On November 12, SEC Chair Paul S. Atkins spoke at the Federal Reserve Bank of Philadelphia, describing the agency’s evolving approach to digital assets under its digital asset regulatory initiative, “Project Crypto.” Atkins indicated that the SEC is evaluating a “token taxonomy” grounded in the Supreme Court-created “Howey test,” which evaluates whether a particular instrument constitutes an investment contract, with the aim of providing greater clarity for market participants. He emphasized his belief that most digital asset tokens currently trading were not themselves securities, though some may have been sold as part of an investment contract.

Atkins credited Commissioner Hester Peirce and the Crypto Task Force for advancing a framework that distinguishes between digital commodities, collectibles, tools, and tokenized securities — only the latter of which Atkins viewed as constituting a security. He contended that “economic reality,” not labels, should determine whether a cryptoasset is a security. Atkins also stated that investment contracts could end, allowing tokens to trade outside the scope of securities regulation once the issuer’s “essential managerial efforts” had ceased — referencing language proffered by the Howey test.

Atkins also announced that he hoped the SEC would consider a package of exemptions to facilitate capital formation for cryptoassets associated with investment contracts and signaled support for legislative efforts to enact a “comprehensive crypto market structure framework.” Atkins emphasized that the SEC’s regulatory efforts were intended to complement, not replace, congressional action, and committed to ongoing coordination with the CFTC and banking regulators to ensure appropriate oversight for non-security cryptoassets, noting anti-fraud provisions would remain in force regardless of an asset’s classification.