SEC Says Tokenized Assets Are Securities First, Technology Second

Putting a security on a blockchain does not change its legal status, three SEC divisions said Wednesday, adding that tokenized assets face the same registration requirements as traditional instruments.

In a joint staff statement on Wednesday, the agency’s Divisions of Corporation Finance, Trading and Markets, and Investment Management said tokens that represent securities remain subject to federal securities laws.

“The format in which a security is issued or the methods by which holders are recorded (e.g., on-chain vs. off-chain) does not affect application of the federal securities laws,” the statement reads.

On-chain transactions refer to securities transfers recorded directly on a blockchain or distributed ledger rather than through conventional database systems.

Issuers can offer tokenized securities as a separate class or alongside traditional shares, according to the statement. If a tokenized security is of substantially similar character and confers substantially similar rights and privileges, it may be treated as the same class for certain purposes under federal securities laws, regardless of format.

The only difference, it said, is that “instead of maintaining the master securityholder file through conventional, off-chain database records, the issuer (or its agent) maintains the master securityholder file on one or more crypto networks.”

The statement comes as the federal agency has shifted its stance on crypto under the Trump administration, dropping or closing more than a dozen cases over the past year, including actions against major crypto companies that turned on whether tokens, staking products, or wallet infrastructure constituted unregistered securities.

While the guidance reinforces that securities laws apply regardless of technological format, it’s the same legal framework underpinning many of the cases the agency had abandoned.

But Wednesday’s statement sidesteps the harder question those cases have raised on whether crypto-native products like tokens and staking programs are deemed securities in the first place.

Ethereum illustrates the unresolved boundary that the statement leaves untouched. In 2024, Consensys revealed in an unredacted lawsuit that the SEC had, in March 2023, authorized an internal investigation into “Ethereum 2.0,” issuing a formal order that explicitly treated Ethereum as a security.

The probe, approved by the Commission the following month, stood in contrast to public comments from former SEC Chair Gary Gensler, who repeatedly declined to state whether the agency viewed ether as a security. The SEC later closed its Ethereum-related investigation without bringing enforcement action and declined to comment on its decision.

The SEC appears to have softened its general stance on crypto, but is still actively pursuing cases, such as those involving Bitcoin mining services, which it claims constitute securities offerings.

Disclosure: Consensys is one of 22 investors in an editorially independent Decrypt.

‘Tokenization changes nothing legally’

The staff statement is “saying, very clearly, ‘tokenization changes nothing legally’—but the unspoken reality is that tokenization changes everything operationally, and the existing securities framework is not built for on-chain market structure,” Andrew Rossow, public affairs attorney and CEO of AR Media Consulting, told Decrypt.

The SEC staff’s statement also does not answer “whether on-chain ledgers can replace or legally equal traditional books and records,” Rossow explained.

“Think of this from the overarching infrastructure. If a blockchain is the de facto cap table or bond register, but the SEC still requires transfer agents, registered custodians, and broker-dealers, then the blockchain is legally ornamental, not authoritative,” he added.

While the SEC appears to be “enforcing ‘technology neutrality’ while relying on technology-specific assumptions,” Rossow said, “neutrality at the classification level masks non-neutrality at the operational level.”

The SEC’s staff statement “freezes the baseline, defers structural reform, and shifts the burden to the entrepreneurial and innovative sectors by quietly expecting us to figure out how to ‘comply first, then come talk to us,’” he said.