On September 25, 2026, the Staff of the Division of Corporation Finance (the “Division”) of the Securities and Exchange Commission (the “SEC”) published a set of responses to frequently asked questions (the “FAQs”) regarding the application of the federal securities laws to certain crypto assets and certain transactions involving crypto assets. The Division slightly updated the FAQs on September 28.
The FAQs build on the SEC’s March 17, 2026 interpretive release (the “Interpretive Release”), which set forth the SEC’s framework for classifying crypto assets and applying the definition of “security” to digital asset transactions. The FAQs are organized into two groups, corresponding to Sections III and IV of the Interpretive Release.
Group 1: Classification of Crypto Assets
The first group addresses the SEC’s classification framework, including the following key guidance:
- The definitions of “functional” and “decentralized” in the Interpretive Release are relevant to how the SEC classifies crypto assets, but are not the standard by which the SEC determines whether an issuer has fulfilled its representations or promises. Each issuer determines the thresholds that must be met to achieve functionality and/or decentralization for purposes of its own representations or promises.
- Staking Receipt Tokens that are receipts for a digital commodity not subject to an investment contract are classified as “digital tools” because they serve the practical function of evidencing the holder’s ownership of the underlying digital commodity. However, a Staking Receipt Token may also be classified as a “digital commodity” if it is issued by a protocol-based Liquid Staking Provider, where the token is intrinsically linked to and derives its value from the programmatic operation of a functional crypto system.
- A “receipt” is distinguished from other financial instruments in that it does not transfer ownership or control of the deposited asset to the receipt issuer, and the issuer cannot transfer, lend, pledge, rehypothecate, or otherwise use the deposited asset for any reason or subject it to claims by third parties.
Group 2: Crypto Assets Subject to an Investment Contract
The second group of FAQs provides guidance on when crypto assets are subject to an investment contract under the Howey test, including the following notable clarifications:
- Promoting a crypto system’s current utility and capabilities likely would not, without more, constitute representations or promises to engage in essential managerial efforts. Similarly, promoting a crypto system’s potential utility with indefinite aspirational statements likely would not constitute such representations or promises if such promotional activities contain nothing promoting the potential for profit.
- Where another party assumes the issuer’s representations or promises to undertake essential managerial efforts, the non-security crypto asset does not separate from and cease to be subject to the associated investment contract.
- Once a crypto system is functional, services to secure, maintain, improve, or enhance such a system or its functionality, or to facilitate network effects, would not involve essential managerial efforts.
- Once a functional crypto system has no central party, statements made by the issuer relating to the functional crypto system likely would not create a new investment contract because neither the issuer nor any other person has control of the crypto system that would allow them to affect its failure or success.
- Where a crypto system is functional and has no central party, an issuer’s announcement of a non-security crypto asset buyback program would not constitute a representation or promise to undertake essential managerial efforts. However, where a crypto system is not functional, such an announcement could constitute such a representation if the issuer presents the buyback as generating yield or a return for token holders.
- A trading platform that offers a secondary market for a crypto asset would only be considered a “promoter” if it met the “promoter” definition in Securities Act Rule 405.
The FAQs represent the latest in a series of actions by the SEC and its Staff to provide regulatory clarity for the digital asset markets. Access the FAQs: Division of Corporation Finance FAQs on Crypto Assets. Access the referenced Interpretive Release: Interpretive Release.