- Most digital assets like ETH, SOL, and XRP are network tokens and not classified as securities.
- Digital collectibles and practical tokens serve utility or ownership, not profit expectations.
- Token classification depends on issuer promises and context, guided by the Howey Test.
Securities and Exchange Commission (SEC) Chair Paul Atkins has outlined a major policy shift on how cryptocurrencies are classified under U.S. securities law. Speaking at the Federal Reserve Bank of Philadelphia’s Fintech Conference on November 12, 2025, Atkins said the agency would move away from broadly labeling digital tokens as securities.
The new approach, he stated, will focus on creating a structured “token taxonomy” grounded in the Howey Test, the longstanding legal standard that determines whether an asset qualifies as a security.
This is a move from the enforcement-driven framework used under former Chair Gary Gensler. Atkins emphasized that the Commission must uphold investor protection while recognizing the limits of its authority and allowing technological innovation to proceed within a clear regulatory boundary.
Clearer Definition for Network and Functional Tokens
Atkins explained that most cryptocurrencies such as Ethereum (ETH), Solana (SOL), and XRP operate as “network tokens” within decentralized ecosystems and should not be classified as securities.
He stated that only tokens sold with explicit and unambiguous promises of profit derived from the issuer’s managerial efforts would fall under the securities category. According to Atkins, digital assets evolve over time, networks mature, control disperses, and issuers’ roles diminish, meaning many tokens no longer rely on centralized management.
He further noted that the SEC’s upcoming framework will allow issuers up to six months to resolve compliance concerns before any enforcement measures are pursued.
Digital Collectibles and Practical Tokens
The SEC chair introduced three distinct categories of crypto assets that fall outside securities law: network tokens, digital collectibles, and digital tools. Digital collectibles, such as NFTs, he said, represent creativity and ownership rather than profit expectation.
These assets are typically used for collecting or displaying digital art, music, or in-game items. Meanwhile, digital tools function as credentials, memberships, or identity badges within digital ecosystems.
Purchasers of these tokens, Atkins explained, are not expecting profits but practical utility. However, he made clear that tokenized securities, assets representing ownership in traditional financial instruments, remain within the SEC’s jurisdiction.
Context and Promises
Atkins stressed that a crypto asset’s classification depends on context and the issuer’s conduct rather than its technical form. While some tokens may initially form part of an investment contract, that status can change once obligations are fulfilled or terminated.
He used the original 1946 Howey case, involving Florida citrus groves, to show that securities law applies to specific arrangements, not the assets themselves. Reflecting on this, Atkins said that the same principle should apply to digital assets whose underlying networks have matured.
The SEC’s “Project Crypto,” announced alongside his remarks, aims to align regulatory clarity with Congressional efforts, including recent Senate discussions on a digital asset market structure bill and Treasury guidance allowing staking in crypto exchange-traded products.
