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For the better part of a decade, the regulatory status of digital assets in the United States has been governed less by statute than by lawsuit. The Securities and Exchange Commission uses the Howey test, a legal standard born from a 1946 Supreme Court case involving Florida citrus grove developments, to define most crypto assets as “investment contracts” – and thus, by definition, securities that are subject to the federal securities laws.
Leaning on Howey, the SEC waged an expansive enforcement campaign against cryptocurrency exchanges, token issuers and decentralized protocols. The Commodity Futures Trading Com-mission, on the other hand, staked its own jurisdictional claim, maintaining that Bitcoin and Ether were commodities subject to its authority. The result was a turf war fought through enforcement actions rather than rulemaking, producing what practitioners came to describe as “regulation by enforcement” and leaving private investors without a clear path to remuneration from crypto-based fraud.
The Digital Asset Market Clarity Act of 2025 (the CLARITY Act) represents the most ambitious congressional response to that vacuum. At its core, the CLARITY Act classifies digital assets into three categories. “Digital commodities,” assets intrinsically linked to a blockchain whose value derives from the network’s use, fall under the CFTC’s exclusive jurisdiction. “Investment contract assets,” tokens sold with the expectation of profit derived from the efforts of others, remain under SEC oversight during their initial offering phase. “Permitted payment stablecoins” are governed by the GENIUS Act, signed into law in July 2025. This tripartite structure would resolve the threshold classification question that has bedeviled every case from Ripple Labs to Risley: Is this token a security, a commodity or something else entirely?
SEC and CFTC Agree on New Regulatory Framework
On March 17, 2026, the SEC and CFTC jointly issued Interpretive Release Nos. 33-11412, 34-105020, and 9198-26, Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets. Issued as a formal interpretive rule under the Administrative Procedure Act, it carries materially greater weight than the SEC’s prior informal proclamations and formally supersedes the agency’s 2019 Framework for “Investment Contract” Analysis of Digital Assets. The CFTC joined to confirm that it will administer the Commodity Exchange Act consistent with the SEC’s interpretation, and the release expressly styles itself as complementing, not replacing, the CLARITY Act now pending in Congress.
A Five-Category Token Taxonomy
The release establishes five categories of crypto assets: digital commodities, digital collectibles, digital tools, stablecoins and digital securities. Only the last category is treated as a security per se. The release defines “digital commodity” as a crypto asset intrinsically linked to and deriving its value from the programmatic operation of a functional crypto system and from supply and demand dynamics, rather than from the expectation of profits derived from the essential managerial efforts of others. Bitcoin, Ether, Solana, Dogecoin and, notably, XRP are confirmed as digital commodities, shifting primary oversight of those assets from the SEC to the CFTC.
Howey Preserved, but Reframed
The release does not displace the Howey test, which remains binding precedent. Instead, it conveys the SEC’s view of how Howey applies to crypto assets and transactions.
The Investment Contract Lifecycle
Perhaps the most consequential development is the release’s treatment of the investment contract lifecycle. The SEC and CFTC clarify how a non-security crypto asset may become subject to, and later cease to be subject to, an investment contract, and they address the application of the federal securities laws to airdrops, protocol mining, protocol staking and the wrapping of non-security crypto assets. The practical takeaway being that a token’s classification can shift across its lifecycle as managerial efforts attach or fall away. Classification is a moment-in-time question, not a static label which may usher novel securities questions not addressed before.
A Cleaner Jurisdictional Line
Under the releases, the CFTC assumes primary responsibility for policing digital commodity markets — a scope that, by some congressional estimates, encompasses roughly 70% of digital assets traded today. The clearer demarcation should reduce the parallel SEC and CFTC investigations that have characterized recent enforcement, with a single agency now likely to take the lead in any given matter.
A Beginning, Not an End
Chairman Atkins has described the interpretation as “a beginning and not the end.” The SEC is working on broader exemptive rulemaking drawing from congressional work, particularly the CLARITY Act, that could include a startup exemption for time-limited registration relief, a fundraising exemption for small offerings, and an investment contract safe harbor clarifying when an issuer has completed or permanently ceased its essential managerial efforts.
What This Means for Market Participants and Litigants
First, reversibility: an interpretive release can be rescinded by a future administration as readily as it was issued. It does not provide the durable litigation protection that statutory codification through the CLARITY Act would. Second, the lifecycle framework cuts both ways. Defendants will use it to argue that statements made during a token’s “non-security” phase cannot ground Section 11 or 12 liability, while plaintiffs will use the same framework to argue that promoter conduct reattached managerial efforts at a definable date. Third, stablecoins now occupy their own regulatory bucket, separate from the digital commodity and digital security categories — a structure that aligns with the GENIUS Act’s yield-restriction architecture and the CLARITY Act’s pending stablecoin provisions. Finally, the agencies’ coordination signals fewer parallel enforcement tracks, which may meaningfully shrink the universe of follow-on private actions that have historically piggybacked on agency proceedings.
Legislative Path Forward
The legislative path, however, remains uncertain as the bill sits in the Senate and as the battle between crypto fintech, such as Coinbase, and the established banking industry continues. A planned January 2026 markup was canceled after Coinbase CEO Brian Armstrong objected to provisions restricting stablecoin yield payments.
Banks argue it’s a level-playing-field and safety-and-soundness issue. Their argument is that a stablecoin account paying yield is functionally equivalent to a savings account, and banks that offer savings accounts are subject to deposit insurance requirements, capital requirements and the full weight of federal banking regulation — so a crypto platform offering yield without those requirements is competing on an unlevel playing field. However, the real concern is deposit flight. Standard Chartered, a global Bank, estimated that stablecoins could pull about $500 billion in deposits from U.S. banks by the end of 2028.
The crypto fintech counterargument is that stablecoin yield is revenue sharing from the interest earned on the Treasury bills held in reserve — not a deposit product — and that restricting it damages legitimate business models without a corresponding consumer protection benefit. For Coinbase, stablecoin-related revenue represented close to 20% of total revenue in the third quarter of 2025, further illustrating the giant stakes.
Whether the CLARITY Act ultimately passes, and in what form, will shape the contours of digital asset regulation, securities litigation and the competitive dynamics between traditional banking and crypto fintech for years to come. With a Senate Banking Committee markup targeted for late April 2026 and the stablecoin yield provision still the central point of contention, market participants on both sides of the divide should expect continued volatility in the legislative text and prepare for multiple possible outcomes. In the meantime, the SEC and CFTC’s joint interpretive release provides a measure of regulatory clarity, but as an interpretive rule rather than a statute, it leaves the most consequential questions, including the scope of private rights of action, the durability of the digital commodity classification and the future of yield-bearing stablecoin products, squarely in the hands of Congress.