The US just defined what crypto is and is not

For years, anyone building or investing in crypto in the United States has had to operate in a fog. The rules were never quite clear. Were Bitcoin and Ethereum securities? What about the token your favorite project just launched? What about the rewards you earned from staking? No one could give you a straight answer, because the regulators themselves never gave one.

That changed on March 17, 2026. The Securities and Exchange Commission and the Commodity Futures Trading Commission issued a joint interpretation that does something neither agency had ever done before: it tells you which crypto assets fall under securities law, which do not and how to tell the difference. This is not a new law passed by Congress. It is official guidance from the two most powerful financial regulators in the country, and it carries enormous weight for every person, company, and investor involved in crypto.

To understand why this matters, you need to understand the problem it solves.

The Big Question: Is Crypto a Security?

For most of its history, the SEC's approach to crypto was built around a 1946 Supreme Court ruling called the Howey test. That ruling defines a security as an investment of money in a common enterprise, where investors expect to earn a profit from the efforts of others. The SEC used this test to argue that many crypto tokens, even ones with real utility, were securities and therefore had to follow the same rules as stocks or bonds.

The trouble was that the SEC applied this test inconsistently, and mostly through enforcement. Instead of writing clear rules, it sued projects after the fact, often catching entrepreneurs off guard. It was, in the words of the new SEC Chairman Paul Atkins, "regulating by enforcement." The CFTC, which oversees commodities like gold and oil, had its own overlapping claims over crypto, especially for assets like Bitcoin. The result was a regulatory grey zone that frustrated builders, spooked investors and pushed many crypto companies to set up operations outside the United States.

What the New Guidance Actually Says

The joint interpretation creates what it calls a “token taxonomy”, essentially a classification system that puts different crypto assets into clear buckets. Here is what each category means.Digital Commodities are crypto assets whose value comes from the way the underlying network works, driven by supply and demand, not from any promises made by a company or team. Think of assets like Bitcoin. These are not securities. The CFTC confirmed that these assets can be treated as commodities under its existing rules.

Digital Collectibles are assets designed to be collected or used, such as those representing artwork, music, videos, trading cards, game items, or internet culture. These are also not securities. A digital artwork token or an in-game item does not carry the legal weight of a stock. Digital Tools are assets that perform a practical function, like a membership pass, a ticket, a credential, or an identity badge. Again, not securities. If a token gives you access to a service rather than a share of profits, it falls into this group.

Stablecoins, specifically those defined under the GENIUS Act as payment stablecoins issued by permitted issuers, are also not securities. This is significant for the many companies building payment infrastructure on top of dollar-backed tokens. Digital Securities, sometimes called tokenized securities, are financial instruments that happen to be formatted as crypto assets. A tokenized stock or bond is still a stock or bond, and it is still regulated as one. Nothing changes here.

The Investment Contract Question

One of the most practically important parts of the guidance deals with a concept called an investment contract. Even if a token is not itself a security, it can become subject to securities law when it is sold in a way that resembles a securities offering. If a company sells a token by making promises about future growth and the work its team will do to make the token more valuable, that sale may constitute an investment contract, and the SEC will treat it as a securities transaction.

But here is the part that is genuinely new: the guidance says that an investment contract can end. Once the company has fulfilled its promises, or once the token operates entirely on its own without the company's continued effort, the securities relationship can terminate. Before this guidance, many projects feared they would be stuck under securities law forever, no matter how decentralized they became. That fear is now significantly reduced.

Staking, Mining, Wrapping, and Airdrops

The guidance also addresses four common crypto activities that have long sat in legal uncertainty. Protocol mining, the process of validating transactions and earning newly created tokens in return, does not involve the offer or sale of a security. Neither does protocol staking, where token holders lock up their assets to help secure a network and earn rewards. The wrapping of a non-security crypto asset, which involves converting a token into a form usable on a different blockchain, also does not constitute a securities transaction.

Airdrops, where projects distribute tokens to wallets for free, were another grey area. The guidance clarifies that these distributions do not count as an "investment of money" under the Howey test, meaning they do not trigger securities law requirements. This removes a significant legal headache for projects that use airdrops to grow their communities.

Why This Is a Landmark Moment

The crypto industry has spent years asking for exactly this kind of clarity. Courts, lawyers, and regulators have disagreed about where the lines are drawn. Major enforcement actions were brought against prominent companies, often on the basis that their tokens were securities. Billions of dollars in legal fees were spent arguing the question. Many talented developers and founders moved to friendlier jurisdictions, taking jobs and tax revenue with them.

This guidance does not answer every question. It is not a law, and it does not bind courts. Congress is still working on comprehensive market structure legislation, which both the SEC and CFTC have said they are eager to implement. But this interpretation sets a clear baseline, right now, for how both agencies will operate. That matters enormously for companies deciding whether to build in the United States.

Chairman Atkins put it plainly: most crypto assets are not securities. That is a striking thing for an SEC chairman to say, and it signals a real shift in how the agency intends to approach the space.

What It Means for Investors and Builders

If you are an investor, this guidance gives you a clearer picture of which assets are subject to investor protection rules and which are not. Assets classified as digital commodities or collectibles are not wrapped in the same disclosure requirements as securities. That does not mean they are risk-free, but it does clarify the regulatory environment around them.

If you are building a crypto project, you now have a framework to assess where your token falls. If your token derives its value from your team's ongoing efforts and promises, it likely involves an investment contract when sold. If your network becomes genuinely decentralized and the token's value reflects the network's utility rather than your labor, you may eventually exit that investment contract relationship. Designing your token and your communications carefully with this taxonomy in mind now has a clear legal foundation to stand on.

If you are an entrepreneur who has been waiting on the sidelines, hesitant to build because the rules were too unclear, this guidance is the clearest green light the regulatory environment has produced in years.

The Road Ahead

The SEC and CFTC have described this interpretation as a bridge, something to provide certainty while Congress moves toward a more permanent legislative framework. That legislation, when it passes, will supersede this guidance and create binding rules. But for now and possibly for several years, this joint interpretation is the map.

The fog is lifting. After more than a decade of confusion, the United States government has taken a serious step toward telling the crypto world where it stands. That is not a small thing.

For more information, you can read the entire SEC press release here.