Decoding Crucial SEC Crypto Guidance: What Tokens Are Securities?

Navigating the complex world of cryptocurrency regulation just got a bit clearer, thanks to the latest pronouncements from the US Securities and Exchange Commission (SEC). If you’re involved in crypto – whether as an investor, developer, or exchange operator – understanding the SEC crypto guidance released in 2025 is absolutely crucial. It’s the roadmap for determining which digital assets might be classified as crypto securities and which ones might not.

Understanding the SEC’s 2025 Crypto Guidance

On April 10, 2025, the SEC’s Division of Corporation Finance (CorpFin) issued a significant statement. This wasn’t just another press release; it was a comprehensive outline for companies involved with crypto assets. The core aim? To reduce the ambiguity surrounding the classification of crypto tokens under US securities laws. This new SEC crypto guidance provides updated clarity on applying the long-standing Howey test and introduces a more structured approach to token classification.

So, what is the Howey test? It’s a framework dating back to 1946, used to determine if something qualifies as an ‘investment contract’ and thus a security. It looks at four key points:

• An investment of money
• An expectation of profit
• A common enterprise
• Reliance on the efforts of others

The 2025 guidance puts significant emphasis on the ‘reasonable expectation of profit’ criterion. The SEC makes it clear: if token buyers expect profits based primarily on the efforts of a central team or promoter, that token is likely a security. As the SEC noted, “Where entrepreneurial efforts drive price appreciation, tokenholders effectively invest in a common enterprise.”

The guidance also introduces a three-pronged framework to help assess tokens:

1. Initial sale context: Was the token marketed as an investment opportunity?
2. Ongoing use: Does the token provide functional utility on a decentralized network?
3. Issuer influence: How much control does the founding team or foundation retain over the project?

Tokens without a profit expectation, such as Ether (ETH) after its transition to proof-of-stake or stablecoins transparently backed by reserves, are generally not considered securities under this framework. However, tokens tied to governance rights or revenue sharing could still fall into the crypto securities category, depending on their specific mechanics.

Which Tokens Are Likely Crypto Securities Under the Howey Test?

The SEC’s 2025 rules state that tokens resembling investment contracts are likely securities. This primarily means tokens sold with promises of future profits driven by a central team’s work. The SEC crypto guidance outlines specific scenarios pointing towards securities classification:

• ICOs with Profit-Centric Marketing: Initial Coin Offerings where the project team heavily promotes future price increases or project success as the main draw.
• Profit-Sharing Governance Tokens: Tokens granting holders a share of protocol revenue, dividends, or profits.
• Utility Tokens with Financial Incentives: Even if a token has utility, if buyers are primarily motivated by the belief the token will appreciate in value or provide financial benefits.
• Tokens with Centralized Control or Pre-mining: Tokens that are heavily pre-mined, centrally managed, or promoted with explicit promises of value growth often lack the decentralization and utility required to avoid securities classification.

Legal precedents also play a role. Cases like LBRY (2023) ruled the token was an unregistered security. The Ripple case distinguished between XRP’s institutional sales (deemed securities) and public sales (not securities). The crypto regulation US landscape is heavily shaped by these court decisions.

Tokens Not Likely Classified as Crypto Securities

Conversely, the SEC crypto guidance acknowledges that not all tokens are securities. Tokens primarily used as tools or goods, rather than for investment, are less likely to be classified as such. These are tokens that provide access to platform services, function as in-game items, digital access keys, or non-transferable membership credits, and are not marketed as investment opportunities.

Key characteristics that decrease the likelihood of a token being deemed a security include:

• Fiat-Backed Stablecoins: Stablecoins with transparent 1:1 fiat backing, regular audits, and designed for payments rather than speculation.
• Layer-1 Utility Tokens: Tokens like Ether (ETH), Solana (SOL), and Avalanche (AVAX) used for network operations (gas fees, staking, validation). Their value derives from network usage, not speculative promotion.
• Lack of Profit Marketing and Central Control: Tokens not promoted with profit promises and whose value growth doesn’t depend on a central team’s ongoing efforts.
• Decentralized Governance: Projects that are truly community-driven, open-source, and have distributed control over key functions and updates. These traits support a non-security classification as the token acts more like a digital tool within a decentralized system.

The 2025 guidance highlights that tokens with genuine utility on decentralized networks may avoid the securities label, representing a significant point of focus in the evolving crypto regulation US environment.

Implications of the SEC Crypto Guidance for the Industry

The 2025 SEC crypto guidance is a pivotal moment, bringing needed clarity to token classification. It will significantly impact how crypto projects launch, tokens are traded, and platforms manage regulatory risk.

For Token Issuers: Projects must now carefully evaluate if their tokens meet the criteria for crypto securities. If so, they may need to register with the SEC or restructure their tokens to emphasize utility and decentralization. Failure to comply risks penalties, lawsuits, or delisting from exchanges. New projects should prioritize legal review from the outset.

For Investors: While potentially limiting the number of available tokens (as unregistered securities may be restricted), this guidance aims to create safer markets by reducing exposure to scams and high-risk projects. Tokens facing legal challenges or flagged by the SEC might become unavailable on certain platforms.

For Exchanges: Both centralized and decentralized exchanges will likely implement stricter listing standards, requiring more thorough legal vetting and clearer risk disclosures. US-based platforms may avoid listing tokens classified as securities to mitigate regulatory exposure. This could also necessitate exchanges registering as securities brokers or alternative trading systems, increasing operational costs and compliance burdens.

Gray Zones and Ambiguities in Token Classification

Despite the new SEC crypto guidance, certain areas remain complex, particularly for tokens blurring the lines between utility and investment. Governance tokens, for instance, don’t always offer direct profits but influence decisions that can boost protocol revenue. If token holders benefit from price appreciation driven by treasury earnings, fees, or staking rewards, they might still be viewed as investing in crypto securities.

Decentralized Finance (DeFi) and Decentralized Autonomous Organizations (DAOs) present unique challenges for crypto regulation US. Many DAOs manage significant funds, distribute rewards, or engage in business-like partnerships. This raises questions:

• When does a community-run project cross the line into acting like a centralized entity?
• Does voting or decentralized control automatically exempt a project from securities laws?

Navigating these gray zones often requires seeking legal opinions and, where possible, SEC no-action letters. A strong legal memo can support a project’s argument for non-security status, though it offers no guarantee. SEC no-action letters provide more certainty but are rare and highly specific to the context. Ultimately, applying the Howey test under the 2025 guidance still requires careful, case-by-case analysis within a rapidly changing legal and technological landscape.

Industry Reactions to the SEC Crypto Guidance

The release of the 2025 SEC crypto guidance was met with mixed reactions. Legal and compliance professionals generally welcomed the increased specificity, finding it helpful for risk assessment. However, many noted that subjective interpretations remain, particularly regarding decentralization levels and the status of complex governance tokens.

Industry groups and developers voiced concerns that the guidance, by focusing heavily on ‘profit expectations’ and issuer control, might stifle crypto innovation in the US. They argue that this approach could incorrectly label genuinely decentralized projects as securities, even without active promoters. For example, Coinbase legal officer Paul Grewal argued that certain activities like token airdrops or selling tokens with clear utility shouldn’t be treated as securities transactions, as they don’t necessarily involve capital raising or promises of profits based on a company’s ongoing work.

At the ‘SEC Speaks’ event in May 2025, SEC Commissioner Hester Peirce reiterated her concern about the SEC’s reliance on enforcement actions over clear rulemaking. She highlighted that this approach creates legal uncertainty for crypto firms and hinders innovation, complicating compliance efforts.

While supporters see the guidance as promoting investor protection and regulatory consistency after years of uncertainty, critics view it as ‘regulation by enforcement,’ burdening startups and maintaining legal ambiguity. The debate continues on whether the guidance provides sufficient clarity or imposes undue restrictions on the evolving crypto space.

Comparing SEC Guidance and MiCA

It’s helpful to compare the SEC crypto guidance with regulatory approaches elsewhere, like the EU’s Markets in Crypto-Assets (MiCA) regulation. They differ significantly in scope, structure, and philosophy.

In essence, while the SEC’s approach integrates crypto into existing securities law through the Howey test and subsequent guidance, MiCA builds a specific regulatory structure tailored to crypto assets. The US approach is more focused on identifying crypto securities and protecting investors within that context, whereas MiCA provides a broader, rule-based framework for the entire crypto market in Europe.

Conclusion

The SEC’s 2025 guidance represents a significant step in clarifying crypto regulation US, particularly regarding token classification. By providing updated insights into the application of the Howey test, the SEC aims to distinguish more clearly between tokens likely to be deemed crypto securities and those that function purely as utility or exchange mechanisms.

While this guidance offers much-needed clarity for issuers, investors, and exchanges, gray areas persist, especially concerning decentralized projects and complex tokenomics. The industry’s reaction reflects this, with appreciation for the guidance but concerns about potential hindrances to innovation and the continued reliance on enforcement actions. As the crypto landscape evolves, continuous legal interpretation and adaptation will be necessary to navigate the complexities of digital asset regulation effectively.