The US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have issued a joint interpretation clarifying how federal securities laws apply to crypto assets and transactions involving crypto assets.
The CFTC has indicated it will administer the Commodity Exchange Act consistently with the SEC's interpretation, with certain non-security crypto assets potentially meeting the definition of a commodity under that framework.
The interpretation provides a token taxonomy covering digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. It also addresses how a non-security crypto asset, one that is not itself a security, may become subject to, or cease to be subject to, an investment contract, and clarifies the application of federal securities laws to airdrops, protocol mining, protocol staking, and the wrapping of non-security crypto assets.
Regulatory significance and jurisdictional clarity
The joint action represents a significant departure from the approach taken by the previous administration, which the current SEC leadership characterised as failing to acknowledge that most crypto assets are not themselves securities. The interpretation is framed as a bridge measure while Congress advances bipartisan market structure legislation intended to codify a comprehensive regulatory framework into statute.
The delineation of regulatory jurisdiction between the SEC and CFTC has been a longstanding source of uncertainty for crypto market participants, issuers, and developers. By establishing a shared interpretive framework, the two agencies aim to reduce the regulatory ambiguity that has complicated capital formation and product development in the US digital asset sector.
The interpretation will be published on CFTC.gov and in the Federal Register. Both agencies have encouraged market participants, including innovators, issuers, and investors, to review the interpretation to understand the jurisdictional boundaries that will govern their activities.
CFTC Chairman Michael S. Selig said the interpretation ends a prolonged period of regulatory uncertainty for crypto entrepreneurs and reflects a shared commitment to developing workable, harmonised regulations. Additionally, SEC Chairman Paul S. Atkins noted that the interpretation draws clear lines in clear terms and acknowledges that most crypto assets are not securities.
