The SEC Closes the Loop on Howey’s Application to Crypto
On March 17, 2026, the SEC released an interpretive framework for crypto assets that does something the agency has avoided for years. It explains how the securities laws apply, and just as importantly, how they stop applying.
At a high level, the Commission introduced a token taxonomy, aligned with the CFTC on jurisdiction, and addressed how common crypto activities fit into existing law. Those are meaningful developments.
The real shift, however, is narrower and more important:
The SEC has finally addressed when an investment contract ends.
That fills a gap that has existed since 1946.
This piece builds on a theme I have developed across prior writing: crypto regulation has been shaped less by formal rulemaking and more by how the SEC has chosen to apply Howey in practice. What we are now seeing is a move toward a more stable, structured approach.
Here is what the March 17 framework actually does.
1) Howey Now Has an Endpoint
The Howey test has always been about reliance. Investors expect profits based on the efforts of others. That part has never been controversial.
What has been unclear is what happens after those efforts are carried out or no longer matter.
Director Moloney’s statement answers that directly. An investment contract ends when the promised managerial efforts are completed, or when they fall away and no longer drive expectations of profit.
That clarification sounds simple. It is not.
It introduces a lifecycle to an analysis that has often been treated as fixed at the moment of sale. The Commission is now acknowledging that the legal status of a transaction can evolve as the underlying facts evolve.
Practice point: You should be analyzing not only whether a structure creates reliance, but whether that reliance has a natural endpoint, and how that endpoint is documented.
2) The Asset and the Transaction Are Not the Same Thing
The SEC’s taxonomy draws a line between categories of crypto assets and the transactions built around them.
The Commission identifies several categories that are not securities:
digital commodities
digital collectibles
digital tools
payment stablecoins
At the same time, it makes clear that a non-security asset can still be sold as part of an investment contract. That depends on how it is offered, what is promised, and how investors are expected to earn a return.
This distinction has always existed in theory. It is now front and center in policy.
Practice point: The analysis should start with the transaction. The asset matters, but the representations around it matter more.
3) Representations Are Doing Most of the Work
The interpretive release places unusual emphasis on the role of representations and promises.
The SEC is focused on:
what is being promised
who is making the promise
how those promises are communicated
how specific they are
That focus ties directly back to reliance. If investors are told, in clear terms, that a team will build, manage, or enhance a project in ways that drive value, that is the kind of statement that can support an investment contract.
Conversely, if those representations are fulfilled or no longer relevant, the foundation for that contract weakens.
Practice point: Treat public statements, white papers, and marketing materials as part of the legal analysis. They are not background. They are evidence.
4) There Is Now a Recognizable Lifecycle
Putting the pieces together, the SEC has introduced a workable structure:
a project raises capital with defined representations
the team carries out those efforts
at some point, those efforts either conclude or stop mattering
At that point, the investment contract can end.
This gives projects a clearer path forward. It also gives regulators a clearer framework for evaluating when that path has actually been followed.
Practice point: Build with the end in mind. If there is no credible way for reliance on a central team to fall away, the analysis becomes much harder.
5) The SEC and CFTC Are Speaking More Consistently
The CFTC’s involvement in the interpretation is worth noting.
For a long time, firms have had to navigate overlapping regulatory theories. This joint approach suggests a more consistent division:
the SEC focuses on securities transactions and investment contracts
the CFTC focuses on commodities and related markets
There is still complexity, but there is less contradiction.
Practice point: Jurisdictional questions are becoming more structured, but they still require careful mapping of both the asset and the activity.
6) A Safe Harbor Framework Is Likely Coming
Chairman Atkins used his remarks to preview what comes next. The Commission is considering a framework that would include:
a startup exemption with a defined runway
a fundraising exemption for larger capital raises
a safe harbor tied to the completion or cessation of managerial efforts
That last piece tracks directly with the interpretive guidance. It would give issuers a clearer standard for when a crypto asset falls outside the securities laws.
This idea is not new. It builds on Commissioner Peirce’s earlier work. What is different is that it now has institutional momentum.
Practice point: If a safe harbor regime takes shape, it will likely reward disciplined disclosures and clear project milestones.
A Final Observation
The SEC has not changed the underlying law. Howey still governs.
What has changed is how the Commission is explaining it.
For years, the hardest question in crypto regulation has been where the securities laws stop. The March 17 release answers that question in a way that is practical and, for the first time, consistent.
That clarity does not eliminate risk. It does make the rules easier to work with.
That alone is a meaningful step.
That’s all for now,
Braeden
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About the author
K. Braeden Anderson is a Partner at Gesmer Updegrove LLP, where he leads the firm’s Securities Enforcement & Investigations practice, and chairs Mackrell International’s Blockchain & Digital Assets Group and Securities Enforcement & Investigations Group. He is a nationally recognized securities regulatory and enforcement attorney whose practice sits at the intersection of traditional financial regulation and emerging technology. He has been recognized in Best Lawyers: Ones to Watch® in America (2025) for Financial Services Regulation Law and Securities Regulation, and was named the #1 most-read fintech thought leader in the United States in Mondaq’s Spring 2025 Thought Leadership Awards.
Before joining Gesmer Updegrove, Braeden founded a Washington, D.C.–based law firm. He previously served as Assistant General Counsel at Robinhood Markets, Inc. (NASDAQ: HOOD), advising on high-stakes regulatory and enforcement matters, and earlier practiced at Kirkland & Ellis LLP and Sidley Austin LLP in New York and Washington, D.C.
Braeden is a prominent voice in securities and crypto regulation and a leading example of how lawyers can build brand through education and content. He publishes a weekly newsletter reaching more than 20,000 legal and financial professionals, runs a YouTube channel with over 160,000 subscribers, and regularly produces written and multimedia thought leadership through his blog, Anderson Insights. His work focuses on enforcement trends, fintech regulation, and the evolving role of digital assets in capital markets.
