SEC Issues New Crypto Guidance Clarifying Investment Contracts

The U.S. Securities and Exchange Commission (SEC) has released new guidance on when crypto assets can fall under federal securities laws.

The updated guidance, which was issued by the SEC's Division of Corporation Finance on September 25, clarifies how to determine whether a token sale or other activity is subject to securities laws.

According to the guidance, a crypto asset may be treated as part of an investment contract if buyers invest money with the expectation of profits from the essential managerial efforts of others.

This is based on the Howey test, which courts use to determine whether an arrangement qualifies as an investment contract.