Clarity at last? Ether, Solana, and XRP are commodities, SEC says in landmark interpretation of securities law

The US Securities and Exchange Commission issued a landmark interpretation of federal securities laws on Tuesday that laid out rules for issuers of virtually all crypto assets.

Broadly speaking, the new guidance sorts crypto assets into two categories: tokenised securities and so-called non-security crypto assets.

“It’s of profound importance, and it’s what we’ve been asking for from the agency for 10 years before appealing to Congress,” Miller Whitehouse-Levine, the founder and CEO of Solana Policy Institute, told DL News.

The crypto industry has long demanded clarity regarding the legal status of cryptocurrencies, arguing they are an entirely new type of financial asset that doesn’t neatly fall into the categories described by existing, century-old regulations.

“I am pleased to announce that the SEC’s persistent failure to provide clarity on this question is over,” SEC Chair Paul Atkins told a packed auditorium at the DC Blockchain Summit on Tuesday.

“As we speak, the Commission is implementing a token taxonomy and investment contract interpretation.”

The SEC’s guidance comes as Senators work to advance legislation that does just that, the aptly named Clarity Act. Passed by the House of Representatives last year, the bill stalled in the Senate amid disagreement over stablecoin interest payments and other issues.

Speaking moments after Atkins, Senate Banking Committee Chair Tim Scott told conference attendees he expects to see an updated draft of the bill by the end of the week.

The SEC’s interpretation creates four categories of non-security crypto assets: digital commodities, digital collectibles, digital tools, and payment stablecoins.

Crypto assets considered digital commodities under the SEC’s new interpretation include Bitcoin, Ether, Solana, XRP, and Doge.

Under certain circumstances, however, issuers of non-security crypto assets may be required to follow onerous federal securities laws.

“Even a crypto asset that is not a security may become subject to the Federal securities laws if it is offered and sold as part of an investment contract,” Atkins said.

“Our interpretation addresses how the investment contract ends, freeing the subject crypto asset from the SEC’s statutes.

Whether a crypto asset is subject to an investment contract will depend in large part on the promises of its issuer, according to a 68-page document explaining the SEC’s interpretation of the securities laws.

“The real meat of it is the investment contract analysis, and not the token taxonomy itself,” Whitehouse-Levine said.

Industry executives, attorneys, and lobbyists celebrated the news on social media.

“Hang it in the Louvre,” Alexander Grieve, vice president of government affairs at crypto-focused venture capital firm Paradigm, wrote on X.

To be sure, any interpretation of established law can be easily overturned by a new SEC chair.

“Only Congress can ensure that regulation in this area is future-proofed through comprehensive market structure legislation,” Atkins said.

“I strongly support the ongoing bipartisan efforts on Capitol Hill to establish a durable framework for these markets.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. Have a tip? Email him at aleks@dlnews.com.