SEC Chair's Latest Speech: Leaving Behind a Decade of Chaos, Cryptocurrency Regulation Enters an Era of Clarity
TechFlow Selected TechFlow Selected
SEC Chair's Latest Speech: Leaving Behind a Decade of Chaos, Cryptocurrency Regulation Enters an Era of Clarity
"We will do what regulators should do: draw clear boundaries and explain them in clear language."
Navigating Web3 tides with focused insightsAuthor: Paul S. Atkins, Chairman of the U.S. Securities and Exchange Commission
Translation: Luffy, Foresight News
Good morning, ladies and gentlemen! Thank you for the warm introduction and for inviting me here today as we continue discussing how the United States can lead the next era of financial innovation.
Recently, when speaking about U.S. leadership in the digital finance revolution, I’ve described “Project Crypto” as the regulatory framework we are building to match the energy of American innovators (note: the U.S. Securities and Exchange Commission launched the Project Crypto initiative on August 1, aiming to update securities rules and regulation so that U.S. financial markets can become blockchain-based). Today, I want to outline the next step in this process. At its core is applying federal securities laws to crypto assets and related transactions with fundamental fairness and common sense.
In the coming months, I expect the SEC to consider establishing a token classification system grounded in the long-standing Howey investment contract securities analysis, while recognizing the boundaries of our legal and regulatory applicability.
What I will discuss builds significantly on the groundbreaking work conducted by Commissioner Hester Peirce’s Crypto Task Force. Commissioner Peirce developed a framework designed to regulate crypto assets under securities law coherently and transparently based on economic substance rather than slogans or fear. Let me be clear: I share her vision. I value her leadership, hard work, and steadfast commitment to these issues over the years. Having worked alongside her for a long time, I’m very pleased she agreed to take on this task.
My remarks will focus on three themes: first, the importance of a clear token classification system; second, the logic of applying the Howey test, acknowledging that investment contracts can terminate; and third, what this means in practice for innovators, intermediaries, and investors.
Before I begin, let me reiterate: although SEC staff are diligently drafting rule amendments, I fully support Congress’s efforts to codify a comprehensive cryptocurrency market structure framework into law. My vision aligns with the bills currently under consideration in Congress and is intended to complement—not replace—Congress’s critical work. Commissioner Peirce and I have made supporting congressional action a priority, and we will continue to do so.
I’ve enjoyed working with Acting Chair Pham, and I wish Mike Selig, President Trump’s nominee for Chair of the Commodity Futures Trading Commission (CFTC), a swift and smooth confirmation process. My experience working with Mike over recent months has convinced me that we are all committed to helping Congress quickly advance bipartisan market structure legislation for presentation to President Trump’s desk. Nothing better protects against regulatory overreach than sound statutory text enacted by Congress.
To reassure my compliance team, here’s my standard disclaimer: my remarks reflect only my personal views as Chair and do not necessarily represent the views of other Commissioners or the SEC as a whole.
A Decade of Uncertainty
If you’re tired of hearing “Are crypto assets securities?”, I understand completely. The confusion arises because “crypto asset” is not a term defined in federal securities law. It’s a technical descriptor indicating only how records are kept and value transferred, saying almost nothing about the legal rights attached to a particular instrument or the economic substance of a specific transaction—precisely the factors that determine whether an asset qualifies as a security.
I believe most cryptocurrencies traded today are not securities in and of themselves. Of course, a particular token may have been sold as part of an investment contract offering—that’s not a radical idea, it’s just straightforward application of securities law. Statutes defining securities list common instruments like stocks, notes, and bonds, and add a broader category: “investment contracts.” This latter term describes a relationship between parties, not a permanent label affixed to an object. Unfortunately, statutes don’t define it either.
Investment contracts can be fulfilled—or terminated. Just because the underlying asset of an investment contract continues trading on a blockchain does not mean the contract remains active forever.
Yet over recent years, too many have argued that if a token was once the subject of an investment contract, it remains a security forever. This flawed view goes further, asserting that every subsequent transaction involving that token—wherever and whenever—is a securities transaction. I struggle to reconcile this position with statutory language, Supreme Court precedent, or common sense.
Meanwhile, developers, exchanges, custodians, and investors have been navigating in the dark—without guidance from the SEC and often facing obstacles. They see tokens serving as payment mechanisms, governance tools, collectibles, or access keys—some hybrid designs that defy existing categories. Yet for years, the regulatory stance has treated all such tokens as equivalent to securities.
This approach is neither sustainable nor practical. It imposes high costs with little benefit; it’s unfair to market participants and investors, inconsistent with the law, and has fueled an exodus of entrepreneurs offshore. The reality is: if America insists that every blockchain innovation must navigate a minefield of securities regulations, those innovations will migrate to jurisdictions more willing to distinguish different types of assets and more eager to establish clear rules upfront.
Instead, we will do what regulators should do: draw clear lines and explain them in plain language.
Core Principles of Project Crypto
Before explaining my views on how securities law applies to cryptocurrencies and transactions, let me first state two guiding principles.
First, whether a stock is represented by paper certificates, DTCC account entries, or tokens on a public blockchain, it remains a stock. A bond doesn’t cease to be a bond just because its cash flows are tracked via smart contracts. Regardless of form, securities remain securities. This is straightforward.
Second, economic substance trumps labels. If an asset fundamentally represents a claim on enterprise profits and was offered with promises relying on others’ key managerial efforts, calling it a “token” or “non-fungible token (NFT)” won’t exempt it from existing securities laws. Conversely, a token being part of a fundraising transaction doesn’t magically transform it into equity in an operating company.
These principles aren’t new. The Supreme Court has repeatedly emphasized that securities law applicability should depend on the substance of a transaction, not its form. What’s new is the scale and speed at which asset types evolve in these emerging markets. This pace demands flexible responses to urgent market demand for guidance.
A Coherent Token Classification System
With this context, let me outline my current thinking on various crypto assets (note: this list is not exhaustive). This framework has been shaped through months of roundtables, over a hundred meetings with market participants, and hundreds of written public comments.
-
First, regarding bills currently under congressional consideration, I believe “digital commodities” or “network tokens” are not securities. These crypto assets derive their value inherently from the programmed operation of a “functionally complete” and “decentralized” crypto system, not from expectations of profit derived from others’ key managerial efforts.
-
Second, I believe “digital collectibles” are not securities. These crypto assets are intended for collection and use, potentially representing or granting holders rights to digital expressions or references to artworks, music, videos, trading cards, in-game items, internet memes, characters, current events, or trends. Buyers of digital collectibles do not expect to profit from the ongoing managerial efforts of others.
-
Third, I believe “digital utilities” are not securities. These crypto assets have practical functions such as membership, tickets, credentials, proof of ownership, or identity badges. Buyers of digital utilities do not expect to profit from the ongoing managerial efforts of others.
-
Fourth, “tokenized securities” are and will remain securities. These crypto assets represent ownership in financial instruments listed within the definition of “securities,” maintained on a crypto network.
Howey Test, Promises, and Termination
While most crypto assets themselves are not securities, they may have been part of, or subject to, an investment contract. Such crypto assets typically came with specific statements or promises requiring the issuer to perform managerial duties, satisfying the Howey test.
The core of the Howey test is: an investment of money in a common enterprise with a reasonable expectation of profits derived from the efforts of others. The buyer’s profit expectation depends on whether the issuer made statements or commitments regarding such key managerial efforts.
In my view, these statements or commitments must clearly and unambiguously specify the key managerial efforts the issuer undertakes.
The next question is: how can non-security crypto assets become detached from investment contracts? The answer is simple yet profound: either the issuer fulfills its stated or promised obligations, fails to fulfill them, or the contract terminates for other reasons.
To illustrate, let me tell you about a place in Florida’s rolling hills—a place I’ve known since childhood. It was once the site of William J. Howey’s citrus empire. In the early 20th century, Howey bought over 60,000 acres of undeveloped land, planting orange and grapefruit groves beside his mansion. His company sold plots of these orchards to individual investors and managed the planting, harvesting, and selling of fruit on their behalf.
The Supreme Court reviewed Howey’s arrangement and established the test for defining investment contracts—a standard that has influenced generations. But today, the land around Howey’s estate has transformed dramatically. His 1925 mansion in Lake County, Florida, still stands a century later, hosting weddings and events, while the citrus groves that once surrounded it have largely vanished, replaced by resorts, championship golf courses, and residential neighborhoods—an ideal retirement community. It’s hard to imagine anyone standing on those fairways and cul-de-sacs today believing they constitute securities. And yet, for years, we’ve seen the same test rigidly applied to digital assets that have undergone similarly profound transformations, yet still carry labels from their issuance days—as if nothing had changed.
The land itself was never a security. It became the subject of an investment contract through a specific arrangement, and when that arrangement ended, it ceased to be bound by that contract. Of course, while the nature of the enterprise on the land changed completely, the land itself remained unchanged.
Commissioner Peirce is absolutely right: a project’s initial token offering may involve an investment contract, but those commitments are not perpetual. Networks mature, code gets implemented, control becomes decentralized, and the issuer’s role diminishes or disappears. At some point, buyers no longer rely on the issuer’s key managerial efforts, and most token trades no longer rest on a reasonable expectation that “a team is still driving things forward.” In short, a token does not remain a security forever simply because it was once part of an investment contract, just as a golf course doesn’t become a security because it once stood where a citrus investment plan operated.
When an investment contract can be deemed fulfilled or terminated according to its terms, tokens may continue trading—but those trades won’t become securities transactions merely because of the token’s origin story.
As many of you know, I strongly support financial super apps—platforms licensed under a single regulator to custody and trade multiple asset classes. I’ve asked SEC staff to prepare recommendations for SEC consideration allowing tokens associated with investment contracts to trade on platforms not regulated by the SEC, including intermediaries registered with or subject to state oversight by the Commodity Futures Trading Commission (CFTC). While fundraising activities should remain under SEC oversight, we shouldn’t stifle innovation and investor choice by restricting where the underlying asset can be traded.
Importantly, this does not mean fraud suddenly becomes acceptable or that SEC oversight diminishes. Antifraud provisions still apply to false statements and omissions related to the sale of investment contracts, even if the underlying asset itself isn’t a security. Of course, to the extent these tokens qualify as commodities in interstate commerce, the CFTC retains antifraud and anti-manipulation authority to act against misconduct in their trading.
This means our rules and enforcement will align with the economic reality that investment contracts can end and networks can operate independently.
Crypto Regulatory Actions
In the coming months, as envisioned in the bills currently under congressional review, I hope the SEC will also consider a series of exemptions to create tailored issuance regimes for crypto assets that were part of or subject to investment contracts.
I’ve directed staff to prepare recommendations for SEC consideration—proposals designed to facilitate financing, embrace innovation, and ensure investor protection.
By streamlining this process, innovators in the blockchain space can focus on development and user engagement, rather than navigating a maze of regulatory uncertainty. Moreover, this approach will foster a more inclusive and vibrant ecosystem, enabling smaller projects with limited resources to experiment and thrive freely.
Of course, we will continue close collaboration with the Commodity Futures Trading Commission (CFTC), banking regulators, and congressional counterparts to ensure appropriate regulatory frameworks for non-security crypto assets. Our goal is not to expand SEC jurisdiction, but to allow financing to flourish while protecting investors.
We will continue listening. The Crypto Task Force and relevant divisions have held multiple roundtables and reviewed extensive written input—but we need more feedback. We need input from investors, from developers worried about code delivery, and from traditional financial institutions eager to participate in on-chain markets without violating rules designed for a paper-based era.
Finally, as I mentioned earlier, we will continue supporting Congress’s efforts to codify a sound market structure framework into law. While the SEC can offer reasonable interpretations under existing law, future SECs could change direction. That’s why tailored legislation is so important—and why I welcome President Trump’s goal of enacting a crypto market structure bill before year-end.
Integrity, Understandability, and Rule of Law
Now, let me be clear about what this framework does not include. It is not a promise of relaxed enforcement by the SEC. Fraud is still fraud. While the SEC protects investors from securities fraud, the federal government includes many other agencies capable of regulating and preventing illegal conduct. That said, if you raise funds by promising to build a network and then disappear with the money, we will find you and take the strongest possible legal action.
This framework is a commitment to integrity and transparency. Entrepreneurs who want to build in America and comply with clear rules should not face shrugs, threats, or subpoenas. Investors trying to distinguish between buying tokenized stocks and purchasing game collectibles should not be left with only a complex web of enforcement actions to guide them.
Most importantly, this framework reflects humility about the SEC’s own jurisdictional limits. Congress created securities laws to address a specific problem—the situation where people entrust money to others based on promises about their honesty and ability. These laws were never meant to serve as a universal charter governing every new form of value.
Contracts, Freedom, and Responsibility
Let me conclude with a historical reflection from Commissioner Peirce’s speech this past May. She invoked the spirit of an American patriot who risked great personal peril—even near death—to defend the principle that free people should not be governed by arbitrary decrees.
Fortunately, our work requires no such sacrifice, but the principle remains the same. In a free society, the rules governing economic life should be knowable, reasonable, and properly bounded. When we extend securities laws beyond their proper scope, when we presume guilt for every innovation, we stray from this foundational principle. When we acknowledge the limits of our authority, when we recognize that investment contracts can end and networks can stand on their own merits, we uphold that principle.
A sensible regulatory approach by the SEC toward crypto won’t determine the fate of markets or any particular project—that will be decided by the market. But it will help ensure America remains a place where people can experiment, learn, fail, and succeed under stable and fair rules.
That is the meaning of Project Crypto, and it is the goal the SEC should pursue. As Chair, I make this commitment to you today: we will not let fear of the future trap us in the past; we will not forget that behind every token debate are real people—entrepreneurs striving to build solutions, workers investing in the future, and Americans seeking to share in this nation’s prosperity. The SEC’s role is to serve all three.
Thank you, and I look forward to continuing our dialogue in the months ahead.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@SECGov
