Most Crypto Tokens Should Not Be Treated as Securities, SEC Chair Says
In a significant shift for the cryptocurrency industry, SEC Chair Gary Gensler announced on August 28, 2025, that the majority of crypto tokens circulating in the market should not be classified as securities under U.S. law. Speaking at a fintech conference in Washington, D.C., Gensler emphasized that while some digital assets may meet the criteria of investment contracts, “most crypto tokens—particularly those that are decentralized and functional—do not qualify as securities.” This statement comes amid ongoing regulatory scrutiny and legal battles, offering potential relief to crypto firms long burdened by the SEC’s aggressive enforcement actions. As the agency refines its framework, the remarks signal a more nuanced approach to crypto oversight, potentially paving the way for clearer guidelines and reduced litigation.
Gensler’s Rationale and the Howey Test
Gensler’s comments hinge on the landmark Supreme Court test from the 1946 case SEC v. W.J. Howey Co., which defines a security as an investment of money in a common enterprise with an expectation of profits derived from the efforts of others. “Many tokens today are more akin to commodities or utilities than investment contracts,” Gensler explained, pointing to decentralized networks where value accrues from widespread use rather than promoter efforts. He clarified that initial coin offerings (ICOs) or centralized projects might still fall under securities regulations, but established tokens like Bitcoin and Ethereum, which he has previously likened to commodities, exemplify those that should not. This distinction aims to address criticisms that the SEC’s broad application of the Howey Test has stifled innovation in the $2.5 trillion crypto sector.
Industry Reaction and Potential Impacts
The crypto community has welcomed the announcement with cautious optimism. Coinbase CEO Brian Armstrong tweeted, “A long-overdue clarification that could unlock billions in institutional investment.” However, skeptics like Ripple CEO Brad Garlinghouse urged the SEC to codify these views into formal rules to prevent future flip-flops. On Wall Street, Bitcoin surged 5% to $68,000 in after-hours trading, while Ethereum climbed 4%. Analysts from JPMorgan predict that exempting most tokens from securities laws could reduce compliance costs for exchanges by up to 30%, fostering more listings and mainstream adoption. Yet, Gensler cautioned that anti-fraud protections under existing laws would still apply, emphasizing investor safeguards without full SEC registration.
Context of Ongoing SEC Crypto Enforcement
Gensler’s remarks follow a series of high-profile cases, including the SEC’s 2023 lawsuit against Binance, settled in 2025 for $4 billion, and ongoing probes into platforms like Kraken. The chair, appointed in 2021, has overseen over 100 crypto-related actions, but recent court rulings—such as the July 2025 decision in SEC v. Coinbase favoring the exchange on secondary market sales—have pressured the agency to refine its stance. With a pro-crypto administration in place post-2024 elections, Gensler indicated collaboration with the CFTC for commodity-like tokens, potentially dividing oversight and easing burdens on decentralized finance (DeFi) projects.
Broader Regulatory Implications
This policy pivot could reshape the U.S. crypto landscape, encouraging innovation while maintaining market integrity. Lawmakers, including Sen. Cynthia Lummis, praised it as a step toward comprehensive legislation like the FIT21 Act, stalled in Congress. Internationally, it may influence regulators in the EU and Asia, where MiCA rules already distinguish between utility and security tokens. For everyday investors, clearer classifications mean less uncertainty, though Gensler warned of persistent risks like scams and volatility. As the SEC drafts new guidance expected by year-end, the industry anticipates a thaw in relations, marking a potential end to the “regulation by enforcement” era that has defined crypto’s turbulent relationship with Washington.# SEC Chair Paul Atkins Declares Most Crypto Tokens Not Securities, Signaling Regulatory Shift
In a pivotal moment for the U.S. cryptocurrency industry, Securities and Exchange Commission (SEC) Chair Paul Atkins announced on August 19, 2025, that the vast majority of crypto tokens should not be treated as securities under existing laws. Speaking at the Wyoming Blockchain Symposium, Atkins emphasized a nuanced approach, stating that classification depends on the context of how tokens are packaged and sold rather than assuming they inherently qualify as investment contracts. This marks a stark departure from the enforcement-heavy stance of his predecessor, Gary Gensler, and aligns with broader efforts to foster innovation while protecting investors. As the crypto market navigates ongoing uncertainties, Atkins’ comments have sparked optimism among industry leaders, potentially paving the way for clearer guidelines and reduced regulatory friction.
A Fresh Perspective on Token Classification
Atkins, who assumed the role following Gensler’s resignation on January 20, 2025, clarified that “very few, in my mind, tokens that are securities,” but stressed that the determination hinges on surrounding factors like marketing and sales structure. He used the analogy of buying an orange: simply purchasing the fruit doesn’t imply an investment contract promising profits from others’ efforts, unlike if it involved harvesting, processing, and dividends—echoing the Howey Test’s criteria for securities. This contrasts sharply with Gensler’s repeated assertion that the “vast majority” of tokens met the Howey Test and required SEC oversight, leading to numerous enforcement actions against platforms like Coinbase and Binance. Under Atkins, the SEC plans to evaluate tokens case-by-case, focusing on whether they function more like commodities or utilities rather than speculative securities.
Contrast with Gensler’s Enforcement Era
Gensler’s tenure, from 2021 to early 2025, was defined by aggressive regulation-by-enforcement, with the SEC pursuing over 80 lawsuits against crypto firms, alleging unregistered securities offerings. High-profile cases included suits against Ripple (over XRP sales), Coinbase (for staking and listings), and FTX (leading to Sam Bankman-Fried’s 25-year sentence for fraud). Critics, including industry executives, accused the SEC of lacking clear guidance, stifling innovation, and creating uncertainty that drove some operations offshore. Atkins’ approach signals a “new day” for the agency, prioritizing innovation and on-chain solutions over blanket classifications. He explicitly rejected Gensler’s broad view, noting the SEC will “plow forward” without presuming tokens are securities by default.
Introduction of Project Crypto for Modernized Oversight
Central to Atkins’ vision is “Project Crypto,” an SEC initiative launched in July 2025 to update securities laws for digital assets and integrate blockchain into U.S. financial markets. Described as a “blueprint to make the U.S. the crypto capital of the world,” the project aims to end “regulation by enforcement” and implement safe harbors, tailored rules, and frameworks for tokenized finance. Atkins highlighted its role in future-proofing markets against “regulatory mischief,” with the first steps involving recommendations from the President’s Working Group on Digital Asset Markets. This multi-pronged effort seeks to simplify compliance for issuers and intermediaries while aligning oversight with blockchain realities, potentially accelerating approvals for ETFs and tokenized assets.
Alignment with Legislative Momentum
Atkins’ remarks coincide with advancing congressional efforts to provide regulatory clarity. The House passed the Digital Asset Market Clarity (CLARITY) Act in July 2025, which defines crypto market structures and could gain bipartisan Senate support when lawmakers return from recess on September 2. Senate Banking Committee Chair Tim Scott indicated up to 18 Democrats might back the bill, reflecting a shift toward structured rules over ad-hoc enforcement. Atkins welcomed this collaboration, stating the SEC will implement working group recommendations independently while supporting legislation to enhance investor protections without hindering growth. This synergy could reduce legal risks for projects, encouraging institutional entry and boosting liquidity in tokenized markets.
Industry Reactions and Potential Impacts
The crypto community has largely hailed Atkins’ stance as a breakthrough, with analysts like Bitwise CIO Matt Hougan calling Project Crypto a “roadmap for the next five years of investment strategy.” Bernstein Research described it as the “boldest and most transformative crypto vision” from an SEC chair, potentially unlocking trillions in tokenized real-world assets (RWAs) and drawing institutions sidelined by prior uncertainty. However, some warn of lingering ambiguity until formal frameworks are in place, and risks like uneven enforcement persist. Short-term market rallies in tokens like Ethereum and Solana are anticipated, with long-term implications for U.S. leadership in global crypto standards, especially against the EU’s MiCA framework.
Looking Ahead: Balancing Innovation and Protection
Atkins’ declaration represents a pro-innovation pivot for the SEC, potentially resolving years of tension and positioning the U.S. as a hub for blockchain finance. By focusing on context over blanket rules and advancing Project Crypto, the agency aims to protect investors while embracing technological evolution. As legislative and regulatory pieces align, the crypto sector could see accelerated growth, but stakeholders emphasize the need for swift, clear implementations to avoid new uncertainties. With Atkins at the helm, the era of aggressive crackdowns appears to be giving way to collaborative governance, offering hope for a more mature and integrated digital asset ecosystem.