The SEC has followed the CFTC’s lead with its own guidance for token issuers, updating how federal securities laws could apply to digital assets. The updates came Friday, revising the SEC’s frequently asked questions issued in March. The move follows similar guidance from the CFTC, which also offered answers to token issuers. Both agencies released their staff answers days after the Senate failed to pass a crypto market structure bill.
The SEC’s guidance is non-binding. The agency said the latest interpretation has “no legal force or effect,” does not alter or amend applicable law, and does not create any new or additional obligations for any person. That framing matters: this is the SEC telling issuers what it thinks, not what the law commands.
The FAQs and the Howey Test
The FAQs apply to how the SEC considers digital asset products falling under the Howey test for investment contracts. Under the updated guidance, token issuers could conduct buyback programs for customers if “a crypto system is functional and has no central party” that would not necessarily qualify as “a representation or promise to undertake essential managerial efforts.” In other words, the SEC is signaling that a decentralized system with no central authority running it might not meet the Howey test.
A system that is “functional, services to secure, maintain, improve, or enhance such a system or its functionality, or to facilitate network effects” would not necessarily satisfy the agency’s Howey test. The distinction is important: the SEC is carving out room for projects that operate without a central manager making promises about future growth.
Staking receipt tokens would not always classify as securities, according to the agency.
What the CFTC Did First
The CFTC moved first. Its guidance was similar in spirit, though the source does not specify exactly what it covered. The two agencies now have parallel frameworks, though each applies its own legal standard.
Both moves came days after the Senate failed to pass a crypto market structure bill. The failure left a legislative gap that both agencies appear eager to fill with their own interpretations. Neither guidance changes the underlying law; both simply tell issuers what the agency thinks about how the existing law applies.
The Chairs Signal a Path Forward
SEC Chair Paul Atkins and CFTC Chair Michael Selig issued statements signaling the agencies would address crypto regulation in the absence of laws passed by Congress. The message is consistent: if lawmakers won’t act, the regulators will.
Commissioner Hester Peirce announced on Friday that she plans to resign on Oct. 2 after serving at the SEC for eight years. Peirce is expected to join Regent University in Virginia as an associate professor in November. Her departure leaves the SEC with two Republican commissioners, Atkins and Commissioner Mark Uyeda, on a bipartisan panel that normally consists of five members.
As of Monday, President Donald Trump had not announced any potential replacements for Peirce or the two remaining Democratic SEC seats.
The Order of Events
- The CFTC issued its guidance, offering answers to token issuers.
- The SEC followed with its own updates to the March FAQs.
- Both moves came days after the Senate failed to pass a crypto market structure bill.
- Chairmen Atkins and Selig signaled the agencies would regulate in the absence of new laws.
- Peirce announced her resignation for Oct. 2.
- Trump has not announced replacements for the open SEC seats.
Where the paper stands
The paper backs the small business against both the agency and the giant, and is against rules the biggest firms helped write, especially when they raise the cost of entry for smaller token issuers. The SEC’s guidance, while non-binding, still shapes how the agency treats token issuers, and it is worth watching how that shapes the market.
The guidance carves out exceptions for decentralized systems without a central authority running them, which could help some issuers avoid being treated as securities. But the paper’s concern is broader: when the SEC and the CFTC coordinate to fill a legislative gap, they risk creating a regulatory framework without the democratic checks that come from elected representatives writing the law.
The guidance also leaves the SEC understaffed. With Hester Peirce’s planned resignation, the SEC will be led by two Republican commissioners, and President Trump has not yet named replacements for the open seats. That political balance matters when the SEC is setting policy for a multi-trillion-dollar industry.
Key Facts Box
- SEC guidance updated Friday, revising FAQs issued in March
- CFTC guidance issued prior to the SEC’s update
- Both released days after the Senate failed to pass a crypto market structure bill
- Peirce resigns Oct. 2 after eight years at the SEC
- SEC will be led by Atkins and Uyeda, two Republican commissioners
- Trump has not announced replacements for the open SEC seats
What the Guidance Actually Changes
The guidance is non-binding, which means it tells issuers what the SEC thinks but does not compel anyone to act on it. That is a meaningful distinction. Issuers can choose to treat the guidance as a signal of the SEC’s current thinking, or they can ignore it entirely. The SEC is not ordering anyone to do anything; it is merely explaining its current position.
The Howey test remains the core standard. A token that meets the test is a security, and the SEC’s guidance offers examples of when a token might not meet it. The guidance also addresses buybacks and staking receipts.
The CFTC’s guidance covers similar ground from a different angle. Where the SEC looks at the Howey test, the CFTC takes a different approach. The two approaches overlap but are not identical.
Why This Matters Now
The Senate’s failure to pass a crypto market structure bill leaves a gap. Without a statute, the SEC and CFTC are the default regulators. Their guidance fills that gap with their own interpretations.
The parallel approach is notable. Rather than fighting over jurisdiction, the two agencies have issued separate but similar guidance. That coordination matters for issuers, who now have two sets of answers pointing in the same direction.
The guidance also signals a pragmatic approach. Both chairmen have said they will regulate in the absence of laws passed by Congress. That is a promise to issuers: even if lawmakers do not act, the regulators will provide clarity.
The Bigger Picture
The SEC’s guidance is a step toward clarity, but it is not a final answer. The agency’s position is that it will regulate in the absence of new legislation, and the guidance reflects that stance. Issuers now have a better sense of what the SEC considers a security, but the underlying law remains unchanged.
The guidance is also a reminder of the SEC’s role. The agency exists to protect investors and maintain fair, orderly, and efficient markets. Its guidance on token issuers fits squarely within that mission.
For now, issuers have a clearer picture of what the SEC thinks. The SEC’s guidance is a step forward, but the work is not done. The agency will need to keep refining its approach as new technologies emerge and as the law continues to evolve.
Source material: “US SEC follows CFTC in staff guidance for crypto,” Cointelegraph.
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