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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Repair Windows errors before they cause bigger problemsFix Now →Scan for outdated or missing drivers - takes under a minuteDriver Scan →To screen a crypto asset under U.S. federal law, examine both the asset’s rights and uses and the specific offer, sale, or arrangement involving it. For an investment-contract analysis, the central question is whether buyers invested in a common enterprise with a reasonable expectation of profit from the essential managerial efforts of others. A token’s name, code, or blockchain format cannot answer that question by itself.
This guide reflects the SEC’s March 17, 2026 interpretive release and agency materials available as of October 8, 2026. The Supreme Court’s Howey test is doctrine; the SEC’s 2026 taxonomy and application guidance are agency interpretations, not a statute or a universal binding court ruling. This is a general U.S. federal-law framework, not legal advice for a particular asset or transaction.
Start by defining exactly what you are checking
Before assessing a token, write down the precise subject of the analysis. “Is this token a security?” can mean several different things, and the answer may differ depending on what was offered, to whom, and when.
- Identify the asset and rights. Record the token’s exact name and version, what rights it conveys, and whether holders can claim income, profits, redemption, governance, custody, or an interest in an underlying security.
- Identify the transaction. Specify whether you are evaluating an initial offering, a later resale, a staking or yield arrangement, a wrapped or receipt token, or another product involving the asset.
- Fix the context. Record the jurisdiction, date, purchaser audience, and communications available to those purchasers, including issuer statements, offering materials, and promises about future work.
- Describe the system’s status. Note whether the associated network is operating, what the token can actually do on it, who controls or develops it, and what work remains.
Keep the asset and the transaction separate throughout the analysis. A crypto asset that is not itself a security may still be offered or sold as part of an investment contract. Conversely, a financial instrument does not stop being a security because it is represented on a blockchain.
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For an investment contract, the Supreme Court’s Howey test asks whether there is an investment of money in a common enterprise, with a reasonable expectation of profits derived from the essential managerial efforts of others. The elements work together: under the SEC’s 2026 interpretation, the absence of any one means there is no investment contract under Howey. That does not rule out a different securities-law basis, such as a token that represents a stock or another financial instrument.
Do not treat a token purchase as automatically satisfying the test. Examine the arrangement and evidence around the purchase: what buyers paid for, what they were told, how the enterprise was organized, and what was expected to generate any profit. The asset’s technical design and label are relevant facts only insofar as they help answer the legal questions.
Compare the facts pointing in each direction
The SEC’s March 2026 interpretation treats the following as useful considerations, not a mechanical scorecard. A factor pointing one way does not settle the classification on its own.
| Question | More consistent with an investment-contract concern | More consistent with a functional-system or commodity-oriented analysis |
|---|---|---|
| What rights does the holder have? | The asset conveys or represents a financial interest, such as a claim to income or profits, redemption rights, or an underlying security. | The asset primarily provides a technical or use right, such as paying network fees or participating in a system’s operation. |
| Is the system functional? | Important functions remain undeveloped, and buyers may depend on promised work before they can use the asset as described. | The asset can be used according to the system’s programmed utility in a functioning network. |
| What is expected to produce a return? | Purchasers may reasonably expect profits from significant work by a promoter or another party. | Value is tied to the system’s programmatic operation and market supply and demand, rather than promised managerial work. |
| Who can affect the system’s success? | A party retains control over important development, operations, or milestones that purchasers were led to expect would drive value. | The system operates without a central party able to control its success or failure, under the assumptions described in the SEC FAQ. |
| What did buyers hear, and when? | Issuer communications in the relevant offering context make clear promises about development, launch, operations, milestones, or other efforts expected to generate returns. | There is no relevant promise of essential managerial work, or the circumstances surrounding the transaction differ from those used to induce investment. |
| What transaction is under review? | The transaction is an offering or arrangement in which the Howey elements may be present. | A later transaction may have different facts; it must be assessed on its own rather than inheriting a label automatically. |
Inspect promises, utility, and control—not just promotional labels
Read purchaser-facing statements in context
Look for specific representations or promises about building a network, launching a product, running a business, meeting milestones, or committing resources. Ask whether those statements could lead a reasonable purchaser to expect profit from the promised work, and whether the work is significant enough to affect the enterprise’s success. The SEC distinguishes essential managerial efforts from merely ministerial tasks.
Current utility claims or vague aspirations, standing alone, may not be enough to create an investment contract, according to the SEC FAQ updated September 28, 2026. Their significance depends on the full facts, including who made the statements, their audience, and the offer or sale in which they appeared.
Test whether the asset works as described
For the SEC’s 2026 interpretation, functionality means the native asset can be used in accordance with the system’s programmed utility. Relevant uses may include paying transaction fees, participating in validation or consensus, helping a network function or remain secure, or exercising governance. Such utility informs the analysis; it is not a blanket safe harbor for every sale of the asset.
Identify the party whose efforts matter
Document who is developing or operating the system, what important work remains, and whether purchasers could reasonably expect profit from that work. The SEC FAQ describes circumstances in which a functional system has no central party able to control its success or failure; on those stated assumptions, issuer statements likely would not create a new investment contract. Do not extend that answer to systems where a party retains meaningful control or to transactions with different facts.
Check whether the asset fits a distinct category
The SEC’s 2026 taxonomy groups crypto assets into five broad categories. They are analytical categories, not substitutes for examining legal rights and the transaction.
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1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problems| SEC category | What to examine |
|---|---|
| Digital commodity | Whether the asset is necessary to participate in or use aspects of a functional crypto system, and whether its value is tied to programmatic operation and supply and demand. The SEC release names Bitcoin (BTC), Ether (ETH), and XRP (XRP) as examples based on their characteristics, terms, and functions as of March 17, 2026; that is not a blanket ruling on every transaction involving them. |
| Digital collectible | Whether the asset’s characteristics are those of a collectible rather than a financial claim. A sale can still involve an investment contract depending on the surrounding promises and facts. |
| Digital tool | Whether the asset functions as a tool within a system. Its utility does not by itself resolve how a particular offering or sale should be treated. |
| Stablecoin | Whether it falls within the statutory category of a payment stablecoin issued by a permitted payment stablecoin issuer, or has other features that could make it a security. Do not assume all stablecoins receive the same treatment. |
| Digital security | Whether the token represents a financial instrument, such as an interest in an underlying security. Representing it on-chain does not change its economic characteristics or legal rights. |
In the SEC’s description, digital commodities, digital collectibles, and digital tools are not themselves securities, but they may be sold subject to an investment contract. An asset’s marketing name does not establish which category applies.
Separate the asset’s status from the transaction and its timing
A non-security crypto asset may be part of an investment contract during a particular offering and later become separate from that contract in circumstances described by the SEC, including fulfillment or abandonment—or inability to fulfill—the promised efforts. The SEC’s FAQ says that, under the interpretation, separation does not occur if another party assumes the issuer’s promised efforts. These are fact-dependent propositions, not an automatic timetable for an asset to “become” a commodity.
A later separation does not erase potential liability for an earlier unregistered offer or for material misstatements. Assess each relevant transaction and date on its own facts, including resales and arrangements such as staking or wrapped-token products.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Understand what “commodity” does—and does not—settle
The SEC’s March 2026 release uses “commodity” in an economic and commercial sense for assets that are fungible, have utility, and derive value from supply and demand. It says a non-security crypto asset other than a payment stablecoin issued by a permitted payment stablecoin issuer could meet the Commodity Exchange Act’s commodity definition.
That does not mean every asset that is not a security is automatically subject to the CFTC’s exclusive jurisdiction, or that every activity involving it is unregulated. The SEC and CFTC said they would coordinate, with the CFTC administering the Commodity Exchange Act consistently with the SEC interpretation. The legal consequences still depend on the statute, instrument, market, and activity at issue.
Write a provisional conclusion and identify what is missing
For a practical screening memo, state whether the known facts are more consistent with a security-oriented or functional-system analysis, rather than declaring a universal classification. Include:
- the asset, transaction, jurisdiction, and date assessed;
- the rights conveyed and the system’s actual functionality;
- the purchaser-facing promises and who made them;
- who controls the system and what significant work remains;
- the facts that support the provisional view and the unresolved facts; and
- whether counsel experienced in securities and commodities law should review the matter.
The SEC’s interpretation does not bind courts or every regulator. A named token, offering, staking service, or exchange product may require analysis of facts and legal issues beyond this screening framework. Consult qualified counsel before relying on a conclusion for a transaction or compliance decision.
Official SEC materials to consult
- Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, SEC interpretive release, March 17, 2026.
- Frequently Asked Questions on the Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, updated September 28, 2026.
- Crypto Assets and the Federal Securities Laws, updated May 15, 2026.
- Transactions Involving Crypto Assets, updated April 29, 2026.
- SEC Clarifies the Application of Federal Securities Laws to Crypto Assets, SEC press release, March 17, 2026.
Because agency positions, statutes, and court decisions can change, verify the current materials and any relevant rulings before using this framework for a live matter.
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