The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission have jointly released interpretive guidance outlining how regulators will determine whether a given crypto asset qualifies as a security. The document establishes a taxonomy of crypto asset categories, most of which the agencies say fall outside securities law. The guidance represents one of the most detailed regulatory attempts to draw this distinction for the industry.
Under the framework, digital securities — crypto assets that satisfy the criteria of the Howey Test — remain under SEC oversight. Other categories, including payment stablecoins, digital tools, digital collectibles, and digital commodities, are generally not treated as securities unless issuers take specific actions, such as fractionalizing tokens, that could trigger securities regulations. SEC Chair Paul Atkins and Commissioners Hester Peirce and Mark Uyeda wrote that the guidance clarifies how the Howey test applies when a crypto asset is part of an investment contract.
Legal experts offered measured assessments of the guidance. Chris LaVigne, a partner at law firm Withers, noted that the SEC shifted its analysis away from the asset itself and toward the transactions and representations surrounding it. He cautioned that the agency retained some enforcement discretion, since a crypto asset not classified as a security could still be sold as part of an investment contract if marketed with promises of profit tied to the issuer’s managerial efforts. A token initially marketed as a security could later be reclassified once those promises are fulfilled or no longer apply, he added.
Jason Gottlieb, a partner at Morrison Cohen, raised questions about what the guidance means for CFTC jurisdiction. He noted that the legal definition of a commodity under the Commodity Exchange Act differs from the definition seemingly applied in the guidance, and that the CFTC’s authority over non-security cryptocurrencies has not been formally codified. He said he is involved in a case before the Seventh Circuit Court of Appeals seeking clarity on this question, and that market structure legislation would be needed to cleanly resolve jurisdictional boundaries.
Congressional movement on that legislation remains uncertain but active. Senator Cynthia Lummis of Wyoming said a markup could occur in the final weeks of April, while Senator Tim Scott of South Carolina indicated lawmakers are nearing agreement on ethics and quorum provisions. Senator Kirsten Gillibrand of New York expressed optimism about an imminent markup that would lead to the merging of Senate Banking and Agriculture Committee bills. Late Friday, Senators Angela Alsobrooks and Thom Tillis reportedly reached an agreement on the stablecoin yield issue, though details had not been shared with the banking or crypto industries at press time.
Congressman Troy Downing of Montana welcomed the guidance as a positive step but stressed that legislation remains necessary, since a future administration could reverse interpretive guidance. He described an April timeline for advancing market structure legislation as achievable, though he warned that prospects would diminish as the year progresses toward midterm elections. The legislation would need to address consumer protections and anti-money laundering measures without being so restrictive as to discourage innovation, he said.
Separately, prediction market platform Kalshi is facing significant legal pressure. The state of Arizona filed criminal charges against the company, alleging that certain contracts involving professional football, college basketball, elections, and public figures violate state law. Arizona Attorney General Kris Mayes‘ office stated that state law prohibits operating an unlicensed wagering business and bans election betting outright. Kalshi co-founder Tarek Mansour called the charges a overreach unrelated to gambling or the merits of the case.
In Nevada, a judge ordered Kalshi to suspend most of its prediction market offerings for at least two weeks pending a hearing on April 3, after an appeals court declined to block the state court’s action. Judge Jason Woodbury wrote that the balance of legal authority currently weighs against federal preemption in this context. Senator Catherine Cortez-Masto of Nevada published an opinion piece arguing that prediction markets violate state and tribal laws and lack the consumer protections required of licensed gaming operators.
Originally reported by CoinDesk.
