Gensler-Era Crypto Regulation Goes Under the Knife: SEC/CFTC Operation Targets Uncertainty Around Crypto Assets’ Legal Status

On March 17, 2026, the SEC and the Commodity Futures Trading Commission (CFTC) jointly issued extensive interpretive guidance on how the federal securities laws apply to certain types of crypto assets and transactions. Whether a particular crypto asset may entail the issuance of a security has been the focus of SEC enforcement actions, and private lawsuits, as well as legislation recently passed by the House of Representatives and now under consideration in the Senate. The guidance lays out joint views of the SEC and the CFTC on the subject, in order to stanch the bleeding of legal uncertainty.

The guidance is lengthy and contains much detailed analysis, for which this article provides only a brief overview and comment. For additional details, please refer to "SEC Staff Clarifies Broker-Dealer Status of Self-Custody Wallet Interface Providers."

The guidance first describes types of crypto assets whose intrinsic nature is such that the agencies do not view them as securities given that, among other things, purchasers would not reasonably expect to profit from investment in these assets based on the essential managerial efforts of others. These include, among others:

• Assets, referred to as digital commodities, deriving their value from the programmatic operation of a crypto system (the guidance cites fungible tokens such as dogecoin and ether and governance tokens as examples).
• Assets, referred to as digital collectibles, designed to be collected for artistic or social purposes (the guidance cites tokens representing rights to artistic or cultural property or tokens referencing popular memes as examples).
• Assets, referred to as digital tools, that perform a practical
  function such as representing a ticket or membership.
• Assets, referred to as stablecoins, designed to maintain a stable value relative to a reference asset (under the soon-to-be effective GENIUS Act, certain stablecoins are to be explicitly excluded from the ambit of federal securities law).

The agencies’ basis for concluding that these are not securities is an analysis that the SEC and the courts have generally applied, known as the Howey test, to determine whether an instrument or arrangement should be treated as an “investment contract” and, consequently, a security under the federal securities laws. An essential element of this analysis requires that, for there to be an investment contract, an investor must rely on essential management efforts of others to produce a financial return to the investor.

For the crypto assets fitting the above-listed categories, the agencies concluded that any financial return is not a function of such essential managerial efforts. Perhaps even more importantly, the guidance sets out principles clarifying how the various elements of the Howey test should be applied to crypto assets broadly. First, the guidance provides examples of what constitutes essential management efforts of others, and what types of promises or representations made by developers to attract users would justify a reasonable expectation of profits from such efforts, which is another element of the Howey test.

Also, in contrast to the approach taken by the SEC under former Chairman Gary Gensler, the guidance states that a crypto asset itself could be considered a non-security crypto asset, yet the arrangement under which interests in those assets are transferred could constitute the offer or sale of an investment contract. This possibility raises questions about what steps a purchaser or seller of those interests must take to assess whether that transaction should be deemed a securities transaction. One such step would be evaluating whether the transaction was induced by representations made regarding essential management efforts of others in the manner required under the Howey test.

Even if such inducement was present, however, a subsequent transaction in the same crypto asset might not entail the offer or sale of a security if any such representations were by that time no longer being relied upon (because, for example, the representations had already been fulfilled or were otherwise no longer capable of being fulfilled). Clearly, such analyses may involve difficult factual determinations and judgments.

The guidance, however, doubtless will not be the agencies’ final word on the security status of crypto assets and arrangements involving such assets that could constitute investment contracts. In a speech announcing the guidance, SEC Chairman Paul Atkins said that the SEC and CFTC will move forward with rulemakings that Atkins has referred to as “Regulation Crypto Assets,” based on the principles outlined in the guidance. Further, the guidance itself notes that the SEC is soliciting public comment on the views in the guidance and that the SEC may refine, revise, or expand these views based on that feedback.

It also is not clear whether courts, if asked, will agree with the agencies’ positions on these matters. It seems possible, for example, that counsel for aggrieved plaintiff investors may at some point bring court actions asserting that some of these positions (a) do not represent the appropriate standard of care for investors or (b) involve regulatory operations the agencies were not properly licensed to perform.