June 25, 2026|Publications
Summary of an article by Ashwin J. Ram, Partner, Buchalter LLP
On March 17, 2026, the SEC issued a 68-page interpretive release that sorts digital assets into five categories. Four of them are not securities. They are digital commodities, digital collectibles, digital tools, and payment stablecoins. The release also recognizes that an investment contract can cease to exist. Ashwin J. Ram argues that targets of pending SEC crypto investigations, Wells notices, and lawsuits now hold new defense arguments and should use them promptly.
Four of the five categories fall outside the securities laws
Digital commodities such as Bitcoin and Ethereum are not securities, and neither are digital collectibles such as NFTs and meme coins. Digital tools, meaning functional tokens that keep their utility without a promoter’s ongoing efforts, are not securities either. Payment stablecoins under the GENIUS Act are not securities, and the release defers to that statute. Only digital securities, such as tokenized stocks, bonds, and fund interests, stay within the securities laws.
An investment contract can end as a project matures
The release’s most consequential analysis addresses when a non-security asset becomes the subject of an investment contract and when that contract ends. Under Howey, a token sale may involve an investment contract because buyers expect profits from the issuer’s continuing work. Once the network decentralizes and the token’s value stops depending on the issuer’s efforts, that contract can cease to exist. The article calls this the transformation doctrine, and federal securities law has no precedent for it.
Pending matters now have three new defense arguments
The SEC has already dropped more than a dozen crypto matters from the prior administration, including actions against Coinbase, Binance, and Kraken. In the cases still open, the first argument is that the asset never qualified as a security under the new categories. The second is that any investment contract ceased to exist as the project matured. The third relies on Chairman Atkins and Commissioners Uyeda and Peirce, who have publicly called the prior regulation-by-enforcement approach wrong.
The SEC is coordinating with the CFTC and making room for innovation
Atkins also announced a memorandum of understanding under which the SEC and CFTC will align definitions, coordinate oversight, and exchange data. Ram expects the MOU to reduce duplicative enforcement, and companies investigated by both agencies can argue that one regulator should resolve the matter. When the article ran, the Division of Trading and Markets was developing an innovation exemption for distributed-ledger platforms trading tokenized securities. The exemption would allow experimentation while the SEC writes permanent rules.
What to do now
- Pending investigation. Ask Enforcement staff to meet about the release’s effect on your matter. If the asset fits a non-security category, ask staff to close the investigation.
- Wells notice. Open the Wells submission with the release. Pair the taxonomy and transformation analysis with the commissioners’ public rejection of regulation by enforcement.
- Active litigation. Weigh moving to dismiss or asking the SEC to dismiss voluntarily. It has already abandoned some crypto cases, and staff may welcome an exit that avoids adverse precedent.
- No contact yet. Test your token, platform, and activities against the five categories, then document and preserve the analysis. If your position is unclear, reach out early to the Division of Corporation Finance or the SEC’s Crypto Task Force.
Originally published in Compliance Week in June 2026. Read the full article.
