SEC crypto asset classification: myths versus facts

The new regulatory framework for digital assets

Paul Atkins and the SEC changed the approach to digital assets on March 17, 2026. The SEC and CFTC named 16 tokens as digital commodities in a 68-page interpretive release, which includes assets like Bitcoin, Ethereum, XRP, Solana, Cardano, Dogecoin, Shiba Inu, and Chainlink. This taxonomy provides five distinct buckets: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. Most crypto assets are not securities, according to Atkins. The commission recognizes that investment contracts can end once an issuer fulfills its promises or a project decentralizes. I find the 68-page interpretive release’s push for clear lines very helpful for market stability. The 16 tokens in the commodity category include Bitcoin, Ethereum, XRP, Solana, Cardano, Dogecoin, Shiba Inu, Chainlink, Avalanche, Polkadot, Hedera, Litecoin, Stellar, Tezos, Bitcoin Cash, and Aptos. CFTC Chairman Michael Selig described the move as a harmonized approach for clear and rational rules of the road. The SEC and CFTC also announced a memorandum of understanding to coordinate oversight. The SEC clarifies that digital collectibles cover assets tied to art and music. Digital tools include membership tokens or identity badges. The commission also states that certain protocol mining and protocol staking activities do not involve the offer and sale of securities.

Coinbase fights the staking classification

Coinbase continues its legal battle against the SEC regarding its staking services. The SEC sent a Wells Notice to Coinbase on March 22, 2023, following an investigation into its staking program. Coinbase argues that its services are fundamentally different from the yield products offered by Kraken. Kraken paid a $30 million settlement to the SEC because it failed to register its staking program. The SEC alleges Coinbase operates an unregistered national securities exchange and a broker. Coinbase pooled customer assets to participate in proof of stake mechanisms. I find the SEC’s attempt to classify staking as a security remains the most problematic part of this enforcement. Brian Armstrong stated that the SEC refused to meet with Coinbase, and he mentioned that 50 percent of officials in Washington express concern about cryptocurrency risks. Brian Armstrong also noted that in 2021, the SEC allowed Coinbase to go public through an IPO despite its S-1 form including 57 references to staking. Paul Grewal said that staking on Coinbase is fundamentally different and not securities. Coinbase claims that superimposing securities law onto staking does not help consumers. Do you think the SEC can maintain this stance after the new taxonomy?

Internal documents and the Howey Test

The Hinman documents from 2018 reveal internal SEC deliberations about whether certain assets satisfy the Howey Test. These documents could assist Coinbase and Ripple in their respective legal fights. The Howey Test requires an investment of money in a common enterprise with an expectation of profits from the efforts of others. The SEC has named several tokens as securities in various enforcement actions, such as Solana, Cardano, BNB, and Polygon. The SEC also alleges Coinbase merged the functions of an exchange and a broker since 2019. The agency seeks injunctive relief and disgorgement. This litigation follows a court decision in March regarding an insider trading case involving Ishan Wahi and Sameer Ramani. I find the SEC’s claim that certain crypto transactions involve securities to be a weak argument. The list of assets the SEC targets includes MATIC, ATOM, SOL, ADA, ALGO, AXS, CHZ, FLOW, ICP, NEAR, and NEXO. The SEC alleges that Coinbase provided a marketplace for buyers and sellers. The agency also claims Coinbase provided facilities for settling crypto asset securities transactions. The SEC argues that if a development team promotes a token while promising ecosystem growth, investors expect profits from those efforts. This logic leads to the classification of assets like DASH, RLY, and XYO as securities. The Ripple case remains a major influence, as the court ruled that programmatic sales of XRP on public exchanges did not constitute securities. This legal distinction helps separate exchange-based trades from institutional sales. The SEC continues to target tokens tied to yield and profit-sharing mechanisms. This includes assets like AMP and RLY which appeared in previous enforcement actions.