US SEC follows CFTC in staff guidance for crypto
With the failed cloture vote on the CLARITY Act, the SEC announced updates on how federal securities laws could apply to token issuers, following similar guidance from the CFTC.
The US Securities and Exchange Commission (SEC) mirrored the guidance recently provided by the Commodity Futures Trading Commission (CFTC) concerning how securities laws may apply to certain types of cryptocurrency assets and transactions involving crypto assets. In an update to the SEC's FAQs from March, the agency clarified that the latest interpretation of its rules relating to crypto was non-binding and did not amend existing law or create new obligations for any individual.
The FAQs would come into play in determining whether digital asset products fell within the purview of the Howey test for investment contracts. Token issuers could potentially engage in buyback programs for customers if the crypto system was functional and lacked a central party, thus not constituting an investment contract under federal securities laws.
The regulator extended similar guidance to crypto networks, stating that systems that were functional, maintained, or enhanced for the benefit of the network would not meet the Howey test criteria. Furthermore, staking receipt tokens were also deemed unlikely to be classified as securities, based on the SEC's stance. This development came on the heels of the Senate's inability to pass the CLARITY Act, which many had anticipated would provide clarity on the regulatory roles of the SEC and CFTC in the burgeoning digital asset space.
The SEC's move followed a similar development by the CFTC, signaling the agencies' intent to address crypto regulation in the absence of Congress passing relevant legislation. Notably, just a few days after this announcement, SEC Chair Paul Atkins and CFTC Chair Michael Selig issued statements affirming their commitment to addressing crypto regulation independently of Congressional action.
The leadership of the SEC will now be shaped by the upcoming departure of Commissioner Hester Peirce, who announced her resignation on October 2nd. Known as "Crypto Mom" for her advocacy of crypto-friendly policies, Peirce is set to join Regent University as an associate professor in November. This departure leaves the SEC chaired by Atkins and Commissioner Mark Uyeda, both of whom are Republican commissioners from a typically bipartisan panel.
As of the latest reports, President Donald Trump had not appointed potential replacements for Peirce or the two remaining Democratic SEC seats.
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