The US Securities and Exchange Commission released staff guidance on how federal securities laws apply to token issuers, mirroring a regulatory playbook the Commodity Futures Trading Commission established weeks earlier. The move comes after Congress failed to advance the CLARITY Act, a bipartisan bill designed to clarify crypto jurisdiction between the two agencies.
The SEC's guidance addresses a persistent pain point for crypto projects. Tokens occupy murky legal territory. Are they securities governed by the SEC? Commodities overseen by the CFTC? Both agencies have claimed overlapping authority, creating regulatory whiplash for developers and token issuers. The CFTC issued its own staff guidance first, establishing principles for how tokens might qualify as commodities rather than securities. The SEC's response walks a parallel path, outlining conditions under which tokens could escape securities classification.
The timing reflects legislative frustration. The CLARITY Act would have formally carved out jurisdiction by asset type and function, giving token projects legal clarity they currently lack. Senator Cynthia Lummis and others pushed hard, but the cloture vote failed. Rather than wait for Congress to act again, both agencies opted to speak through staff guidance. This approach carries less weight than rulemaking but still signals regulatory intent without requiring formal rule changes.
The SEC's framework likely pivots on functionality and decentralization. Tokens with governance rights, profit-sharing mechanisms, or reliance on a central entity for development look more like securities. Tokens that operate as pure utility tools within decentralized networks have a stronger case for exclusion. The agency will examine whether a reasonable investor expects profits from others' efforts, applying the Howey Test framework that has governed securities law for decades.
This guidance matters because enforcement activity will follow. The SEC has already signaled its target list. Projects like Solana, Cardano, and others have faced scrutiny. Platforms offering staking as a service face particular pressure. The agency views staking rewards as potential unregistered securities products, especially when platforms control rewards and intermediaries pocket fees.
The CFTC's earlier guidance carved out clearer commodity ground. Tokens with deep liquidity, transparent pricing, and genuine commodity utility could qualify for CFTC oversight instead. Bitcoin and Ethereum already operate in this space. Smaller or newer tokens with limited real-world use cases face the opposite problem. They fall into the securities bucket unless they can demonstrate genuine decentralization and non-reliance on insider development.
Neither agency abandoned enforcement. Both explicitly retained the right to pursue cases against projects that violate existing law. The guidance simply clarifies the regulatory boundaries going forward. Project teams can use these principles to structure token issuances and governance in ways that minimize legal exposure.
Crypto market participants should expect a bifurcation. Tokens positioned as pure commodities with genuine decentralization will operate with clearer rules under CFTC authority. Tokens designed to generate investor returns through development teams or platform operators will face SEC scrutiny. Projects in the middle ground face continued uncertainty, though this guidance provides more solid ground than the old regime of enforcement-driven regulation.
The real test comes in execution. Staff guidance carries interpretive weight but remains subject to court challenge. If the SEC pursues cases against projects that followed this guidance, the framework loses credibility. Projects will need to document their design choices carefully, showing how token characteristics align with commodity or utility frameworks rather than securities characteristics.