SEC and CFTC Issue Joint Crypto Guidance

On March 17, the SEC and the CFTC issued long awaited interpretive guidance clarifying how the federal securities laws apply to crypto assets and transactions. The guidance, while not formal rulemaking, provides direction on how to apply crypto assets to the Howey test, the Supreme Court standard used to determine whether a transaction constitutes an ‘investment contract’ and therefore a security subject to SEC regulation. In particular, the guidance specifies that while digital securities are securities for purposes of the federal securities laws, digital commodities, digital collectibles, digital tools and stablecoins are not securities. However, the guidance noted that non-security digital assets may still be subject to investment contracts in certain circumstances depending on how they are offered, marketed or used, particularly if there is an expectation of profits based on the efforts of others.

The guidance is a notable reflection of the increased collaboration between the SEC and CFTC, consistent with their recently issued joint memorandum of understanding intended to reduce regulatory overlap and foster coordination between the two agencies.  

Click here for the SEC Press Release.  

Click here for the SEC Fact Sheet. 

Click here for the SEC Interpretive Release.