The Interpretive Release supersedes prior Staff guidance on cryptoassets, establishing a five-part token taxonomy and formally recognizing that tokens can change their character as investment contracts.

By Jenny Cieplak, Paul M. Dudek, Zachary Fallon, Yvette D. Valdez, Stephen P. Wink, Douglas K. Yatter, Adam Bruce Fovent, E. Dafni (Daphne) Lambadariou, and Deric Behar

Key Points

The release:

  • Establishes a five-part token taxonomy of cryptoassets comprising digital commodities, digital collectibles, digital tools, stablecoins, and digital securities, with only digital securities being securities outright
  • Clarifies that while a non-security cryptoasset can be sold in connection with an investment contract (and as a result subject to securities laws), such cryptoasset does not necessarily continue to be treated as a security; it separates from the investment contract once the issuer fulfills its representations, or when enough time passes that investors can no longer reasonably expect the issuer to perform
  • Underscores that issuers remain potentially liable under the anti-fraud provisions of the securities laws for material misstatements or omissions made in connection with the sale of an investment contract, even if the token later separates from the investment contract under which it is sold
  • Clarifies that airdrops, mining, staking, and “wrapping” of a non-security cryptoasset would generally fall outside of the securities laws

Introduction 

On March 17, 2026, the Securities and Exchange Commission (SEC or the Commission), joined by the Commodity Futures Trading Commission (CFTC), issued a comprehensive interpretation (the Interpretive Release) clarifying how federal securities laws apply to cryptoassets and transactions involving cryptoassets. 

SEC Chairman Paul Atkins lauded the Interpretive Release, stating in the accompanying press release that “[a]fter more than a decade of uncertainty, this interpretation will provide market participants with a clear understanding of how the Commission treats crypto assets under federal securities laws.” 

The Interpretive Release supersedes the SEC Staff’s 2019 Framework for “Investment Contract” Analysis of Digital Assets and various earlier SEC Staff statements regarding whether the Commission will seek to characterize cryptoassets as securities. In substance, the Interpretive Release applies the Supreme Court’s Howey test for determining whether a financial instrument is an investment contract,1 and conveys the Commission’s views on how aspects of Howey apply to various cryptoassets. It establishes a framework the SEC and Staff will follow in administering the federal securities laws, including with respect to enforcement actions.

The Interpretive Release is the first major SEC statement following the SEC–CFTC Memorandum of Understanding (MOU) signed on March 11, 2026, which established a framework for coordination on issues of shared regulatory concern and committed both agencies to “clarify, coordinate, and harmonize” policies, including “providing a fit-for-purpose regulatory framework for crypto assets” (see this Latham blog post). The Interpretive Release is clear evidence of the regulatory cooperation embodied in the MOU. CFTC Chairman Michael Selig specifically endorsed the Interpretive Release, stating, “The CFTC joined the interpretation to provide guidance the CFTC and its staff will administer the Commodity Exchange Act consistent with the SEC’s interpretation.”2

The Token Taxonomy

The SEC classifies cryptoassets into five categories based on their characteristics, uses, and functions.

Digital Commodities are cryptoassets that are integral to, and derive their value from, the operation of a “functional” cryptosystem, and from supply and demand dynamics, rather than from expected profits based on the essential managerial efforts of others. Importantly, according to the release, in order for a digital commodity to be considered part of a functional cryptosystem, such system’s native cryptoasset must be able to be used on the system in accordance with the programmatic utility thereof and cannot have a “central party” that oversees participation or distributes rewards to users.3 Further, digital commodities cannot have “intrinsic economic properties or rights, such as generating a passive yield or conveying rights to future income, profits, or assets of a business enterprise or other entity, promisor, or obligor.”

Notably, the Interpretive Release identifies specific digital commodities by name, including Bitcoin (BTC), Ether (ETH), Solana (SOL), XRP, Cardano (ADA), Aptos (APT), Avalanche (AVAX), Chainlink (LINK), Dogecoin (DOGE), and others. A digital commodity, although it typically conveys to holders certain technical or governance rights with respect to the associated functional cryptosystem, is not a security because “it does not have the economic characteristics of a security.”

  • The Interpretive Release is consistent with SEC Chairman Atkins’ November 2025 speech, in which he stated that “most cryptoassets are not securities” and previewed a token taxonomy classifying digital assets into categories, including digital commodities. 

Digital Collectibles are cryptoassets designed to be collected and may represent artwork, music, videos, trading cards, in-game items, or references to internet memes and trends. Memecoins fall within this category; the Commission states that they typically are acquired for artistic, entertainment, social, or cultural purposes, with value driven by supply and demand rather than any essential managerial efforts of others. Therefore, “A digital collectible itself … is not a security because it does not have the economic characteristics of a security.” 

  • Prior guidance: The Interpretive Release is consistent with the SEC Staff’s February 27, 2025, statement, which held that memecoins “do not involve the offer and sale of securities” because their value is driven by “speculative trading and the collective sentiment of the market, like a collectible” (see this Latham blog post).

Digital Tools perform practical functions such as acting as memberships, tickets, credentials, or identity badges. They are often non-transferable and derive value from their functional utility. A digital tool itself is not a security because it “does not have intrinsic economic properties or rights, such as generating a passive yield or conveying rights to future income, profits, or assets of a business enterprise or other entity, promisor, or obligor.” While the Interpretive Release points to non-transferrable or “soul-bound” tokens (such as academic credentials) as examples of digital tools, it does not state that these are required characteristics of digital tools; fungible tokens that have functional utility (e.g., reward multiplier tokens) could therefore fall into this category.

Stablecoins are designed to maintain a stable value relative to a reference asset. Payment stablecoins issued by permitted payment stablecoin issuers under the GENIUS Act are categorically not securities by operation of statute (see this Latham Client Alert). The Commission affirms that “Covered Stablecoins,” as described in a prior SEC Staff statement (see this Latham blog post), do not involve the offer and sale of securities. Thus, the SEC’s guidance on Covered Stablecoins is broader than the GENIUS Act definition of permitted payment stablecoins, which limits such stablecoin reserves to specified investments4 and requires issuers to be licensed by federal or state regulators.

  • Prior guidance: The Interpretive Release is consistent with the SEC Staff’s April 4, 2025, Statement on Stablecoins, which concluded that Covered Stablecoins are not securities (see this Latham blog post). The SEC defines stablecoins as those that are designed to maintain a stable value relative to the US dollar on a one-for-one basis, can be redeemed for US dollars on a one-for-one basis, and are backed by assets held in a reserve that are considered low-risk and readily liquid with a USD-value that meets or exceeds the redemption value of the stablecoins in circulation.

Digital Securities are financial instruments enumerated in the definition of “security” that are formatted as, or represented by, a cryptoasset. As stated clearly in the Interpretive Release, “A security is a security regardless of whether it is issued, or otherwise represented, offchain or onchain.”5

  • Prior guidance: This is consistent with the January 28, 2026, SEC Staff Statement on Tokenized Securities, which established a technology-neutral framework and held that the “the economic reality of the instrument rather than the name [or format] given to the instrument” determines its legal classification (see this Latham blog post). And as SEC Commissioner Hester Peirce noted in a July 9, 2025 statement, “blockchain technology … does not have magical abilities to transform the nature of the underlying asset. Tokenized securities are still securities.” 

Investment Contracts and the Howey Test

Perhaps the most consequential element of the Interpretive Release addresses when a non-security cryptoasset becomes subject to an investment contract and therefore becomes a security under the federal securities laws and, critically, when it ceases to be subject to one. 

A non-security cryptoasset becomes subject to an investment contract “when an issuer6 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.” According to the SEC, the reasonableness of such expectations depends on the specific facts and circumstances of each case. The SEC elaborates that “representations or promises are more likely to create reasonable expectations of profit when they are explicit and unambiguous as to the essential managerial efforts to be undertaken by the issuer, contain sufficient details demonstrating the issuer’s ability to implement the proposed project, and explain how the issuer’s efforts will produce the profits that purchasers reasonably expect.”

  • In the SEC’s April 2019 Framework for “Investment Contract” Analysis of Digital Assets (which is superseded by this Interpretive Release), SEC Staff held that a reasonable expectation of profits could be found even if representations or promises were “implicit” or “implied.” The heightened threshold in the Interpretive Release — that representations or promises must be “explicit and unambiguous” — was first expressed in Chairman Atkins’ November 2025 speech, where he said, “A purchaser’s reasonable expectation of profits depends on the issuer’s representations or promises to engage in essential managerial efforts. In my view, these representations or promises must be explicit and unambiguous as to the essential managerial efforts to be undertaken by the issuer.”

Post-sale representations by an issuer do not convert a prior sale into an investment contract; representations must be conveyed to purchasers prior to or contemporaneously with the issuer’s offer or sale. This is in keeping with the historical “transaction-by-transaction” approach to analyzing the securities status of an asset.7

The Commission also emphasized “the fact that a non-security crypto asset is subject to an investment contract does not transform the non-security crypto asset itself into a security.” 

A non-security cryptoasset “is no longer subject to the associated investment contract once the issuer has fulfilled its representations or promises to engage in essential managerial efforts,” although the Interpretive Release clarifies that the issuer could continue to build on the protocol as long as those initial promises have been completed. If one of the issuer’s promises is to decentralize or develop functionality, the issuer’s definition of decentralization and functionality would control.8

The Interpretive Release also addresses simple agreements for future tokens (SAFTs), treating them as delayed-delivery offerings in which the sale of the non-security cryptoassets occurs at the time of entry into the agreement, not at the time of token delivery. The non-security cryptoassets become subject to an investment contract at the time of the SAFT regardless of when delivery occurs. However, upon delivery, the tokens may immediately separate from the investment contract if the issuer has already fulfilled its essential managerial efforts (for example, by publicly disclosing completion). If the issuer’s managerial efforts remain ongoing at delivery, the tokens continue to be subject to the investment contract until those efforts are fulfilled or abandoned.9

In addition, an asset may separate from an investment contract when “a sufficiently long period of time may have passed” and “it has become clear to investors that the issuer has neither conducted the essential managerial efforts it represented or promised it would undertake nor indicated that it still intends to conduct such efforts.”10 The Interpretive Release notes that such a failure does not result in the characterization of the initial offering being something other than an investment contract, and notes that the issuer may still be responsible for material misstatements or omissions in its marketing materials.

  • The concept that investment contracts can “come to an end” was previewed in Chairman Atkins’ November 2025 speech, where he observed that digital assets are not perpetually securities if the issuer’s managerial efforts cease for whatever reason, for example the network decentralizes or the enterprise has changed course: “Once the investment contract can be understood to have run its course, or expires by its own terms, the token may continue to trade, but those trades are no longer ‘securities transactions’ simply by virtue of the token’s origin story.” This Interpretive Release now formalizes that view at the Commission level.

This framework provides a pathway for tokens initially sold subject to investment contracts to eventually trade on secondary markets without triggering securities registration requirements on the markets and other market participants. However, until separation occurs, the SEC takes the position that a non-security cryptoasset may remain subject to the associated investment contract in secondary market transactions where purchasers of the asset would reasonably expect for the issuer’s essential managerial efforts related to the asset to continue.

Importantly, the Interpretive Release makes clear that token issuer fraud liability persists even after a token separates from an investment contract. The SEC states that “if 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.”11

Mining, Staking, Wrapping, and Airdrops

Beyond the token taxonomy, the Interpretive Release provides clarity on several crypto-native activities that have faced regulatory uncertainty, concluding that each, as described, falls outside the scope of the securities laws.

Protocol Mining (or proof-of-work mining) refers to the consensus mechanism used by certain blockchain networks to validate new transactions and secure the network. According to the SEC, protocol mining does not involve the offer and sale of securities. The Commission reasons that miners contribute their own computational resources and that rewards are payments in exchange for services provided to the network, not profits derived from the essential managerial efforts of others. 

  • Prior guidance: This is consistent with the SEC Staff’s March 20, 2025, Statement on Certain Proof-of-Work Mining Activities, which characterized mining as “an administrative or ministerial activity” that does not satisfy the Howey test’s “managerial efforts of others” requirement (for more information, see this Latham blog post).

Protocol Staking (proof-of-stake mining) refers to the consensus mechanism used by certain blockchain networks where node operators must pledge or “stake” their own funds in the form of the network’s cryptoasset to be eligible to create and validate new blocks of data, and update the state of the network. According to the SEC, protocol staking (including self-staking, custodial staking, and liquid staking) does not involve the offer and sale of securities. Node operators are characterized as “merely engaging in an administrative or ministerial activity” to secure the network and facilitate its operation, which does not satisfy Howey’s “efforts of others” requirement.

Staking Receipt Tokens (i.e., digital assets issued to users who deposit their cryptocurrency into a liquid staking protocol, a specialized form of protocol staking) are likewise receipts that “merely evidence” ownership of deposited digital commodities, and are not securities when the underlying asset is not itself a security or subject to an investment contract. 

  • Prior guidance: This is consistent with the SEC Staff’s August 5, 2025, Statement on Certain Liquid Staking Activities (see this Latham blog post), which held that Staking Receipt Tokens are receipts that “merely evidence” the deposited cryptoassets held with Liquid Staking Providers, and are not securities because the underlying cryptoasset is not a security.

Wrapping refers to the process of locking a native cryptoasset (like Bitcoin) in a digital vault with a custodian or cross-chain bridge and being issued a corresponding, 1:1 backed token (like Wrapped Bitcoin) on a different blockchain (like Ethereum). This allows assets to be used in decentralized finance (DeFi) apps and on networks that are not natively compatible.

According to the SEC, the wrapping of non-security cryptoassets into redeemable wrapped tokens does not involve securities transactions where the underlying asset is not a security or subject to an investment contract. The wrapping process is characterized as “an administrative or ministerial function typically used to facilitate or enhance the interoperability between different crypto networks and different token standards.” 

  • New guidance: Wrapping is addressed for the first time in formal Commission or Staff guidance. No prior SEC Staff statement specifically addressed wrapping activities.

Airdrops of non-security cryptoassets, where issuers “disseminate their crypto assets in exchange for no or nominal consideration,” do not create investment contracts, according to the SEC, because the first element of the Howey test (an investment of money) is not satisfied. However, the SEC distinguishes airdrops where recipients can prospectively perform services or provide consideration in exchange for the airdropped tokens, from retroactive airdrops, where issuers take a “snapshot” of past activity to determine eligible airdrop recipients without previewing such activity ahead of time. While “prospective” airdrops may implicate securities laws when digital assets are airdropped, retroactive airdrops do not, as no investment of money is made prospectively by the recipient.

  • Prior guidance: Airdrops are addressed for the first time in formal Commission or Staff guidance. Chair Atkins had previewed potential guidance on airdrops in his July 2025 speech, noting that the SEC would consider “purpose-fit disclosures, exemptions, and safe harbors, including for so-called ‘initial coin offerings,’ ‘airdrops,’ and network rewards.” 

Key Takeaways and the Path Ahead

For crypto market participants, there are several practical considerations stemming from the Interpretive Release:

  1. The digital commodities listed in the SEC’s token taxonomy now have official Commission confirmation of non-security status.
  2. Staking services, mining pools, and wrapping services operating as described in the Interpretive Release can proceed without securities registration.
  3. To the extent issuers made representations regarding essential managerial efforts, those who clearly outline their essential managerial efforts, provide a timeline and milestones, explain the resources required, and otherwise tie those efforts to token holder profits should expect to remain in compliance with securities laws for such distributions.
  4. For misstatements or omissions made in connection with the creation of the investment contract (or at any time during the existence of that investment contract), fraud liability persists even after a token separates from the investment contract.

The Commission has indicated this Interpretive Release is its first step toward a clearer regulatory framework and is soliciting public comment. In turn, it may “refine, revise, or expand upon the interpretation in order to provide further clarity regarding the Commission’s treatment of crypto assets under the Federal securities laws.”

Chairman Atkins, speaking at the DC Blockchain Summit, separately previewed the potential components of a crypto safe harbor proposal that would give the SEC a “head start” on implementing the pending Clarity Act market structure legislation. Those components are intended to “provide crypto innovators bespoke pathways to raise capital in the U.S.”:

  1. A startup exemption, allowing for a time-limited registration exemption for offerings of investment contracts involving certain cryptoassets (potentially up to $5 million over four years)
  2. A fundraising exemption for new offerings of investment contracts involving certain cryptoassets (potentially up to $75 million annually)
  3. An investment contract safe harbor, which would be a rule-based standard for issuers who have completed or otherwise permanently ceased all essential managerial efforts, thereby separating their tokens from investment contracts

At the March 19, 2026, SEC Speaks conference, Chairman Atkins framed the Interpretive Release as part of a broader “A-C-T” strategy to advance, clarify, and transform the SEC’s regulatory framework. He reiterated that the Interpretive Release “amounts to a beginning, not an end,” signaling additional guidance and rulemaking ahead.

While the CFTC joins the Interpretive Release, it did not provide further clarity as to whether the non-security cryptoassets would be classified as commodities under the Commodity Exchange Act. However, recent statements from CFTC Chairman Selig may suggest that additional guidance is forthcoming. Indeed, Chairman Selig, speaking at the FIA Global Cleared Markets Conference on March 9, 2026, stated that the CFTC is working to “advance a clear crypto asset taxonomy so that market participants can understand whether their products fall within CFTC jurisdiction, SEC jurisdiction, both, or neither.” He also has directed CFTC Staff to develop guidance concerning the application of the CFTC’s intermediary registration requirements for digital wallets and DeFi applications.

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