Paul Atkins outlines crypto token taxonomy under Howey test

SEC Chair Paul Atkins outlined plans to establish a cryptocurrency token taxonomy grounded in the Howey Test, aiming to clarify which digital assets fall under securities laws. In prepared remarks at the Federal Reserve Bank of Philadelphia’s fintech conference on Wednesday, he indicated the Commission will consider the framework in the coming months.

The taxonomy would draw on the Supreme Court’s 1946 Howey investment‑contract analysis, which the SEC has long used to assess securities. Atkins stressed that a token’s status can change as a project and its network develop. 

“Networks mature. Code is shipped. Control disperses. The issuer’s role diminishes or disappears. At some point, purchasers are no longer relying on the issuer’s essential managerial efforts, and most tokens now trade without any reasonable expectation that a particular team is still at the helm.” He noted that a cryptocurrency can be part of an investment contract without remaining a security indefinitely.

Oversight would not be relaxed under the framework, according to Atkins. “Now, let me be clear about what this framework is not. It is not a promise of lax enforcement at the SEC. Fraud is fraud.” He reiterated that tokenized securities, such as stocks recorded on a blockchain, remain securities and within the agency’s jurisdiction.

Atkins has directed staff to prepare recommendations that would allow tokens tied to an investment contract to trade on platforms outside SEC regulation, including venues registered with the Commodity Futures Trading Commission or operating under state regimes. He also wants the Commission to weigh a package of exemptions to create an offering regime specific to crypto assets that are part of or subject to an investment contract.

Work is continuing on what Atkins has called “super‑apps,” applications that would permit trading and custody of multiple asset types under a single regulatory license. He has asked staff to advance recommendations on that concept.

Lawmakers are advancing market structure legislation for digital assets. The House passed a version over the summer, and the Senate is considering two versions, including a draft released this week by the Senate Agriculture Committee. 

Atkins framed the SEC’s effort as complementary. “What I envision aligns with legislation currently being considered by Congress and aims to complement, not replace, Congress’s critical work,” he noted. “Commissioner Peirce and I have made it a priority to support Congressional efforts, and we will continue to do so.”

As we reported earlier, Donald Trump nominated Paul Atkins to lead the agency in December 2024. Atkins previously served at the SEC from 2002 to 2008 and later founded Patomak Global Partners.