Quick answer:There’s no blanket rule that crypto is or isn’t a security. Courts and regulators apply the decades-old Howey test on a case-by-case basis, asking whether a digital asset was sold as part of an investment contract. As of March 2026, the SEC has issued new interpretive guidance sorting crypto assets into categories — but the underlying legal test, and the risk of fraud claims for investors, hasn’t gone away. 

What Is the Howey Test and Does It Still Apply to Crypto? 

Under the U.S. Supreme Court’s 1946 decision in SEC v. W.J. Howey Co., an arrangement is an “investment contract” — and therefore a security — if it involves (1) an investment of money, (2) in a common enterprise, (3) with a reasonable expectation of profits, (4) derived from the managerial or entrepreneurial efforts of others. This test predates cryptocurrency entirely, but it remains the controlling framework courts use to decide whether a particular token sale, offering, or arrangement falls under the federal securities laws. 

How Did the SEC’s 2026 Guidance Change Crypto Classification? 

On March 17, 2026, the SEC issued a formal interpretive release, joined by the CFTC, providing the most detailed guidance to date on how Howey applies to digital assets. The release sorts crypto assets into five categories: 

• Digital commodities 

• Digital collectibles 

• Digital tools 

• Stablecoins 

• Digital securities 

Which Crypto Assets Are Securities? The SEC’s Five Categories at a Glance

According to the SEC, the first four categories generally are not securities in themselves, because they typically lack the “economic characteristics of a security.” However, the SEC was clear that classification isn’t just about labels — the same token can still be sold subject to an investment contract (and therefore be treated as a security transaction) if the issuer made promises of managerial effort that purchasers reasonably relied on for profit. In other words, a non-security token can still be wrapped in a securities transaction depending on how, and with what promises, it was sold. 

It’s worth noting that this guidance is an interpretive release, not a binding rule adopted through formal rulemaking. That means it carries meaningful weight but can be revised, narrowed, or withdrawn by a future SEC without a lengthy rulemaking process — a key reason this area continues to evolve. 

Can Investors Sue for Crypto Losses? 

For investors, the practical question is rarely “is crypto, in general, a security?” It’s “was this specific offering sold to me as an investment contract, based on promises made by the issuer or promoter?” Relevant facts often include: 

• Whitepapers, marketing materials, or social media statements promising returns based on the team’s ongoing efforts 

• Whether purchasers were told profits would come from the managerial work of a founding team or company, rather than the purchaser’s own use of the asset 

• How specific and concrete the issuer’s promises were (vague, aspirational language is treated differently than detailed commitments with milestones and timelines) 

If a digital asset was sold as an investment contract and the issuer made false or misleading statements about the project, the technology, its finances, or its prospects, investors who relied on those statements and suffered losses may have a securities fraud claim — similar in structure to a traditional stock-based securities class action. 

Why Do Crypto Securities Cases Keep Changing? 

This is one of the more actively shifting corners of securities law right now, with new SEC and CFTC guidance, pending federal legislation on digital asset market structure, and ongoing court decisions all shaping how these cases are evaluated. Anyone who believes they were misled in connection with a crypto investment should have the specific facts of their purchase evaluated individually, rather than relying on general assumptions about how “crypto cases” are treated. 

Frequently Asked Questions About Crypto and Securities Law 

Is Bitcoin a security?

Bitcoin is generally treated as a digital commodity, not a security, because it has no central issuer or managing team whose efforts drive its value. However, investment products built around Bitcoin — or specific offerings sold with promises of profit from a promoter’s efforts — can still fall under the securities laws. 

What is the Howey test?

The Howey test comes from a 1946 U.S. Supreme Court decision and defines an “investment contract” under federal securities law. An arrangement is a security if it involves an investment of money, in a common enterprise, with an expectation of profits derived from the efforts of others. Courts still apply it to crypto today. 

Can I sue if I lost money on a crypto investment?

Possibly. If the asset was sold as an investment contract and the issuer or promoter made false or misleading statements about the project, its technology, or its finances, investors who relied on those statements and lost money may have a securities fraud claim. The specific facts of the offering determine whether a claim exists.

Are stablecoins securities? 

Under the SEC’s 2026 guidance, stablecoins generally are not securities in themselves, because they are designed to hold a stable value rather than generate profit. But a stablecoin arrangement structured or marketed to produce returns for holders can still be treated as a securities transaction under the Howey test.

Does the SEC still regulate crypto after the 2026 guidance?

Yes. The March 2026 interpretive release clarified how the SEC classifies crypto assets, but it did not remove them from the agency’s reach. Tokens sold as investment contracts remain subject to the federal securities laws, and the SEC continues to pursue fraud claims involving digital assets alongside the CFTC.

What is the difference between a digital commodity and a digital security?

A digital commodity derives its value from a decentralized network rather than a central team’s efforts, so it generally is not a security. A digital security represents a traditional financial interest — like tokenized stock or a profit-sharing right — and is subject to the securities laws regardless of the technology used.

How BG&G Can Help 

Bronstein, Gewirtz & Grossman, LLC investigates and litigates securities fraud claims involving both traditional securities and digital assets. If you believe you were misled in connection with a cryptocurrency or token investment, our attorneys can help evaluate whether your losses may support a claim, at no cost to you for a consultation. 

Sources

• SEC v. W.J. Howey Co., 328 U.S. 293 (1946) 

• SEC & CFTC Interpretive Release, “Application of the Federal Securities Laws to Certain Types of Crypto Assets” (Mar. 17, 2026) 

• SEC Crypto Task Force 

Related Reading

• What Is Securities Fraud and How Does It Happen? 

• What Is a Securities Class Action Lawsuit? 

• How Do I Know If I Lost Money in a Securities Fraud Case? 

• AI Hype and Securities Fraud: What Investors Should Watch For 

Bronstein, Gewirtz & Grossman, LLC (BG&G) is a nationally recognized plaintiff’s law firm with nearly 30 years of experience representing investors and consumers in securities fraud and class action litigation. Ranked among the top securities class action firms in the country by ISS Securities Class Action Services, BG&G has recovered hundreds of millions of dollars for clients nationwide. The firm handles securities class action cases on a fully contingent basis.
Learn more about our firm.