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Rewritten for the individual investor from the SEC's Crypto Assets and the Federal Securities Laws building block (April 2026). This is education, not legal advice.
Whether a crypto asset counts as a "security" decides which laws protect you, which agency polices the market, and what a company selling you that asset has to tell you first. For years nobody could get a straight answer. In 2026 the SEC finally published guidance that sorts most crypto into understandable buckets. Here's what it says, minus the lawyer-speak.
The SEC starts with three definitions:
The SEC now recognizes a category called digital commodities. These are assets you need in order to use a functioning crypto system, and their value comes from how that system operates plus ordinary supply and demand. Not from a company's promises.
The SEC's own list of examples includes: Bitcoin (BTC), Ether (ETH), Solana (SOL), XRP, Cardano (ADA), Dogecoin (DOGE), Litecoin (LTC), Chainlink (LINK), Avalanche (AVAX), Polkadot (DOT), Stellar (XLM), Bitcoin Cash (BCH), Hedera (HBAR), Shiba Inu (SHIB), Aptos (APT), and Tezos (XTZ).
If you hold these coins, you are holding something the SEC treats like a commodity (think gold or wheat), not a stock. That means buying and selling them on an exchange is generally not a securities transaction.
NFTs and meme-style assets that exist to be collected or used (artwork, music, trading cards, game items, meme coins tied to internet culture) are called digital collectibles. Examples the SEC gives: CryptoPunks, Chromie Squiggles, fan tokens, and WIF.
The trap: if a collectible gets fractionalized (split so many people own a piece and hope to profit together), it may become a security. If someone offers you "shares" of an NFT, treat it like a securities pitch and expect the seller to follow securities rules.
Assets that just perform a function (a membership pass, a ticket, a username like an Ethereum Name Service domain, an ID badge) are digital tools. These are generally not securities. They're more like a key to a door than an investment.
A payment stablecoin (used for payments and settlement, and regulated under the GENIUS Act that became law in July 2025) is generally not a security. USDC is the classic example of a coin aiming for this lane.
Other stablecoins may be securities depending on how they're built. A "stablecoin" that promises you yield generated by someone else's management of a reserve starts looking a lot like an investment product. Read what backs the coin before you park money in it.
A digital security (also called a tokenized security) is a regular financial instrument, like a share of stock or a bond, wrapped in crypto form. If a token represents ownership in a company or a claim on its profits, it's a security no matter what technology carries it. One warning from the SEC worth repeating: the rights you get holding the token version may differ from holding the real thing, including voting and economic rights. Read the fine print on any "tokenized stock."
Original sources: SEC Building Block · SEC 2026 Interpretive Guidance (PDF) · SEC Glossary
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