled version of the two, the practical diligence question for issuers and intermediaries will remain similar, though not identical across versions: what issuer, originator, or related-person efforts remain live; what has been disclosed about them; and whether the market can document the basis for treating the asset or transaction outside the securities-law framework. Until legislation is enacted, the harder question after the Release is no longer simply whether a token is itself a security. It is whether the market is still trading the token on the strength of promised efforts, and whether that conclusion can be documented through a communications review, a separation analysis, and ongoing monitoring as issuer conduct evolves.

About the Author

Ingram Weber advises token issuers, trading platforms, custodians, and other digital asset market participants on U.S. federal securities law compliance, regulatory strategy, and enforcement matters, with particular expertise in cross-border issues involving Japan and Singapore and, more broadly, the Asia-Pacific region. If the issues discussed in this article are relevant to your business, you are encouraged to reach out to discuss how these considerations may apply to your specific facts and circumstances.

^[1]Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Securities Act Release No. 33-11412, Exchange Act Release No. 34-105020, File No. S7-2026-09 (Mar. 17, 2026), available at https://www.sec.gov/files/rules/interp/2026/33-11412.pdf.

^[2]Release § III, at 13.

^[3]Release § III.A, at 14 (digital commodities); § III.B, at 16 (digital collectibles); § III.C, at 20 (digital tools).

^[4]Release § III.D, at 22 ("Stablecoins other than payment stablecoins issued by a permitted payment stablecoin issuer may meet the definition of 'security' depending on the facts and circumstances."). Payment stablecoins issued by a permitted payment stablecoin issuer will be excluded from the definitions of “security” under the Securities Act and the Exchange Act by operation of section 17 of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, Pub. L. No. 119-27, 139 Stat. 419 (the “GENIUS Act”), upon the Act’s effective date (the earlier of 18 months after enactment or 120 days after the primary Federal payment stablecoin regulators issue any final regulations implementing the Act). Pending that effective date, the Release interprets that the offer and sale of “Covered Stablecoins,” in the manner and under the circumstances described in the staff's April 2025 statement, does not involve the offer and sale of securities within the meaning of Securities Act section 2(a)(1) or Exchange Act section 3(a)(10). See Release § III.D, at 21–23.

^[5]Release § III.E, at 23.

^[6]Release § III, at 13–14 ("[T]here may be crypto assets that do not fall within any of these five categories, as well as crypto assets with hybrid characteristics that may fall within more than one category.").

^[7]Release § V, at 34 (protocol mining and staking); § VI, at 54 (wrapping); § VII, at 58 (airdrops).

^[8]See, e.g., Div. of Corp. Fin., Sec. & Exch. Comm'n, Staff Statement on Meme Coins (Feb. 27, 2025), https://www.sec.gov/newsroom/speeches-statements/staff-statement-meme-coins; Div. of Corp. Fin., Sec. & Exch. Comm'n, Staff Statement on Stablecoins (Apr. 4, 2025), https://www.sec.gov/newsroom/speeches-statements/statement-stablecoins-040425; Div. of Corp. Fin., Sec. & Exch. Comm'n, Staff Statement on Certain Proof-of-Work Mining Activities (Mar. 20, 2025), https://www.sec.gov/newsroom/speeches-statements/statement-certain-proof-work-mining-activities-032025; Div. of Corp. Fin., Sec. & Exch. Comm'n, Staff Statement on Certain Protocol Staking Activities (May 29, 2025), https://www.sec.gov/newsroom/speeches-statements/statement-certain-protocol-staking-activities-052925; Div. of Corp. Fin., Sec. & Exch. Comm'n, Staff Statement on Certain Liquid Staking Activities (Aug. 5, 2025), https://www.sec.gov/newsroom/speeches-statements/corpfin-certain-liquid-staking-activities-080525. The Release expressly notes that staff statements "have no legal force or effect" and that "the views expressed by the Commission in this release supersede any prior statements by the Commission or its staff on these topics." Release § III.B, at 18 n.62 (and substantially identical formulations in §§ III.D and V.A).

^[9]Release § IV.A, at 24 n.83.

^[10]Securities Act of 1933 § 2(a)(1). The parallel definition of "security" in the Securities Exchange Act of 1934 is "essentially identical in meaning." SEC v. Edwards, 540 U.S. 389, 393 (2004) (citing Reves v. Ernst & Young, 494 U.S. 56, 61 n.1 (1990)); see Securities Exchange Act of 1934 § 3(a)(10). On the absence of a statutory definition of "investment contract," see Release § II, at 11.

^[11]Release § I, at 4 n.7. See also SEC v. Barry, 146 F.4th 1242, 1251 (9th Cir. 2025) (the Howey test "has three elements," including "a common enterprise"); SEC v. Scoville, 913 F.3d 1204, 1220 (10th Cir. 2019) (same).

^[12]United Hous. Found., Inc. v. Forman, 421 U.S. 837, 849 (1975) ("[I]n searching for the meaning and scope of the word 'security' . . . form should be disregarded for substance and the emphasis should be on economic reality.").

^[13]Release § IV.A, at 24 ("How an issuer markets and promotes a contract, transaction, or scheme is relevant to assessing whether the issuer is offering or selling an investment contract.").

^[14] Release § IV.A, at 27.

^[15]Release § IV.A, at 24–25.

^[16]Release § I, at 4 n.7, and § II, at 12 n.42 (citing SEC v. Glenn W. Turner Enters., Inc., 474 F.2d 476, 482 (9th Cir. 1973), and noting that "administrative and ministerial activities are not managerial efforts that satisfy Howey's 'efforts of others' requirement"); see also First Fin. Fed. Sav. & Loan v. E.F. Hutton Mortg., 834 F.2d 685 (8th Cir. 1987); Union Planters Nat'l Bank of Memphis v. Commercial Credit Bus. Loans, Inc., 651 F.2d 1174 (6th Cir. 1981); Donovan v. GMO-Z.com Tr. Co., 779 F. Supp. 3d 372, 388 (S.D.N.Y. 2025).

^[17]Release § IV.A, at 24 n.83.

^[18]Release § IV.A, at 25–26 ("[I]t would not be reasonable for a purchaser to expect profits based on representations or promises made by third parties, such as unaffiliated proponents of the relevant crypto system or holders of the relevant crypto asset, unless the representations or promises are authorized by the issuer and conveyed to purchasers." (citing 17 C.F.R. § 243.101(c) (definition of "person acting on behalf of an issuer" in Regulation FD))).

^[19]Release § IV.A, at 26 n.89 ("[W]here the third party and the issuer collude to convey representations or promises, it would be reasonable for a purchaser to expect profits based on those explicit representations or promises.").

^[20]Release § IV.A, at 25–27.

^[21]Release § IV.A, at 25.

^[22]Release § IV.A, at 26 n.89.

^[23]Release § IV.A, at 26 ("Of necessity, in order to shape a purchaser's expectations, the representations or promises must be conveyed to the purchaser prior to or contemporaneously with the issuer's offer or sale to the purchaser.").

^[24]Release § IV.A, at 26 ("[T]he issuer's post-sale representations or promises would not convert the prior sale into an offer or sale of an investment contract.").

^[25]Release § IV.A, at 26.

^[26]Release § IV.A, at 26.

^[27]Release § IV.A, at 27.

^[28]Release § IV.A, at 27.

^[29]Release § IV.A, at 27 ("[R]epresentations or promises that are vague or contain no semblance of an actionable business plan, such as those lacking milestones, funding, or other plans for needed resources, likely would not create reasonable expectations of profit.").

^[30]Framework for "Investment Contract" Analysis of Digital Assets, Strategic Hub for Innovation and Fin. Tech., Sec. & Exch. Comm'n (Apr. 3, 2019), https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets, superseded by Release § I, at 9 n.21. The Release separately supersedes the staff statements on meme coins, stablecoins, protocol mining, and protocol staking. See Release nn. 62, 79, 99–100.

^[31]The "economic realities" mandate traces to the Supreme Court's instruction in United Housing Found., Inc. v. Forman, 421 U.S. 837, 849 (1975), that "the application of these statutes" must "turn on the economic realities underlying a transaction, and not the name appended thereto," and that "the emphasis should be on economic reality." See also SEC v. W.J. Howey Co., 328 U.S. 293, 298 (1946) (defining investment contract by reference to the "substance" of the arrangement).

^[32]Division of Corporation Finance, SEC, Framework for “Investment Contract” Analysis of Digital Assets (Apr. 3, 2019) (the “2019 Framework”).

^[33]Release § IV.A, at 27–28.

^[34]Release § IV.A, at 28.

^[35]Release § IV.B, at 28.

^[36]Paul S. Atkins, Chairman, Sec. & Exch. Comm'n, The Securities and Exchange Commission’s Approach to Digital Assets: Inside "Project Crypto" (Nov. 12, 2025), https://www.sec.gov/newsroom/s....

^[37]Paul S. Atkins, Chairman, Sec. & Exch. Comm'n, Regulation Crypto Assets: A Token Safe Harbor (Mar. 17, 2026), https://www.sec.gov/newsroom/speeches-statements/atkins-remarks-regulation-crypto-assets-031726.

[38] Id.

^[39]Release § IV.B, at 28.

^[40]Release § IV.B, at 29 ("This separation of the non-security crypto asset from the issuer's representations or promises to engage in essential managerial efforts may occur at any time after the offer of the associated investment contract, such as immediately upon delivery of the non-security crypto asset to purchasers or at a future date.").

^[41]Release § IV.B.1, at 29.

^[42]Release § IV.B.1, at 29.

^[43]Release § IV.B.1, at 29.

^[44]Release § IV.B.1, at 29 n.96 ("[I]f the issuer represents or promises to achieve decentralization of an associated crypto system, whether the issuer has achieved decentralization would be based on how the issuer defined or otherwise described decentralization, not a general market conception of what constitutes decentralization.").

^[45]Release § IV.B.1, at 30 (citing Securities Offering Reform, Securities Act Release No. 33-8591, 70 Fed. Reg. 44,721, 44,765 n.391 (Aug. 3, 2005)).

^[46]Release § IV.B.1, at 30–31.

^[47]Release § IV.B.1, at 31.

^[48]This difficulty reflects a broader mismatch between securities doctrine and the technical characteristics of digital assets. Traditional securities markets accommodate the coexistence of identical instruments sold in both registered and exempt transactions by relying on transfer restrictions, intermediated recordkeeping, and resale safe harbors such as Rule 144, rather than on intrinsic differences between units. By contrast, most crypto tokens are designed to be freely transferable and fungible at the protocol level. Although certain token implementations, particularly in permissioned or compliance-oriented systems, can embed transfer restrictions directly into smart contracts (for example, through whitelisting or transfer controls), these mechanisms are not widely adopted in public token markets and typically depend on off-chain inputs or administrative control. Traditional markets also use identifiers such as CUSIP numbers to track issuances, but legal status is enforced through intermediaries and transfer restrictions rather than the identifier itself. In the absence of broadly implemented, interoperable transfer controls, intermediaries in crypto markets cannot reliably map transaction-specific legal distinctions onto otherwise identical units, leaving them to rely on asset-level judgments under conditions of legal uncertainty.

^[49]The implications for broker-dealers and alternative trading systems are significant, but arise from classification uncertainty rather than from any single rule. A range of obligations under the federal securities laws and self-regulatory organization rules, including, where applicable, custody and customer protection requirements under SEA Rule 15c3-3, turn on whether an asset is a “security.” Those regimes, however, do not provide a clear mechanism for assets whose status depends on the transaction-specific inquiry under the Howey test. Where issuer or affiliate conduct could give rise to a reasonable expectation of profits for some purchasers but not others, intermediaries must make asset-level listing and compliance judgments without the ability to resolve that inquiry at the level of individual transactions. In such circumstances, an intermediary that treats an asset as a non-security based on the Release’s Section IV.A analysis could still face scrutiny if regulators conclude that, in light of contemporaneous facts and circumstances, purchasers were reasonably relying on the efforts of others. The Release effectively places weight on intermediaries’ ongoing diligence and monitoring. Firms that handle assets with evolving or ambiguous fact patterns should therefore adopt and maintain written policies and procedures for initial listing determinations, periodic reassessment, and documentation of the factual bases for those judgments.

^[50]Release § IV.B.2, at 31.

^[51]Release § IV.B.2, at 31.

^[52]Release § IV.B.2, at 31–32.

^[53]Release § IV.B.2, at 31 n.98 ("A public announcement of non-performance should be widely disseminated to market participants and unambiguous in order for investors to no longer reasonably expect the issuer to perform the essential managerial efforts.").

^[54]Release § IV.B.2, at 32.

^[55]Release § IV.B.2, at 32 ("An issuer that fails to perform or otherwise complete the essential managerial efforts it represented or promised it would undertake may face liabilities under the Federal securities laws for these failures, including under the anti-fraud provisions of the Federal securities laws.").

^[56]Securities Act of 1933 § 5.

^[57]Securities Act of 1933 § 12(a)(1).

^[58]Release § IV.B.3, at 33 ("If the issuer fails to register the offering of that investment contract or conduct it pursuant to an available exemption, the issuer will violate the Securities Act and investors will have certain rights against the issuer under the Federal securities laws for this failure to register or use an applicable exemption, even if the non-security crypto asset subsequently separates from the associated investment contract and that investment contract ceases to exist.").

^[59]Securities Act of 1933 § 17(a), 15 U.S.C. § 77q(a).

^[60]Securities Exchange Act of 1934 § 10(b).

^[61]17 C.F.R. § 240.10b-5.

^[62]Release § IV.B.3, at 33–34 ("[I]f the issuer makes material misstatements or omissions in connection with the creation of the associated investment contract or at any time during the existence of that investment contract, the issuer may be subject to liability under the anti-fraud provisions of the Federal securities laws for such conduct, even if the non-security crypto asset subsequently separates from the associated investment contract and that investment contract ceases to exist.").

[63] Ripple, 682 F. Supp. 3d at 328–29. Judge Torres also expressly declined to reach whether true secondary market sales by parties unaffiliated with the issuer would constitute investment contracts, observing that "[w]hether a secondary market sale constitutes an offer or sale of an investment contract would depend on the totality of circumstances and the economic reality of that specific contract, transaction, or scheme." Id. at 329 n.16 (citing Marine Bank v. Weaver, 455 U.S. 551, 560 n.11 (1982)). The Programmatic Sales at issue in Ripple were Ripple's own sales executed through exchange algorithms, not third-party-to-third-party resales, and the scope of Ripple's holding on secondary trading is therefore narrower than is sometimes assumed.

[64] Ripple, 682 F. Supp. 3d at 323–24. This is a meaningful framing point for the Release: under Ripple, XRP itself was not inherently an investment contract, and the investment-contract analysis turns on the circumstances of the relevant transaction. The same token can move in and out of investment-contract status depending on the circumstances of a particular sale. The Release's by-name listing of XRP as a digital commodity is therefore consistent with Ripple's outcome on Programmatic Sales but does not, on Ripple's own logic, immunize the asset from investment-contract treatment in some future transaction.

[65] The Release supersedes prior staff guidance and prior staff statements but does not purport to address existing judicial precedent. The Ripple appeals were dismissed by joint stipulation in August 2025, and the SEC dismissed Coinbase in February 2025. As a result, the divergent approaches reflected in Ripple, Terraform, and Coinbase remain at the district court level, with no current vehicle for near-term Second Circuit resolution.

[66] SEC v. Terraform Labs Pte. Ltd., 684 F. Supp. 3d 170, 197 (S.D.N.Y. 2023).

^[67]The Commission has consisted of five members since its establishment under the Securities Exchange Act of 1934. The three-member quorum that adopted the Release is consistent with Commission Rule 41, 17 CFR § 200.41, which generally requires three commissioners to transact business. As of the Release date, the Commission had only three confirmed members: Chairman Paul S. Atkins, Commissioner Hester M. Peirce, and Commissioner Mark T. Uyeda. Commissioner Caroline A. Crenshaw's term expired on June 5, 2024; she served in holdover status until her departure in early January 2026; Commissioner Jaime Lizárraga resigned effective January 17, 2025. The Release therefore reflects the views of a Commission operating with two vacant seats, no Democratic-appointed members, and no internal dissent. For administrative law purposes, a quorum acting is acting, and the Release was validly adopted. The political salience of the composition is nonetheless relevant to durability: a Commission returning to full complement, or one reconstituted after a change in administration, could revisit or retract the interpretation without clearing the procedural bar that would apply to a legislative rule.

^[68]Commissioner Crenshaw had been the Commission's most vocal critic of the current administration's crypto enforcement posture, dissenting from specific rollbacks of prior settlements and from the Commission's broader policy reorientation. Her departure removed the only formally dissenting voice from the Commission table.

^[69]The Release is an interpretive release, not a legislative rule adopted through ordinary notice-and-comment rulemaking. Interpretive rules are exempt from APA notice-and-comment requirements, 5 U.S.C. § 553(b)(A), and may be revised or rescinded without a new round of public comment. See Perez v. Mortg. Bankers Ass'n, 575 U.S. 92, 96 (2015). A future Commission could revise or withdraw the Release by publishing a new interpretive release, subject only to the requirement that the change be adequately explained, including a reasoned response to any significant reliance interests on the prior interpretation. See FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515–16 (2009); Encino Motorcars, LLC v. Navarro, 579 U.S. 211, 221–22 (2016). That procedural flexibility stands in contrast to a legislative rule, which would require a new rulemaking proceeding, including public comment, before it could be undone.

^[70]The SEC-CFTC Memorandum of Understanding on Regulatory Harmonization, signed March 11, 2026, expressly covers digital assets and appears to be the first formal inter-agency agreement between the two regulators to do so. The 2026 MOU expressly supersedes the agencies' July 11, 2018 MOU on coordination in areas of common regulatory interest and information sharing, and expressly reaffirms their March 17, 2004 MOU regarding the oversight of security futures product trading and the sharing of SFP information. See Memorandum of Understanding Between the SEC and CFTC Regarding Harmonization in Areas of Common Regulatory Interest (Mar. 11, 2026), https://www.sec.gov/files/mou-...; SEC Press Release No. 2026-26 (Mar. 11, 2026); 2026 MOU art. III, § 5(d) (supersession) and § 5(c) (reaffirmation). Neither prior instrument addressed crypto assets. The 2026 MOU commits both agencies to coordinate across a range of shared regulatory functions, including joint interpretations and rulemakings to clarify product definitions, coordinated examination and enforcement, and the development of a fit-for-purpose framework for crypto assets and other emerging technologies. Chairman Atkins and CFTC Chairman Selig co-signed the MOU as part of the broader Project Crypto initiative to harmonize federal oversight of digital asset markets. The MOU's significance for present purposes is that the CFTC's endorsement of the Release's five-category taxonomy is not merely implicit in the coordination agreement: the CFTC joined the Release directly, providing guidance that the CFTC and its staff will administer the Commodity Exchange Act consistently with the SEC's interpretation. That direct co-issuance matters for market participants who have operated under inconsistent agency positions. See also Release § I, at 9 (describing the interpretation as the Commission's "first step" toward a clearer regulatory framework for crypto assets, and providing the CFTC's guidance that it will administer the Commodity Exchange Act consistent with the interpretation).

^[71]The Joint Harmonization Initiative encompasses a broader scope than crypto alone. The MOU identifies six areas of focus: clarifying product definitions through joint interpretations and rulemakings; modernizing clearing, margin, and collateral frameworks; reducing registration frictions for dually-regulated entities; developing a fit-for-purpose regulatory framework for crypto assets and other emerging technologies; streamlining regulatory reporting for trade data, funds, and intermediaries; and coordinating cross-market examinations, economic analyses, risk monitoring, surveillance, and enforcement. The Release is the first concrete output of the Initiative, but the agencies have indicated that further joint interpretations and rulemakings are anticipated across all six areas. Its practical significance for practitioners is that positions taken in any one JHI output should be read in light of the broader coordination framework.

[72] Digital Asset Market Clarity Act of 2025, H.R. 3633, 119th Cong. (as passed by the House, July 17, 2025), available at https://www.congress.gov/bill/119th-congress/house-bill/3633/text/eh. References to numbered sections of the House-passed CLARITY Act are to this engrossed version.

[73] H.R. 3633, 119th Cong. (as reported by the S. Comm. on Banking, Housing, and Urban Affairs with an amendment in the nature of a substitute, June 1, 2026) (Calendar No. 423); see proposed Securities Act § 4B(b) (setting out the ancillary-asset presumption and certification mechanism); Senate Comm. on Banking, Housing, and Urban Affairs, Digital Asset Market Clarity Act: Section-by-Section (May 12, 2026), available at https://www.banking.senate.gov/imo/media/doc/section-by-section.pdf (describing the ancillary-asset disclosure and certification framework).

[74] CLARITY Act § 201 (amending, inter alia, Securities Act of 1933 § 2(a)(1) to provide that "[t]he term 'investment contract' does not include an investment contract asset" and adding the definition of "investment contract asset"). Section 201 makes parallel amendments to the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and the Securities Investor Protection Act of 1970.

[75] CLARITY Act §§ 203, 204.

[76] CLARITY Act § 205 (adding Securities Exchange Act of 1934 § 42).

[77] CLARITY Act § 204; see H. Comm. on Fin. Servs., Section-by-Section: Digital Asset Market Clarity (CLARITY) Act of 2025 (noting that the Section 204 requirements, including lockup periods and sales-volume limitations, are reduced after the blockchain system is certified as mature), available at https://financialservices.house.gov/uploadedfiles/2025-07-10_-_sbs_-_clarity_act_of_2025_final.pdf.

[78] H.R. 3633 (as reported in the Senate), supra note 73, proposed Securities Act of 1933 § 4B(b); see Section-by-Section, supra note 73 (describing certification by "ancillary asset originators or a digital asset intermediary" that "entrepreneurial or managerial efforts have ended, and that SEC disclosures are no longer required").