Securities Regulation Daily Wrap Up, BLOCKCHAIN—SEC’s Atkins outlines vision for ‘token taxonomy,‘ says most crypto tokens not securities, (Nov 13, 2025)
Organizations Mentioned:Federal Reserve Bank of Philadelphia
By Suzanne Cosgrove
The Commission’s views align with legislation currently under consideration by Congress, and aim to complement its framework, not replace it, he says.
SEC Chairman Paul Atkins said Wednesday said that the Commission is considering establishing a “token taxonomy,” anchored in longstanding Howey investment contract securities analysis. The agency’s approach to tokenization is the “next step’ in its Project Crypto and builds on the work of its Crypto Task Force headed by SEC Commissioner Hester Peirce, he said, speaking at the Federal Reserve Bank of Philadelphia.
It’s complicated, Atkins added: While most crypto assets are not themselves securities, crypto assets can be part of—or subject to—an investment contract.
Guiding principles. Atkins said two basic principles guide his thinking on securities laws as they apply to crypto tokens: First, that a stock is still a stock whether it is a paper certificate, an entry in a DTCC account, or represented by a token on a public blockchain.
Second, “economic reality trumps labels.” Calling something a “token” or an “NFT” does not exempt it from current securities laws if it represents a claim on the profits of an enterprise and is offered with the sorts of promises based on the essential efforts of others, he said. Conversely, the fact that a token was once a part of a capital-raising transaction does not convert it into the stock of an operating company.
A crypto asset framework. Atkins outlined what he sees as four essential categories of digital assets.
As contemplated in legislation currently before Congress, “digital commodities,” or “network tokens,” are not securities. These crypto assets derive their value from a programmatic operation of a crypto system that is “functional” and “decentralized,” rather than from the expectation of profits arising from the essential managerial efforts of others, he said.
Second, “digital collectibles” are not securities. These crypto assets are designed to be collected and/or used and may represent or convey rights to artwork, music, videos, trading cards, in-game items, or digital representations or references to internet memes, characters, current events, or trends. Purchasers of these digital collectibles are not expecting profits from the essential managerial efforts of others.
Third, “digital tools” are not securities. These crypto assets perform a practical function, such as a membership, ticket, credential, title instrument, or identity badge. Again, purchasers of digital tools are not expecting profits from the essential managerial efforts of others.
Finally, “tokenized securities” are, and will continue to be, securities. These crypto assets represent the ownership of a financial instrument enumerated in the definition of “security” that is maintained on a crypto network.
Satisfying the Howey test. Atkins reiterated that while most crypto assets are not themselves securities, crypto assets can be part of—or subject to—an investment contract. These crypto assets are accompanied by certain representations or promises to undertake essential managerial efforts that satisfy the Howey test, which entails an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the essential managerial efforts of others.
A purchaser’s reasonable expectation of profits from the assets depends on the issuer’s representations or promises to engage in essential managerial efforts, Atkins said. “In my view, these representations or promises must be explicit and unambiguous as to the essential managerial efforts to be undertaken by the issuer.
“How can a non-security crypto asset separate from an investment contract?” he asked. The answer: “The issuer either fulfills the representations or promises, fails to satisfy them, or they otherwise terminate.”
“Once the investment contract can be understood to have run its course, or expires by its own terms, the token may continue to trade, but those trades are no longer ‘securities transactions’ simply by virtue of the token’s origin story,” Atkins said.
“In a free society, the rules that govern economic life should be knowable, reasoned, and appropriately constrained,” he told the group. “When we stretch the securities laws beyond their proper scope, when we treat every innovation as presumptively suspect, we stray from that core principle. When we recognize the limits of our authority, when we acknowledge that investment contracts can end and networks can stand on their own merits, we honor it.”
MainStory: TopStory Blockchain CommodityFutures ExchangesMarketRegulation GCNNews InvestorEducation SECNewsSpeeches