The NAL provides incremental clarity for innovators in the digital asset space and reduces legal risk for similarly structured rewards tokens.

By Zachary Fallon, Stephen P. Wink, Hank Balaban, Connor Jobes, Daphne Lambadariou, and Deric Behar

Key Points:

  • Pursuant to the NAL, transactions in Fuse Tokens will not be considered to involve securities requiring registration under the securities laws.
  • The Fuse Token is designed for consumer utility, and not for capital raising, profit, or speculative investment. It therefore does not meet the Howey test criteria for an investment contract (and consequently is not a security).
  • The SEC Staff continues to take a pragmatic approach to the economic reality of digital assets by carving out real-world utility tokens from the securities laws.

Introduction

On November 24, 2025, the SEC Division of Corporation Finance issued a no-action letter (NAL) stating that it would not recommend enforcement against Fuse Crypto Limited or its Fuse Token under Section 5 of the Securities Act of 1933. Furthermore, Fuse will not be required to register the tokens with the SEC under Section 12(g) of the Securities Exchange Act of 1934 if it offers and sells the tokens in the manner and under the circumstances described in Fuse’s request letter (Latham is the counsel of record for Fuse).

The Staff provides no legal analysis in the NAL and issued the letter based on the facts and analysis presented in the request letter.

The Fuse Network and Fuse Token

According to the request letter, Fuse operates licensed retail electricity businesses and is focused on accelerating the decentralization of electricity grids and optimizing energy delivery. The Fuse Network is a decentralized physical infrastructure network that leverages blockchain technology to coordinate distributed energy resources (DERs)1 across its system into a Virtual Power Plant (VPP).2 Consumers are incentivized to adopt DERs in order to shift their energy consumption at more efficient times, export excess energy when needed, and make their DERs available for use by the local electricity grid.

Once onboarded, the consumer determines their energy needs and cost saving preferences in the Fuse App. By providing their preferences, consumers choose how and when to allow Fuse to adjust their DER, therefore participating in the VPP and supporting the Fuse Network. Consumers are rewarded with redeemable tokens (defined below) and reductions to their electricity bill resulting from their reduced electricity usage, including during peak hours.

Consumers also earn rewards for deploying their DERs,3 making DERs available for use,4 and participating in VPPs via demand flexibility.5 Rewards are issued in the form of tokens (Fuse Tokens), a blockchain-based digital asset native to the Fuse Network. The purpose of the Fuse Token is to reward consumers for their contributions within the Fuse Network in order to incentivize smarter energy behavior, such as shifting demand to align with grid needs or generating and storing energy for peak times.

For certain contributions to the Fuse Network, Fuse will measure each consumer’s activity in accordance with a predetermined rewards formula, providing a basis for determining reward distribution to all consumers based on the actions they have taken and their proportional impact.

Fuse Tokens, which are awarded pro rata to participating consumers in accordance with the predetermined formula, are earned solely based on a consumer’s activity in relation to the energy grid. Fuse Tokens do not represent a claim on, or correlate to, Fuse’s income, business, or profits. Consumers can claim earned Fuse Tokens for their self-custodial wallet within the Fuse App, from which they can transfer the Tokens to a third-party self-custodial wallet of their choosing.

Importantly, Fuse Tokens can only be redeemed within the Fuse App to receive discounts or rebates on costs related to participation in the Fuse Network (Fuse Goods and Services). Fuse Tokens cannot be used to offset future costs (e.g., as a credit toward future electricity bills not yet incurred). This means that earned Fuse Tokens have consumptive utility and purpose, allowing the consumer to receive tangible benefits for their prior actions.

As redemption value is based on the average market price of the Fuse Tokens on third-party unaffiliated digital asset markets at the time of redemption, earned Fuse Tokens are transferable and tradable on such markets. The secondary market will allow consumers — who may have generated rewards in excess of the discounts for Fuse Goods and Services — to convert their Fuse Tokens into cash.

Finally, the underlying economic reality acts to limit market speculation in Fuse Tokens, disincentivizing rational actors from treating Fuse Tokens as an investment vehicle and limiting demand to actual consumptive use. This is primarily achieved in two ways: (i) the discount amount for each consumer is capped by the market and Fuse’s profit margins on such goods or services, and (ii) the redemption value of each Fuse Token is based on the average market price of such token on third-party unaffiliated digital asset markets at the time of redemption.

In other words, if the price of Fuse Tokens exceeds the applicable discount a consumer could apply in the Fuse App, rational consumers who have not already earned Fuse Tokens will not seek to purchase Fuse Tokens on the secondary market and instead pay for their Fuse Goods and Services at full price out of pocket, therefore limiting demand for Fuse Tokens.

Legal Analysis

The no-action request focuses on whether the Fuse Token is an “investment contract” (and thus a security) under US securities law, specifically the longstanding Howey test. Under the Howey test, a transaction involves a security when there is a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others. The request letter asserts that Fuse Tokens should not be considered securities transactions requiring registration under the securities laws for the following reasons:

  • Economic reality: Fuse Token sales and distributions are not for cash or capital raising but instead reward consumers to participate in the Fuse Network for the purpose of receiving discounts on Fuse Goods and Services.
  • No reasonable expectation of profits: The Fuse Token was designed solely for consumptive use in connection with the Fuse Network, with attendant reduction in electricity costs and potential redemption value. Such cost reduction or redemption capability are not “profits” to the consumer but rather a type of rebate to encourage certain consumptive behaviors.
  • No reliance on managerial efforts: Any managerial efforts undertaken by Fuse to increase usage or demand of the Fuse Network will not reasonably be expected to result in an increase in the value of the Fuse Token.
  • Limit on speculation and secondary market trading: The Fuse Token’s value is directly tied to its utility for actual users in the Fuse Network, and its redemption mechanics and maximum discount value effectively narrow the Fuse Token’s price band and limit potential speculation.
  • Marketing limited to consumptive use: The Fuse Token has never been marketed as an investment or in a manner that would cause a purchaser to expect profit or passive returns resulting from any promoters’ or third parties’ “undeniably significant” managerial efforts. On the contrary, Fuse’s marketing emphasizes the consumptive use of Fuse Tokens and makes clear to consumers that Fuse Tokens are not intended as investments and will not inherently provide any return, profit, dividend, or distribution to consumers as a result of Fuse’s efforts.
  • No network effects driving value: The value of the Fuse Token is indifferent to the success of the Fuse Network. It is based on consumptive use and will not gain additional leverage or value from increased use of or demand relating to the Fuse Network.

Conclusion

By ensuring that the Fuse Token maintains real-world applicability, Fuse fosters an ecosystem in which the value of the tokens is derived from their consumptive use rather than speculative investment or secondary market trading. The NAL is therefore consistent with prior SEC Staff positions declining to find an investment contract where functionality is paramount, and expectation of profits and speculation are de minimis.

This is the second no-action relief granted by SEC Staff in the current administration for a digital asset utility token, following those issued in 2019 and 2020 (for information on previous digital asset-related NALs, see these Latham blog posts.6

Legal experts and market participants have applauded the NAL as a positive development for the crypto industry. It represents a pragmatic shift for utility-based tokens under the securities laws and is generally part of a more welcoming regulatory environment under the current administration.

Although fact-specific, the NAL may reduce enforcement risk for blockchain startups and drive further innovation in the blockchain space.

Follow this and other critical developments on Latham’s US Crypto Policy Tracker.