The SEC/CFTC Token Taxonomy: What the Five Categories Mean for Your Token

Last updated: June 22, 2026

What Changed When the SEC and CFTC Classified Crypto Tokens?

On March 17, 2026, the SEC and CFTC jointly issued a 68-page interpretive release establishing a five-category token taxonomy that replaces a decade of regulation by enforcement.¹ Release Nos. 33-11412 and 34-105020 classify every crypto token into one of five categories — digital securities, digital commodities, stablecoins, digital tools, or digital collectibles — and assign regulatory jurisdiction accordingly. The release names a series of tokens by example as digital commodities under CFTC jurisdiction, including Bitcoin, Ethereum, and Solana.² Of the tokens it names, several — including XRP, SOL, ADA, and AVAX — had previously been named in SEC enforcement litigation before the taxonomy treated them as commodities.³

For your token, the question is no longer whether it is a security. The question is which category applies — and which regulator comes with it.

Key Takeaways

• Five categories, not two. The taxonomy moves beyond the binary security/commodity debate. Digital tools and digital collectibles fall largely outside SEC and CFTC jurisdiction.
• Specific tokens are named by example. The release identifies sixteen tokens that underlie futures on designated contract markets — including BTC, ETH, SOL, and XRP — plus Algorand (ALGO) and LBRY Credits (LBC), as digital commodities under CFTC oversight. The list is illustrative, not a closed universe.⁴
• Stablecoins get their own regime. Tokens pegged to reference assets are governed by the GENIUS Act’s Permitted Payment Stablecoin Issuer framework — separate from both the SEC and CFTC.
• The Howey test survives. The taxonomy supplements but does not replace the investment contract analysis. Tokens can still be offered as securities even if the underlying asset is a commodity.
• Classification is fact-specific. Labels on pitch decks do not control. The category depends on the token’s economic substance, how it was marketed, and what the issuer promised.

Use our Token Classification Issue Spotter to identify the factors that determine your token’s category.

Which of the Five Token Categories Does Your Token Fall Into?

The answer depends on your token’s economic substance — not its label, not its marketing, and not what your pitch deck calls it.⁵ The taxonomy maps each token to one of five categories based on what the token actually does and what rights it confers.

*Excludes attorney fees. These are illustrative, approximate filing, registration, and regulatory costs only — the fixed costs that do not change regardless of who advises you. Specific figures vary by year, state, and the operative fee schedule.

Digital Securities

The most common founder mistake: assuming a governance token is not a security. If your token distributes revenue, pays dividends, or confers claims on an asset pool, it is likely a digital security subject to full SEC registration and disclosure.⁶ The release defines the category in these terms:

A digital security (commonly known as a “tokenized” security) is a financial instrument enumerated in the definition of “security” that is formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks.⁶

Tokenized versions of traditional instruments are securities regardless of the underlying technology. But the gray zone is wider than most founders expect. Uniswap’s UNI token, for example, does not distribute protocol revenue to holders as of publication. If it did, the classification analysis would shift. Governance tokens that vote on treasury distributions occupy precisely this boundary.

If your token distributes economic value to holders — assume SEC jurisdiction until a fact-specific analysis confirms otherwise. Unregistered offerings carry disgorgement, civil penalties, and potential officer-and-director bars.

Once a token is classified as a digital security, the next question is registration pathway — and the analysis now routes through Chairman Atkins’s three-pillar Innovation Exemption framework, whose pillar selection, eligibility criteria, and Loper Bright APA-challenge vulnerability are analyzed in the founder’s decision guide.

Digital Commodities

The release identifies specific tokens as digital commodities by example — the sixteen tokens that underlie futures on designated contract markets (BTC, ETH, SOL, XRP, DOGE, ADA, AVAX, LINK, DOT, HBAR, LTC, BCH, SHIB, XLM, XTZ, and APT), plus Algorand (ALGO) and LBRY Credits (LBC).⁷ If your token is among those named, the analysis is straightforward — CFTC jurisdiction applies. If it is not, the release supplies a standard rather than a fixed list:

A digital commodity is a crypto asset that is intrinsically linked to and derives its value from the programmatic operation of a crypto system that is “functional,” as well as supply and demand dynamics, rather than from the expectation of profits from the essential managerial efforts of others.⁸

In practical terms, our reading of that standard turns on three conditions for a token not named in the release: the network has achieved genuine functionality, no person or group exercises operational or economic control over it, and purchasers no longer reasonably depend on the issuer’s continuing managerial efforts to drive value. These are the firm’s own framing of how the release’s “functional” and “managerial efforts” language applies; the release states the standard above, not a numbered test. A token can transition from an investment contract to a digital commodity over time. The timing is fact-specific and often gradual.

If an AI agent transacts in digital commodities on your platform, CFTC jurisdiction extends to the deployer — not just the protocol.

If your token is not among those the release names — the digital commodity classification requires demonstrating functionality, decentralization, and the absence of outstanding issuer promises.

Stablecoins

A token pegged to the U.S. dollar is not automatically a “stablecoin” for regulatory purposes. Circle’s USDC illustrates what qualifies: fiat-backed reserves held in U.S. dollars and short-term Treasuries, with on-demand par redemption and transparent attestations.⁹ The GENIUS Act framework applies only to tokens issued by a Permitted Payment Stablecoin Issuer with qualifying reserves and full AML/CIP programs. Algorithmic stablecoins that maintain their peg through smart contract mechanisms rather than reserves may not qualify under this framework at all — and could be classified as digital securities instead. Yield-bearing stablecoins face the same risk, and whether they qualify under the GENIUS Act or trigger securities treatment is among the questions Congress is still working through as the market-structure legislation advances.

If your stablecoin generates yield or uses algorithmic mechanisms — it may not qualify under the GENIUS Act, and you may be looking at SEC registration.

Digital Tools

The trap: labeling your token “utility” on a pitch deck does not make it a digital tool. The taxonomy evaluates actual function, not marketing language.¹⁰ A token that grants genuine access to a service, functions as a credential, or operates as a non-transferable membership badge is likely a digital tool — generally outside SEC and CFTC jurisdiction. But if your holders are purchasing the token primarily expecting price appreciation rather than using its function, the analysis shifts toward investment contract. Secondary market activity driven by speculation rather than utility use is a red flag.

If your “utility token” trades on secondary markets at prices disconnected from its utility value — the classification may not hold.

Digital Collectibles

NFTs, digital art, and meme tokens derive value from artistic merit, cultural significance, or community dynamics — not managerial effort.¹¹ A single collectible sold as art is generally not a security. But two scenarios change the analysis. First, fractionalization. The release addresses it directly:

The offer and sale of a digital collectible that … is fractionalized or otherwise enables individuals to acquire a fractional ownership interest … could constitute the offer or sale of a security.¹¹

Second, creator promises: if you market an NFT collection with a roadmap promising metaverse integration, revenue sharing, or value enhancement tied to your team’s ongoing efforts, the analysis shifts toward investment contract — regardless of the underlying art.

If you are selling fractional NFT interests or promising roadmap-driven value appreciation — you may have a securities offering, not a collectible sale.

Does the Token Taxonomy Replace the Howey Test?

No. The taxonomy supplements the investment contract analysis — it does not replace it.¹² The release states that it does not supersede or replace the Howey test, which remains binding legal precedent.¹³

What the taxonomy does replace is the SEC’s 2019 “Framework for ‘Investment Contract’ Analysis of Digital Assets” — the staff-level guidance that served as the primary analytical tool for seven years.¹⁴ In our analysis, the taxonomy also effectively displaces former Director William Hinman’s 2018 speech suggesting that a sufficiently decentralized token could not be a security — though that is the firm’s own reading; the release itself does not mention the Hinman speech.¹⁵

The critical distinction: a token can be a digital commodity and still be sold through an investment contract. Bitcoin is a commodity. But if someone sold Bitcoin with promises of managed returns from their trading expertise, that offering could still be a security. The taxonomy classifies the asset. Howey classifies the transaction.

The taxonomy tells you what your token is. Howey tells you whether how you sold it created a security.

What Questions Does the Token Taxonomy Leave Open?

The taxonomy resolves the security-versus-commodity binary. It does not resolve everything.¹⁶

Multi-functional tokens. A token that serves as both a governance mechanism and a gas token straddles categories. The release acknowledges overlap but provides no clear priority rule for tokens with characteristics of more than one category.

Subjective functionality. The “functionality” test for digital commodities measures a network against the issuer’s own representations — not an objective standard. Two identical networks could reach different classification results based on what each issuer promised.

DeFi protocol exposure. The taxonomy classifies tokens, not protocols. A DeFi protocol that facilitates trading across multiple token categories faces overlapping SEC and CFTC jurisdiction with no single compliance framework.

Stablecoin yield. Whether yield-bearing stablecoins qualify under the GENIUS Act or trigger securities treatment remains unresolved — and is one of the questions Congress is addressing as it builds out the broader market-structure framework.

Political durability. The release is commission-level guidance, not a statute. A future administration could revise or withdraw it.

If your token touches more than one category or operates in DeFi — the taxonomy is a starting point, not the final answer.

Classification Decision Matrix

Use this matrix to identify your token’s likely classification path. This is a starting point for analysis — not a substitute for legal counsel.

How to Classify Your Token Under the New Taxonomy

Classification is not a label you choose. It is a legal conclusion based on your token’s economic substance, offering history, and current function.¹⁷ Five steps:

1. Map your token’s primary characteristic. Use our Token Classification Issue Spotter to identify which category your token most closely resembles — and which classification factors apply.

2. Audit your offering history. How the token was marketed matters as much as what it does today. Pitch decks, social media posts, and investor communications that emphasized returns or price appreciation create investment contract risk — even if the token now functions as a utility.

3. Evaluate outstanding promises. If purchasers are still reasonably relying on your team’s managerial efforts to drive value, an investment contract may still attach — regardless of the token’s underlying category.

4. Check for category overlap. Tokens with characteristics of multiple categories (governance + economic rights, utility + secondary market speculation) require individualized analysis. The taxonomy does not provide a default rule for multi-functional tokens.

5. Get a classification opinion. The taxonomy replaced ambiguity with structure, but classification under the five categories remains fact-specific. A formal classification analysis protects your project and demonstrates regulatory good faith.

The taxonomy gave the industry the framework it asked for. The question is no longer whether your regulator will come — it is which one.

Related Resources

• The SEC’s Innovation Exemption: A Founder’s Decision Guide to the Atkins Token Safe Harbor — the registration pathway downstream of taxonomy classification

• The CLARITY Act Explained: CFTC vs. SEC Jurisdiction Defined — the legislative companion piece

• Token Launch Legal Checklist — the existing exemption pathways

• Token Classification Issue Spotter — interactive tool to identify your token’s category

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Disclaimer: This article provides general information for educational purposes only and does not constitute legal advice. Token classification under the SEC/CFTC taxonomy is fact-specific and evolving. Consult qualified legal counsel for advice on your specific situation.

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Footnotes

1. Securities and Exchange Commission and Commodity Futures Trading Commission, “Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets,” Release Nos. 33-11412, 34-105020, File No. S7-2026-09 (announced Mar. 17, 2026; effective Mar. 23, 2026), available at sec.gov. ↩

2. Id. (identifying tokens treated as digital commodities, including those that underlie futures on designated contract markets, plus Algorand and LBRY Credits). ↩

3. XRP was the subject of SEC v. Ripple Labs, Inc., No. 1:20-cv-10832 (S.D.N.Y.), and SOL, ADA, AVAX, LINK, and DOT were named as alleged securities in the complaint in SEC v. Coinbase, Inc., No. 1:23-cv-04738 (S.D.N.Y.). The taxonomy’s treatment of these tokens as CFTC-jurisdiction commodities represents a significant shift in the agencies’ enforcement posture. ↩

4. The sixteen tokens that underlie futures on designated contract markets: Bitcoin (BTC), Ethereum (ETH), Solana (SOL), XRP, Dogecoin (DOGE), Cardano (ADA), Avalanche (AVAX), Chainlink (LINK), Polkadot (DOT), Hedera (HBAR), Litecoin (LTC), Bitcoin Cash (BCH), Shiba Inu (SHIB), Stellar (XLM), Tezos (XTZ), and Aptos (APT). The release separately names Algorand (ALGO) and LBRY Credits (LBC) as digital commodities. See Release Nos. 33-11412, 34-105020. The enumeration is illustrative rather than a closed universe of digital commodities. ↩

5. Release Nos. 33-11412, 34-105020 (classification based on economic substance and function, not marketing labels or issuer self-designation). ↩

6. Release Nos. 33-11412, 34-105020 (digital securities category definition). ↩ ↩²

7. See Release Nos. 33-11412, 34-105020; supra note 4. ↩

8. Release Nos. 33-11412, 34-105020 (digital commodity standard). The three-condition framing that follows in the text is the firm’s own analysis of how the release’s “functional” and “managerial efforts” language applies, not a numbered test stated in the release. ↩

9. GENIUS Act, Pub. L. No. 119-27 (signed July 18, 2025) (establishing the Permitted Payment Stablecoin Issuer framework, qualifying reserve requirements, and redemption obligations). ↩

10. Release Nos. 33-11412, 34-105020 (digital tools category: tokens with genuine practical utility, evaluated by actual function rather than marketing representations). ↩

11. Release Nos. 33-11412, 34-105020 (digital collectibles category and fractionalization analysis). ↩ ↩²

12. Release Nos. 33-11412, 34-105020 (preserving the investment contract analysis as the foundational framework for securities determination). ↩

13. SEC v. W.J. Howey Co., 328 U.S. 293 (1946). ↩

14. Securities and Exchange Commission, “Framework for ‘Investment Contract’ Analysis of Digital Assets” (Apr. 3, 2019), available at sec.gov. ↩

15. William Hinman, Director, Division of Corporation Finance, SEC, “Digital Asset Transactions: When Howey Met Gary (Plastic)” (June 14, 2018), available at sec.gov. The characterization that the taxonomy “effectively displaces” this speech is the firm’s analysis; the release does not address the speech. ↩

16. Release Nos. 33-11412, 34-105020 (acknowledging unresolved classification questions for multi-functional tokens, DeFi protocol exposure, and yield-bearing stablecoins). ↩

17. Release Nos. 33-11412, 34-105020 (classification as a legal conclusion requiring fact-specific analysis of economic substance, offering circumstances, and current function). ↩