SEC Commissioner Paul Atkins Delivers Crucial Clarification: Most Cryptocurrency Tokens Are Not Securities

In a significant development for the digital asset industry, U.S. Securities and Exchange Commissioner Paul Atkins has delivered a pivotal clarification that could reshape the regulatory landscape. Speaking in Washington, D.C., on March 15, 2025, Atkins reiterated a foundational principle: the vast majority of cryptocurrency tokens, including prominent network tokens and popular memecoins, should not be classified as securities. This statement provides crucial guidance amid years of regulatory uncertainty and market speculation. His remarks directly address the core legal question that has loomed over blockchain innovation since its inception.

SEC Commissioner Paul Atkins Defines the Securities Boundary

Commissioner Atkins anchored his explanation firmly in established U.S. law, specifically referencing the Howey Test. This Supreme Court precedent defines an investment contract, and thus a security, based on four criteria. Atkins emphasized that for a token to be deemed a security, investors must have a clear expectation of profits derived solely from the managerial or entrepreneurial efforts of a third party. He stated this promise must be explicit and unambiguous. Consequently, decentralized network tokens that function as utilities within a blockchain ecosystem, such as those used for transaction fees or governance, typically fall outside this definition. Similarly, many memecoins created as community-driven digital assets without a central promoting entity lack the requisite “common enterprise” structure.

This clarification arrives after a decade of intense debate. The SEC’s previous enforcement actions against projects like Ripple’s XRP created a chilling effect, causing many developers to fear their tokens could be retroactively classified as unregistered securities. Atkins’s comments aim to provide a more predictable framework. He distinguished between a token’s initial sale, which might constitute a securities offering, and its subsequent secondary market trading as a functional asset. This distinction is vital for exchanges and decentralized finance (DeFi) platforms operating in the United States.

The Howey Test’s Application to Digital Assets

The legal analysis hinges on the consistent application of the Howey Test. Legal experts have long argued that blindly applying an 80-year-old test to 21st-century technology creates friction. Atkins addressed this by breaking down the test’s components in a modern context. First, an investment of money is clear when purchasing a token. Second, the investment must be in a common enterprise, meaning the fortunes of investors are tied together. Third, there must be a reasonable expectation of profits. Fourth, those profits must come from the efforts of a promoter or a third party.

For example, a token presale for a yet-to-be-built platform where the promoter’s work is essential for value creation likely meets all four prongs. Conversely, a fully functional, decentralized network token like Bitcoin or Ethereum, where no central party’s efforts dictate its market value, presents a weaker case for being a security. Atkins stressed that the SEC’s jurisdiction definitively covers any asset that meets this test, but the agency must exercise its authority judiciously and not overreach into non-securities commodities.

Historical Context and Regulatory Evolution

The path to this clarification has been winding. In 2017, former SEC Chairman Jay Clayton famously stated that every Initial Coin Offering (ICO) he had seen looked like a security. This set an aggressive tone. Subsequently, the 2018 DAO Report confirmed that tokens offered as investment contracts were securities. However, the 2019 Framework for “Investment Contract” Analysis of Digital Assets introduced more nuance, acknowledging that some digital assets may not be securities. Commissioner Atkins’s 2025 remarks build directly upon this framework, providing the clearest high-level endorsement of its principles to date.

This evolution mirrors global trends. Regulatory bodies in jurisdictions like Singapore, Switzerland, and the European Union (with its MiCA regulation) have also worked to distinguish between payment, utility, and asset tokens. The lack of a coherent U.S. federal policy, however, has been cited as a key reason for the migration of blockchain talent and capital overseas. Atkins’s statement is seen as a move to provide domestic clarity and foster responsible innovation within U.S. markets.

Implications for Crypto Exchanges and Developers

The immediate impact of this regulatory guidance is profound. For centralized exchanges like Coinbase and Kraken, it offers a clearer rubric for which assets they can list without fearing SEC enforcement. It may lead to the relisting of certain tokens previously delisted due to compliance concerns. For developers, it creates a safer pathway to launch network tokens without immediately triggering securities registration requirements, provided they structure their projects to avoid central promoter dependency.

However, Atkins offered a crucial caveat. He explicitly stated that tokens which are securities fall squarely under the SEC’s regulatory jurisdiction. This maintains the agency’s enforcement posture against fraudulent ICOs, unregistered securities offerings, and projects that make false promises to investors. The boundary, therefore, remains active, and the SEC will continue to police its side vigilantly. The table below summarizes the key distinctions:

Likely NOT a Security	Likely IS a Security
Decentralized network tokens (e.g., for gas fees)	Tokens sold to fund a company’s development
Memecoins with no central development team	Tokens where profits are promised from a team’s work
Fully functional utility tokens at launch	Tokens representing equity or profit share
Bitcoin and similar proof-of-work assets	Tokens in an ICO with a detailed roadmap

The Path Forward: Collaboration with Congress

Perhaps the most forward-looking element of Commissioner Atkins’s address was his commitment to legislative collaboration. He confirmed that the SEC will work directly with the U.S. Congress to enact a comprehensive cryptocurrency market structure bill in the near future. Such legislation would aim to codify these distinctions into law, moving beyond regulatory guidance to provide lasting statutory clarity. This would address critical gaps, such as defining the roles of the SEC versus the Commodity Futures Trading Commission (CFTC) and establishing clear rules for custody, consumer protection, and market integrity.

Previous legislative efforts, like the Lummis-Gillibrand Responsible Financial Innovation Act, have laid important groundwork. A collaborative push from the SEC could provide the momentum needed for a bipartisan breakthrough. A clear federal law would preempt a patchwork of conflicting state regulations, creating a unified national market. It would also provide the banking sector with the confidence needed to offer more robust digital asset services, potentially integrating crypto deeper into the traditional financial system.

Expert Analysis and Market Reaction

Financial legal scholars have welcomed the clarity. “Commissioner Atkins is drawing a line that respects both investor protection and technological neutrality,” noted Dr. Sarah Chen, a professor of fintech law at Stanford. “By insisting on an explicit promise of profits from a third party, he is protecting legitimate utility projects while keeping the SEC’s enforcement tools sharp for actual fraud.” Market reaction was cautiously optimistic, with major cryptocurrency indices showing modest gains following the news, reflecting reduced systemic regulatory risk.

The long-term effect could be a more mature and compliant industry. Projects will have stronger incentives to design truly decentralized networks or to properly register their securities offerings from the outset. This reduces legal risk for all participants and could attract more institutional investment. The focus now shifts to Congress and whether lawmakers can translate this regulatory perspective into durable, innovation-friendly legislation.

Conclusion

SEC Commissioner Paul Atkins has provided a crucial and timely clarification on cryptocurrency securities regulation. By reaffirming that most tokens are not securities unless they involve a clear expectation of profit from a third party’s efforts, he has injected much-needed predictability into the market. This stance, rooted in the Howey Test, helps separate functional digital assets from investment contracts. Furthermore, his pledge to collaborate with Congress on a market structure bill signals a potential turning point toward comprehensive federal legislation. For the cryptocurrency industry, this development represents a significant step toward regulatory maturity and long-term stability within the United States.

FAQs

Q1: What did SEC Commissioner Paul Atkins say about cryptocurrencies?
Commissioner Atkins stated that most cryptocurrencies, including network tokens and memecoins, should not be treated as securities. He clarified that a token is only a security if investors have an explicit expectation of profit from a third party’s managerial efforts.

Q2: What is the Howey Test and why is it important?
The Howey Test is a Supreme Court standard used to determine if an asset is an “investment contract” and thus a security. It assesses whether there is an investment of money in a common enterprise with an expectation of profits from the efforts of others. It is the legal foundation for all SEC crypto enforcement.

Q3: Does this mean the SEC will stop regulating cryptocurrencies?
No. Commissioner Atkins explicitly stated that tokens which are securities remain under SEC jurisdiction. The agency will continue to police fraudulent ICOs and unregistered securities offerings. The clarification simply narrows the scope of what is considered a security.

Q4: What is a cryptocurrency market structure bill?
This is proposed legislation that would create a comprehensive federal framework for regulating digital assets. It would define the roles of different agencies (like the SEC and CFTC), establish rules for trading and custody, and provide clear legal definitions to replace regulatory guidance.

Q5: How does this affect Bitcoin and Ethereum?
Atkins’s reasoning strongly supports the view that decentralized, functional network tokens like Bitcoin and Ethereum are not securities. Their value is not derived from the managerial efforts of a central promoter, which aligns them more closely with commodities like gold under this analysis.