On March 17, 2026, the SEC issued an interpretation, joined by the CFTC, that sorts crypto assets into five categories: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. Only digital securities are always securities, but a non-security crypto asset can be sold subject to an investment contract, and that contract can later end. The interpretation also concludes that certain airdrops, protocol mining, protocol staking, and wrapping arrangements do not involve securities transactions.
In this lesson you will
- Name the five categories in the SEC's 2026 token taxonomy and which are securities
- Explain how a non-security crypto asset becomes subject to, and separates from, an investment contract
- Summarize the interpretation's conclusions on airdrops, mining, staking, and wrapping
- Describe the legal character of Release No. 33-11412 and the CFTC's role
What the SEC issued, and what kind of document it is
On March 17, 2026, the SEC issued an interpretation clarifying how the federal securities laws apply to certain crypto assets and crypto asset transactions, and the CFTC joined it to provide guidance that the CFTC and its staff will administer the Commodity Exchange Act consistently with that interpretation [1]. The document is Release No. 33-11412, titled "Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets," and it is labeled "Final rule; interpretation; guidance," with an effective date of March 23, 2026 [2].
It is a Commission-level interpretation, which carries more weight than the staff statements that preceded it; the release states that the Commission's views supersede any prior statements by the Commission or its staff on these topics [2]. It does not create new exemptions or registration paths. Those came later as proposals, discussed in Lesson 3.
The five-category taxonomy
The interpretation classifies crypto assets into five categories based on their characteristics, uses, and functions [2]:
- Digital commodities: crypto assets that derive their value from the programmatic operation of a functional crypto system and from supply and demand, rather than from the essential managerial efforts of others; examples named include Bitcoin, Ether, Solana, and XRP [2].
- Digital collectibles: assets designed to be collected or used that may represent artwork, music, trading cards, in-game items, or references to memes or characters [2]. SEC educational materials add that a fractionalized collectible may be a security [3].
- Digital tools: assets that perform a practical function, such as a membership, ticket, credential, title instrument, or identity badge, and that are often non-transferable [2].
- Stablecoins: assets designed to keep a stable value relative to a reference asset such as the U.S. dollar; they may or may not be securities depending on their characteristics [2].
- Digital securities: financial instruments within the definition of "security" that are formatted as or represented by a crypto asset; these are securities [2].
Digital commodities, collectibles, and tools are not themselves securities, but the interpretation warns that a non-security crypto asset can be offered and sold subject to an investment contract, which is a security [2]. It also acknowledges that some crypto assets may not fit any category or may have hybrid characteristics [2]. A token's label does not settle its status: the release says all instruments with the economic characteristics of a security are securities regardless of format or label [2].
When an investment contract starts, and when it ends
Under the interpretation, a non-security crypto asset becomes subject to an investment contract when an issuer induces 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 [2]. How the issuer markets and promotes the arrangement is relevant to that analysis [2].
The interpretation also explains how the contract can end. A non-security crypto asset is no longer subject to the investment contract once the issuer has fulfilled its representations or promises to perform essential managerial efforts, such as building promised functionality or reaching roadmap milestones [2]. Separation can also occur when the issuer clearly and publicly abandons those efforts, so purchasers can no longer reasonably expect them [2]. SEC Chairman Paul Atkins said the interpretation "reflects the reality that investment contracts can come to an end." [1]
Airdrops, mining, staking, and wrapping
The interpretation also addresses four common activities, always "in the manner and under the circumstances described" in the release [2]:
- Protocol mining: covered mining activities do not involve the offer and sale of a security, so participants need not register those transactions [2].
- Protocol staking: covered staking activities likewise do not involve the offer and sale of a security; a staking receipt token issued for a non-security crypto asset that is not subject to an investment contract is not a receipt for a security [2].
- Wrapping: a redeemable wrapped token that is a receipt for a non-security crypto asset not subject to an investment contract is not a security, but a wrapped token that is a receipt for a digital security or for an asset subject to an investment contract is a security [2].
- Airdrops: when recipients give no money, goods, services, or other consideration to the issuer, the first element of the Howey test, an investment of money, is not met [2]. The interpretation does not address airdrops of digital securities [2].
The wrapping rule matters for tokenization. Wrapping a tokenized share does not take it outside the securities laws, because a receipt for a security is itself a security [2].
What came next
The SEC said the interpretation complements congressional efforts to write a comprehensive market structure framework into statute [1]. On August 18, 2026, the SEC proposed "Regulation Crypto Assets," which builds on the March interpretation, including a proposed safe harbor for when a crypto asset is deemed not to be subject to an investment contract [4]. That proposal is covered in Lesson 3. As of November 2, 2026, it remains a proposal.
Key terms
- Digital commodity
- A crypto asset whose value comes from the programmatic operation of a functional crypto system and from supply and demand, not from others' essential managerial efforts; not itself a security.
- Digital collectible
- A crypto asset designed to be collected or used, such as digital art or in-game items; not itself a security, though fractionalized interests may be.
- Digital tool
- A crypto asset that performs a practical function, such as a ticket, membership, or credential; often non-transferable and not itself a security.
- Investment contract
- An investment of money in a common enterprise with a reasonable expectation of profits from the essential managerial efforts of others (the Howey test); it is a security.
- Essential managerial efforts
- The issuer's promised work that drives the success or failure of the project; when the issuer fulfills or clearly abandons it, the investment contract can end.
- Airdrop
- A distribution of crypto assets to recipients who give the issuer no consideration in return.
- Wrapped token
- A token that serves as a receipt for a crypto asset deposited with a custodian or bridge, redeemable one-for-one.
Check your understanding
Sources
- [1]U.S. Securities and Exchange Commission, “SEC Clarifies the Application of Federal Securities Laws to Crypto Assets (Press Release 2026-30),” March 17, 2026.
- [2]U.S. Securities and Exchange Commission and Commodity Futures Trading Commission, “Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets (Release No. 33-11412),” March 17, 2026.
- [3]U.S. Securities and Exchange Commission, “Crypto Assets and the Federal Securities Laws,” May 15, 2026.
- [4]U.S. Securities and Exchange Commission, “SEC Proposes New Regulation Crypto Assets (Press Release 2026-76),” August 18, 2026.
Educational content only — not legal, tax, or investment advice, or an offer to sell or a solicitation of an offer to buy any security. Rules and data are described as of November 2026 and may change. Securities offered through Umergence LLC, Member FINRA/SIPC.