SEC Issues Guidelines on Crypto Promises and Investment Contracts

The Securities and Exchange Commission (SEC) has clarified how promises made by crypto issuers can affect the treatment of non-security tokens as part of an investment contract. According to the SEC's Division of Corporation Finance, what an issuer promises buyers can determine whether a token is offered as part of an investment contract.

Under existing framework, a non-security crypto asset can be offered as part of an investment contract when buyers reasonably expect profits from work the issuer promises to perform. The key difference lies in describing what a network does versus asking buyers to rely on promised work for returns.

The SEC's March interpretation states that later token sales can also be securities transactions while an earlier investment contract remains connected to the asset, requiring registration or an available exemption.