The Securities and Exchange Commission (SEC), in collaboration with the Commodity Futures Trading Commission (CFTC), has issued a comprehensive interpretation in Release Nos. 33–11412 and 34–105020, dated for publication in the Federal Register in 2026. This document provides essential guidance on the application of federal securities laws to specific types of crypto assets and related transactions. It represents a pivotal shift from prior approaches, often criticized as “regulation by enforcement,” toward a more structured framework informed by extensive public input, including roundtables, written submissions, and stakeholder meetings. The interpretation clarifies the classification of crypto assets, their potential status as securities, and the regulatory treatment of activities such as protocol mining, staking, wrapping, and airdrops, all while adhering to the established Howey test from SEC v. W.J. Howey Co. (1946).
Key Elements of the Interpretation
The document begins with foundational definitions. A “crypto asset” is defined as any digital representation of value recorded on a cryptographically secured distributed ledger, encompassing blockchain-based tokens and similar instruments. Related terms include “crypto networks” (blockchains or distributed ledgers) and “crypto applications” (software running on such networks), collectively referred to as “crypto systems.” Transactions are categorized as “onchain” (recorded directly on the network) or “offchain” (processed externally).
The interpretation reviews the SEC’s historical engagement with crypto assets, starting from the 2017 DAO Report, which applied the Howey test to determine that certain crypto assets constituted investment contracts — and thus securities — under Sections 2(a)(1) of the Securities Act of 1933 and 3(a)(10) of the Securities Exchange Act of 1934. The Howey test evaluates whether a transaction involves (1) an investment of money, (2) in a common enterprise, (3) with a reasonable expectation of profits derived from the efforts of others. The document acknowledges past criticisms of the SEC’s enforcement-focused strategy and highlights recent initiatives, such as the Crypto Task Force established in 2025 and the joint SEC-CFTC “Project Crypto” announced in 2026, aimed at fostering innovation while ensuring investor protection.
A central component is the classification of crypto assets into five categories based on their characteristics, uses, and functions:
- Digital Commodities: These are crypto assets functioning as stores of value or mediums of exchange, akin to traditional commodities like gold or oil, but without conferring equity or debt rights.
- Digital Collectibles: Assets with unique attributes, such as non-fungible tokens (NFTs), valued for rarity or cultural significance rather than investment potential.
- Digital Tools: Utility-focused assets granting access to services or functionalities within crypto systems, such as governance tokens for decentralized applications.
- Stablecoins: Pegged to stable fiat currencies or assets, designed for transactional stability rather than speculative gain.
- Digital Securities: Assets explicitly meeting the definition of securities, such as those representing equity, debt, or profit-sharing interests.
The interpretation further explains how a “non-security crypto asset” — one that does not inherently qualify as a security — may become subject to an investment contract. This occurs when issuers make representations or promises that create expectations of profits reliant on their efforts. Conversely, such assets can separate from investment contract status upon fulfillment or failure of those promises, providing a pathway for regulatory evolution.
Specific activities are addressed in detail:
- Protocol Mining and Staking: Mining involves validating transactions on proof-of-work networks, while staking secures proof-of-stake networks by locking assets. The interpretation specifies conditions under which these activities do not constitute securities transactions, emphasizing decentralization and lack of profit expectations from third-party efforts. Staking receipt tokens are also analyzed for potential security status.
- Wrapping: This process involves converting one crypto asset into a compatible form for use on another network. The guidance clarifies when wrapping does or does not implicate securities laws.
- Airdrops: Free distributions of crypto assets are evaluated under the Howey test, with covered airdrops potentially qualifying as investment contracts if they involve promotional efforts creating profit expectations.
The document concludes with economic considerations, underscoring the need for balanced regulation to promote market efficiency and innovation.
Comparison of “Security” and “Commodity” Definitions and Their Significance
Under federal law, a “security” is broadly defined in the Securities Act and Exchange Act to include instruments such as stocks, bonds, and investment contracts. The Howey test is the primary tool for identifying investment contracts, requiring an investment in a common enterprise with profit expectations from others’ efforts. This definition emphasizes investor protection through mandatory registration, disclosure, and antifraud provisions enforced by the SEC. In contrast, a “commodity” under the Commodity Exchange Act (CEA) encompasses physical goods (e.g., wheat, oil), services, rights, and interests, including digital assets (e.g., Bitcoin, Ethereum, Solana, Dogecoin) when treated as fungible stores of value. The CFTC oversees commodity derivatives (e.g., futures), but spot markets for commodities are subject to lighter federal oversight, focusing on manipulation and fraud rather than comprehensive disclosure.
The significance of this distinction is profound for crypto markets. Classification as a security triggers stringent SEC requirements, including registration of offerings and intermediaries, which can impose high compliance costs but enhance transparency and investor safeguards. Commodity status, however, allows for more flexible trading on CFTC-regulated platforms for derivatives, with spot transactions potentially falling under state laws or minimal federal rules. For crypto assets, this bifurcation determines jurisdictional oversight: SEC for securities-like tokens (e.g., those with profit-sharing), and CFTC for commodity-like ones (e.g., Bitcoin as a digital commodity). Misclassification risks enforcement actions, while clear delineation reduces legal uncertainty, enabling tailored regulation that balances innovation with protection.
Future Implications for the Crypto Market
This interpretation heralds a transformative era for the crypto market by providing much-needed clarity, potentially reducing litigation and fostering institutional adoption. By categorizing assets and activities, it enables issuers to design compliant products, such as decentralized protocols that avoid security status through genuine decentralization. This could accelerate innovation in areas like decentralized finance (DeFi) and NFTs, as market participants gain confidence in navigating regulations without fear of retroactive enforcement.
Looking ahead, harmonized SEC-CFTC oversight under Project Crypto may lead to integrated frameworks, such as unified exchanges for crypto securities and commodities, enhancing liquidity and cross-border compatibility. Investor protection will strengthen through better disclosures, potentially attracting traditional finance players and increasing market capitalization. However, challenges remain: evolving crypto systems may test the boundaries of these categories, necessitating ongoing guidance. Economically, this could bolster U.S. leadership in blockchain technology, as recommended by the 2025 President’s Working Group report, by keeping innovation domestic rather than driving it offshore. Overall, the interpretation positions the crypto market for sustainable growth, emphasizing accountability while embracing technological advancement.
Author: Trent V. Bolar, Esq. (LinkedIn Profile)
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© 2026 Trent V. Bolar, Esq. | All rights reserved.
Staking, Wrapping, and Airdrops: The SEC’s Epic Interpretation Shaping Tomorrow’s Crypto Landscape was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
