The Last Chapter in the Book of Howey? SEC and CFTC Draw the Lines on Crypto

For a decade or more, web3 founders structuring projects out of the Cayman Islands which had any US token holders have had to live with a particularly uncomfortable question: is my token a security under US based laws? For projects with a substantial US token holder base or development team, the answer could mean the difference between regulatory clarity and an enforcement action or Wells notice. That question has now received its clearest answer yet.

On March 17, 2026, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) issued a joint 68-page interpretive release clarifying how both regulators consider that federal securities laws apply to certain crypto assets and transactions.

This followed hot on the heels of a Memorandum of Understanding (MoU) announced on March 11, 2026, under which the two agencies committed to coordinate on oversight, reduce duplication, and align their regulatory frameworks.  This represents one of the most important changes to digital asset treatments globally, as much of the world follows the US regulatory lead.  Presently the Gensler era decisions have influenced IOSCO and other international digital asset treatment, and this change will take some time to filter though to the international bodies.

The Token Taxonomy

The release introduces a five-category taxonomy for digital assets:-

• Digital commodities — assets intrinsically linked to a functional network, whose value derives from the programmatic operation of a system and ordinary supply and demand, not from the managerial efforts of others. Bitcoin, Ether, Solana, Cardano, Avalanche, XRP, Dogecoin, Litecoin, Chainlink, Polkadot, Hedera, Bitcoin Cash, Shiba Inu, Stellar, Tezos and Aptos are among those expressly named. These fall primarily under CFTC oversight as commodities.

• Digital collectibles — not securities.

• Digital tools — not securities.

• Stablecoins — not securities, provided they are structured consistently with the GENIUS Act definition.

• Digital securities (or tokenised securities) — are considered securities.

The guidance also provides welcome clarity on a number of specific activities: protocol mining, protocol staking, and wrapping a non-security crypto asset do not involve the offer or sale of a security.

Importantly, airdrops do not constitute an "investment of money" under the Howey test.

The release addresses the lifecycle of investment contracts in the web3 space. A non-security crypto asset can become subject to an investment contract (where it is accompanied by representations or promises about managerial efforts that satisfy the Howey test), but it can equally cease to be subject to one — a critical acknowledgment for mature, decentralised networks.This was a key point of debate under the Gensler SEC, where the position taken by the regulator was, in effect, that something sold as a security under US law was always a security.  The web3 industry’s position in a number of cases has been vindicated in this new SEC/CFTC position.

What the Agencies Said

SEC Chairman Paul S. Atkins, announcing the interpretive release, was direct about the significance of the change:

After more than a decade of uncertainty, this interpretation will provide market participants with a clear understanding of how the Commission treats crypto assets under federal securities laws. This is what regulatory agencies are supposed to do: draw clear lines in clear terms.

Chairman Atkins also took the opportunity to acknowledge what had been a long-standing point of contention:

It also acknowledges what the former administration refused to recognize – that most crypto assets are not themselves securities.

CFTC Chairman Michael S. Selig, who prior to his confirmation as CFTC Chairman played a leading role as Chief Counsel of the SEC's Crypto Task Force, matched the tone:

For far too long, American builders, innovators, and entrepreneurs have awaited clear guidance on the status of crypto assets under the federal securities and commodity laws. With today's interpretation, the wait is over.

The MoU itself drew similarly emphatic language from Chairman Atkins, who noted that:

For decades, regulatory turf wars, duplicative agency registrations, and different sets of regulations between the SEC and CFTC have stifled innovation and pushed market participants to other jurisdictions.

The Director of the SEC's Division of Corporation Finance titled his speech on the day "The Last Chapter in the Book of Howey" — capturing the sentiment that after 80 years of the Howey investment contract test dominating the analysis, the agencies now have a workable, modern framework.

Is This Really the Last Chapter?

The interpretive release carries significant practical weight. Writing in Forbes, former banking regulator Jason Brett noted that Ryne Miller, partner at Morrison & Foerster, put it plainly:

A Commissioner-level interpretation is a big deal. Even in a post-Loper Bright world without Chevron-style deference, its practical and persuasive power will shape industry behavior, judicial analysis, and enforcement policy for the foreseeable future — shifting us from regulation-by-enforcement to a rules-based framework.

Notably, this interpretive release is expressly not the "innovation exemption" that Chairman Atkins has separately flagged as forthcoming — meaning further clarity is still on the way for certain limited trading activities.

What This Means for Cayman-Based Projects

The Cayman Islands has long been the preferred home for web3 projects and decentralised protocols — and for good reason. Its robust Cayman Foundation structure, VASP regime, and coming tokenised funds legislation give it a structural edge. Projects that have structured themselves out of Cayman, using Cayman Foundations as the ownerless governance layer for their protocols, have been navigating US securities law uncertainty as a secondary concern. That uncertainty is now substantially reduced.

For projects holding digital commodities (as now defined), or those whose tokens have matured to the point of being characterised as digital commodities rather than investment contracts, the path to operational clarity in the US market is considerably clearer. The guidance on staking and protocol mining will also be relevant to many Cayman-domiciled validator and protocol entities.

The Joint Harmonization Initiative announced under the MoU (co-led by Robert Teply at the SEC and Meghan Tente at the CFTC) will continue to coordinate policy across rulemaking, examinations, and enforcement. The agencies have also invited public input, which can be submitted through the SEC and CFTC websites.

The practical takeaway if you are structuring a web3 project today and your token is likely to be characterised as a digital commodity under this framework, US regulatory risk just became materially lower — and the Cayman Foundation remains the most versatile vehicle through which to hold and govern that protocol and hold a token issuer, enabling token issuance to the world without creating unexpected US taxation nexus issues. 

Certainty around audit and taxation will now become a greater point of scrutiny and likely a greater reason for projects to use international structuring, as well as the protection of international structures from plaintiff law firms which, despite the regulator’s position, are still seeking to have courts hold that tokens are securities.

We will very likely see several more chapters before the book of Howey is truly closed, but at least one unsatisfying cliffhanger has moved substantially closer to a satisfying ending.