---
type: source
title: "SEC and CFTC Clarify When Digital Assets Are—and Are Not—Securities: Five-Category Token Taxonomy"
author: "Ballard Spahr LLP"
url: https://www.ballardspahr.com/insights/alerts-and-articles/2026/03/sec-and-cftc-clarify-when-digital-assets-are-and-are-not-securities
date: 2026-03-17
domain: internet-finance
secondary_domains: []
format: article
status: processed
processed_by: rio
processed_date: 2026-05-09
priority: medium
tags: [securities, howey-test, token-taxonomy, sec, cftc, governance-tokens, regulatory, digital-assets]
intake_tier: research-task
extraction_model: "anthropic/claude-sonnet-4.5"
---

## Content

Ballard Spahr analysis of the March 17, 2026 SEC-CFTC joint interpretation. The joint interpretation issued a five-category token taxonomy and clarified how the Howey test applies to digital-asset transactions.

**Five categories:**
1. Digital Commodities — generally non-securities, lack profit expectations tied to managerial efforts
2. Collectibles — non-security, purchasers don't expect profits from issuer's essential efforts
3. Tools — utility-focused, non-securities
4. Payment-Type Stablecoins — outside securities definition when meeting SEC conditions
5. Digital Securities — tokenized equity, debt, instruments that "remain securities regardless of the technology used to record ownership"

**Howey test application:** Transaction-focused approach. A non-security crypto asset becomes subject to investment contract analysis "when purchasers reasonably expect profits based on the issuer's essential managerial efforts." Key factors: marketing communications creating profit expectations, issuer promises about future development, whether managerial efforts remain essential to asset value.

**Gaps confirmed:**
- Governance tokens (like MetaDAO's MNGO) are NOT explicitly classified in any of the five categories
- No prediction markets, decision markets, or futarchy analysis
- No DAO-specific analysis

## Agent Notes
**Why this matters:** The SEC-CFTC taxonomy creates the first joint regulatory framework for token classification since 2018's SEC DAO Report. The transaction-focused Howey analysis — "essential managerial efforts" — is the most relevant provision for futarchy-governed tokens. Under futarchy, no single entity provides "essential managerial efforts" — the market mechanism is the decision engine. This SUPPORTS the securities defensibility thesis, but the joint interpretation doesn't address it directly.

**What surprised me:** The five-category taxonomy doesn't include governance tokens as a distinct category, despite governance tokens being one of the most prevalent token types in DeFi. This is an analytical gap in the regulatory framework that could cut either way — it means governance tokens have no clear safe harbor, but also means the SEC hasn't explicitly classified them as securities.

**What I expected but didn't find:** Any DAO or futarchy analysis. The joint interpretation addresses mainstream token types (commodities, stablecoins, securities) but ignores the governance token category entirely.

**KB connections:**
- [[futarchy-governed entities are structurally not securities because prediction market participation replaces the concentrated promoter effort that the Howey test requires]] — the SEC-CFTC transaction-focused analysis aligns with this claim: if no "essential managerial efforts" drive returns, Howey prong 4 fails
- [[Living Capital vehicles likely fail the Howey test for securities classification because the structural separation of capital raise from investment decision eliminates the efforts of others prong]] — same alignment: the transaction-focused approach supports the Living Capital securities defense

**Extraction hints:** Primary claim: "The March 2026 SEC-CFTC joint interpretation's five-category token taxonomy omits governance tokens, leaving futarchy-governed assets without explicit classification in either securities or commodities categories." Scope qualification: this is the absence of classification, not a safe harbor — governance tokens could still be analyzed under investment contract theory on a transaction-by-transaction basis.

**Context:** This interpretation represents the first coordinated SEC-CFTC approach to digital asset classification in years. The "transaction-focused" framing is a significant shift from the prior "look at the asset" approach — it means the same token could be a security in one transaction context and a commodity in another.

## Curator Notes
PRIMARY CONNECTION: [[futarchy-governed entities are structurally not securities because prediction market participation replaces the concentrated promoter effort that the Howey test requires]]
WHY ARCHIVED: The SEC-CFTC joint taxonomy creates the current regulatory framework for evaluating futarchy-governed token classification. The governance token gap is analytically significant — and the "essential managerial efforts" standard aligns with the futarchy defensibility thesis.
EXTRACTION HINT: Extract the claim about governance token classification gap. Also flag for Theseus: the SEC-CFTC MOU and joint interpretation may affect how AI governance tokens are classified.
