The Securities and Exchange Commission issued joint guidance with the Commodity Futures Trading Commission on Tuesday, March 19. The regulatory agencies aimed to provide clarity regarding how securities laws apply to digital assets. This move marks a significant shift from the previous enforcement-heavy approach under former Chair Gary Gensler.
Regulatory Ambiguities Remain
While the guidance acknowledges past regulatory muddiness, attorneys from Gibson Dunn argue it stops short of necessary corrections. The document fails to explicitly state that an investment contract requires a contractual obligation between issuer and investor. Instead, it relies on vague facts and circumstances to determine if a digital asset constitutes a security.
Under the Howey test, the statute defines an investment contract as an agreement where the issuer delivers ongoing profits. The new guidance suggests the contract travels with the asset temporarily if inducement exists. This leaves room for interpretation regarding when the security status ends.
The SEC missed an important opportunity to clearly reject that approach and restore a key statutory dividing line between assets and securities.
The guidance continues to allow public statements to influence classification without concrete promises. This ambiguity exposes the industry to potential future enforcement actions by private plaintiffs. Attorneys warn that mere public statements affecting value are insufficient for securities classification.
Secondary Market Concerns
Secondary market trading rules also lack definitive clarity in the new framework. The agency states assets remain subject to contracts if purchasers reasonably expect issuer promises to remain connected. However, it provides no concrete method for assessing those reasonable expectations.
Private plaintiffs could leverage these ambiguities to file lawsuits against major exchanges and key industry players. Without clear restraints, the guidance could distort the securities-law baseline during ongoing market-structure litigation. This uncertainty threatens the long-term viability of the crypto industry in the United States.
Judge Analisa Torres previously recognized that blind bid-ask transactions do not imply investment contracts. Buyers in secondary markets do not know if money goes to the issuer or a third party. The SEC should endorse this analysis to prevent overbroad enforcement actions.
The industry should respond to the SEC invitation for comments on its guidance. Highlighting lingering flaws ensures regulatory clarity and stability for market participants. Simply giving the legal architecture of the last enforcement campaign a facelift is not enough.
Stakeholders must advocate for clear, meaningful, and permanent restraints to ensure regulatory stability. The current administration might not enforce ambiguities aggressively, but a future SEC could. Clear rules are essential for institutional adoption and market confidence.
