Overview
Are cryptocurrencies securities? For years, this single question has shaped, and disrupted, the entire U.S. crypto industry. The answer determines which regulator has authority, what rules apply, who can legally trade, and whether trillion-dollar markets operate inside or outside federal law.
In March 2026, the answer finally started becoming clearer. On March 11, the SEC and CFTC signed a landmark Memorandum of Understanding (MOU) officially classifying Bitcoin and Ethereum as digital commodities under CFTC jurisdiction. Then, on March 16, the SEC proposed amending Rule 15c2-11, a core OTC broker-dealer rule, to limit its scope to equity securities only, effectively signaling that most crypto assets do not fall under traditional securities reporting requirements. Together, these two developments mark the most significant regulatory shift in U.S. crypto history. With the global crypto market sitting at approximately $2.6 trillion, according to CoinGecko live data (March 17, 2026), understanding exactly what these changes mean for traders, exchanges, and investors is not optional, it is essential.
Key Highlights
- SEC proposes limiting Rule 15c2-11 to equity securities (March 16, 2026), effectively removing most crypto assets from decades-old OTC broker-dealer reporting requirements, confirmed by SEC.gov.
- Bitcoin and Ethereum are officially classified as digital commodities under CFTC jurisdiction, per the SEC-CFTC MOU signed March 11, 2026, confirmed by CoinDesk, Blockonomi, and Yahoo Finance.
- The Howey Test remains the legal standard for determining whether any crypto asset is a security, a 4-part test from a 1946 Supreme Court ruling that the SEC still applies today.
- ICO tokens and capital-raising tokens remain under SEC oversight as securities, even after the MOU, confirmed by multiple law firm analyses (Cleary Gottlieb, Duane Morris).
- The CLARITY Act, passed by the House in July 2025 with a 294-134 bipartisan vote, remains stalled in the Senate as of March 2026 but would cement the full legislative framework when passed.
- A 60-day public comment period is now open on whether crypto assets could qualify as equity securities under the revised Rule 15c2-11, per the official SEC press release, March 16, 2026.
1. Why the Securities Question Has Always Mattered for Crypto
The classification of a digital asset as a security has enormous legal consequences. If a token is a security, the issuer must register with the SEC, follow strict disclosure requirements, and operate within a framework built for stocks and bonds in the 1930s. Any exchange listing must register as a national securities exchange or operate as an ATS.
For most of crypto’s history, this created “regulation by enforcement.” Under former Chairman Gensler, the SEC sued Coinbase, Binance, Ripple, Kraken, and dozens of others without providing a clear registration pathway; companies learned their token was a security only after receiving a lawsuit. The result: billions in legal costs, innovation pushed offshore, and institutional capital frozen out of legally uncertain markets. New SEC Chairman Paul Atkins, starting January 2025, marked a decisive turn, culminating in the March 2026 regulatory actions.
The securities classification question is not a legal technicality. It is the single most important regulatory variable determining whether the U.S. crypto market can attract institutional capital, develop compliant products, and compete with regulated markets in Europe and Asia.
Understand how regulatory clarity shapes institutional crypto capital flows: Read: Will Regulatory Clarity Drive Institutional Crypto Adoption in 2026? →
2. The Howey Test: The Legal Framework That Decides Everything
2.1 What Is the Howey Test?
The Howey Test comes from a 1946 U.S. Supreme Court ruling, SEC v. W.J. Howey Co. It remains the primary legal standard the SEC uses to determine whether any transaction constitutes an “investment contract”, and therefore qualifies as a security under the Securities Act of 1933.
Under the Howey Test, a transaction is a security if it meets all four of the following criteria:
- Investment of money: funds or assets are exchanged
- In a common enterprise: investors pool capital with a shared interest in an outcome
- With an expectation of profits: the investor expects financial returns
- Primarily from the efforts of others: the returns depend on a third party’s actions, not the investor’s own
2.2 How the Howey Test Applies to Crypto
Bitcoin fails the Howey Test. The SEC confirmed in 2019 that Bitcoin has no central company or management team driving its value — no common enterprise and no reliance on a promoter’s efforts. It is therefore not a security.
Ethereum was disputed for years. The March 11, 2026 SEC-CFTC MOU resolved it definitively: Ethereum is classified as a digital commodity under CFTC jurisdiction, per CoinDesk, Blockonomi, and Yahoo Finance.
ICO tokens present the hardest cases. Many initial coin offerings involved teams selling tokens to investors with explicit promises of returns tied to the team’s development work, precisely the structure the Howey Test targets. Per the Duane Morris 2025 crypto class action roundup, a bridge token sold to institutional investors was ruled a security by the Southern District of New York. NFTs with promised future benefits were found to be plausible securities claims. Meme coins, by contrast, were found by the SEC’s Division of Corporation Finance in February 2025 not to involve securities offerings.
2.3 SEC Chair Atkins Adds Nuance: Securities Can Expire
In November 2025, SEC Chairman Atkins introduced an important evolution in Howey application: “Investment contracts can be performed and they can expire. They do not last forever simply because the object of an investment contract continues to trade on a blockchain.” This view, echoed by Commissioner Hester Peirce, suggests that tokens initially classified as securities during fundraising can transition to commodity status as their network matures and decentralizes. This is also the foundation of the “decentralization on-ramp” in the CLARITY Act.
Bitcoin and Ethereum are no longer securities questions, they are settled as commodities. The live securities debate now centers on altcoins, ICO tokens, and newly launched tokens where centralized issuers still drive value.
Get the full breakdown of how crypto assets are classified under U.S. law: Read: The CLARITY Act — Will 2026 Be Crypto’s Legislative Breakthrough? →
3. Rule 15c2-11: The OTC Rule That Just Changed the Game for Crypto
3.1 What Is Rule 15c2-11?
Rule 15c2-11 is a Securities Exchange Act rule adopted in 1971. It requires broker-dealers to collect, review, and maintain current public information about an issuer before they can publish quotations for that issuer’s securities in over-the-counter markets. The rule was designed specifically to prevent manipulation and fraud in thinly traded penny stock markets.
For decades, the rule was understood to apply only to OTC equity securities, common stocks, preferred stocks, and similar instruments. However, amendments adopted in 2020 and implemented in 2021 introduced language broad enough to raise questions about whether the rule could extend to fixed-income securities and, critically, to crypto assets that had been classified as securities.
As Commissioner Peirce noted in her March 16, 2026 statement published directly on SEC.gov: by the rule’s literal text, it had always applied to any “security.” Market participants understood it to mean OTC equities only, but the 2021 implementation created legal ambiguity that created compliance burdens and regulatory uncertainty across fixed income and crypto markets simultaneously.
3.2 What the March 16, 2026 SEC Proposal Changes
On March 16, 2026, the SEC published an official press release proposing amendments to Rule 15c2-11 that would replace the word “security” throughout the rule with “equity security.” This single change formally limits the rule’s scope to equities and removes the ambiguity created in 2021.
The direct consequence for crypto: broker-dealers would no longer need to satisfy the rule’s disclosure and issuer information requirements before quoting or trading crypto assets in OTC markets, even in cases where the question of whether those assets are securities remains unresolved.
SEC Chairman Paul Atkins stated directly: “Regulations should be appropriately tailored to fit the asset class to which they apply. This proposal would clarify regulatory obligations when publishing quotations and affirm what was always understood: Rule 15c2-11 applies to equity securities.”
Per crypto.news and Invezz reporting from March 17, 2026, the SEC has opened a 60-day public comment period seeking feedback on whether the definition of “equity security” should extend to crypto assets and how the rule should apply going forward.
3.3 What This Means for Exchanges and Traders
For crypto exchanges, this proposal is significant for three reasons. First, it removes a compliance barrier that had deterred broker-dealers from supporting crypto OTC trading activity, particularly for tokens whose legal classification as securities or commodities remained contested. Second, as crypto.news noted, it reduces the likelihood of firms facing enforcement action under a rule that was never designed for decentralized networks or token-based systems. Third, it signals a broader regulatory direction: the current SEC administration intends to apply rules to crypto based on functional analysis of each asset class, not blanket application of legacy equity frameworks.
Importantly, as Invezz and CoinEdition both confirmed, the proposal does not place crypto outside the regulatory perimeter entirely. The SEC has made clear that oversight continues through other mechanisms, including fraud, market manipulation, and the securities classification question itself for tokens that meet the Howey Test.
The Rule 15c2-11 amendment is not just a technical fix, it is a directional signal that the SEC under Atkins is moving away from applying equity frameworks to crypto assets and toward building rules specifically designed for digital assets.
4. The SEC-CFTC MOU: Bitcoin and Ethereum Are Now Officially Commodities
4.1 What the MOU Establishes
On March 11, 2026, the SEC and CFTC signed a Memorandum of Understanding establishing a coordinated regulatory framework for digital assets, ending years of jurisdictional conflict that had paralyzed the U.S. crypto market. According to CoinDesk, Blockonomi, Yahoo Finance, and the agencies’ own joint statements, the MOU creates the following framework:
- Bitcoin and Ethereum are officially classified as digital commodities under CFTC jurisdiction
- ICO tokens and capital-raising tokens meeting the Howey Test remain under SEC securities oversight
- Primary market activities (initial token sales, fundraising) fall under SEC jurisdiction
- Secondary market trading of digital commodities falls under CFTC jurisdiction
The MOU also establishes a Joint Harmonization Initiative, a joint body that will coordinate rulemaking, enforcement, and market oversight between the two agencies. Firms registered with both agencies can now rely on “substitute compliance,” meaning compliance with one agency’s rules satisfies equivalent requirements from the other.
As SEC Chairman Atkins stated directly in the March 11 announcement: “For decades, regulatory turf wars, duplicative agency registrations, and different sets of regulations between the SEC and CFTC have stifled innovation and pushed market participants to other jurisdictions. This updated MOU will serve as a roadmap for a new era of harmonization.”
4.2 The Regulatory Classification Map: Where Each Crypto Asset Stands
| Asset Type | Classification | Regulator | Key Condition |
| Bitcoin (BTC | Digital Commodity | CFTC | Fully decentralized, no issuer |
| Ethereum (ETH) | Digital Commodity | CFTC | Network sufficiently decentralized |
| ICO/Capital-raising tokens | Security | SEC | Meet Howey Test criteria |
| Stablecoins (USDT, USDC) | Payment Stablecoin | Federal banking + SEC/CFTC shared | Governed by GENIUS Act (July 2025) |
| NFTs with promised benefits | Potential Security | SEC | Case-by-case Howey analysis |
| Meme Coins | Not Securities | Neither | Per SEC Division statement, Feb 2025 |
| Infrastructure tokens | Digital Commodity | CFTC | Directly tied to blockchain network function |
5. The CLARITY Act: The Full Legislative Framework Still Pending
5.1 Where the CLARITY Act Stands
The Digital Asset Market CLARITY Act (H.R. 3633) passed the U.S. House of Representatives on July 17, 2025, with a strong 294-134 bipartisan vote. The bill remains stalled in the Senate due to disagreements over stablecoin yield provisions and banking industry opposition, with negotiations ongoing as of March 2026.
Despite the delay, Ripple CEO Brad Garlinghouse has publicly estimated an 80–90% probability of the CLARITY Act passing by April 2026. JPMorgan analysts described midyear passage as a positive catalyst for digital assets.
5.2 What the CLARITY Act Would Add
The MOU is a coordination agreement, it does not carry the force of legislation. The CLARITY Act would cement the full statutory framework, introducing a key mechanism the MOU lacks: a “decentralization on-ramp” allowing tokens initially classified as securities to transition to commodity status once their blockchain is certified as “mature”, defined as no single entity holding more than 20% control. This creates a legal pathway for crypto projects to raise funds under SEC oversight, then transition to the lighter-touch CFTC framework as they decentralize.
The MOU and the Rule 15c2-11 proposal are the most important immediate developments. The CLARITY Act, when it passes, will lock in the full framework legislatively, removing the last major source of regulatory uncertainty for U.S. crypto markets.
Stay ahead of CLARITY Act developments and their market impact: Read: U.S. Crypto Regulation Advances in 2026 →
6. What All of This Means for Crypto Investors in 2026
For Bitcoin and Ethereum holders: Commodity classification removes the last regulatory uncertainty. U.S. spot Bitcoin ETFs held approximately $87.07 billion in AUM as of early March 2026, per CoinFomania and Cryptos News data, recovering after a four-month outflow streak that saw over $4.5 billion leave the funds in early 2026. Further institutional inflows are expected as regulatory clarity deepens.
For altcoin holders: Classification is still live for most altcoins. Tokens raised through ICOs that meet the Howey Test remain securities. Commissioner Peirce has explicitly stated she will monitor the 60-day comment process to determine whether any crypto assets could qualify as equity securities under the revised Rule 15c2-11.
For exchange users: The Rule 15c2-11 amendment, if finalized, reduces compliance costs for broker-dealers in OTC crypto markets, expanding the range of accessible crypto assets over time.
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7. Conclusion
The question of whether cryptocurrencies are securities under SEC OTC rules is no longer unanswered. Bitcoin and Ethereum are commodities. ICO tokens meeting the Howey Test are securities. Meme coins are not. Stablecoins operate under the GENIUS Act. And Rule 15c2-11 is being rewritten to reflect that digital assets are not OTC equity stocks.
The March 2026 SEC-CFTC MOU and Rule 15c2-11 proposal end the era of enforcement-by-litigation and begin the era of rule-by-design. The CLARITY Act, when passed, will complete the statutory framework. For investors: understand how your assets are classified — that clarity is what institutional capital is now following.
Want to understand how these regulatory changes affect your portfolio strategy? Read: What Regulatory Changes Are Coming for Crypto and How They Affect Investments →
Frequently Asked Questions (FAQ)
Q1: Are cryptocurrencies considered securities by the SEC?
Not all of them. Bitcoin and Ethereum are officially classified as digital commodities under CFTC jurisdiction, per the SEC-CFTC MOU signed March 11, 2026. Tokens issued through initial coin offerings that meet the four-part Howey Test, investment of money, in a common enterprise, with expectation of profits from others’ efforts, are treated as securities. Meme coins and infrastructure tokens generally do not qualify as securities under current SEC guidance.
Q2: What is Rule 15c2-11 and why does it matter for crypto?
Rule 15c2-11 is an SEC broker-dealer rule adopted in 1971 requiring firms to collect issuer information before quoting securities in OTC markets. In 2021, its scope was reinterpreted broadly enough to raise questions about whether it applied to crypto assets. On March 16, 2026, the SEC proposed amending the rule to explicitly limit it to equity securities only, which would remove crypto from its reporting requirements and make it easier for broker-dealers to support OTC crypto trading without burdensome disclosure obligations designed for stock issuers.
Q3: What did the SEC-CFTC MOU of March 2026 decide?
The MOU signed March 11, 2026 classifies Bitcoin and Ethereum as digital commodities under CFTC jurisdiction, ends years of overlapping authority, and establishes a Joint Harmonization Initiative for coordinated oversight. Firms registered with both agencies can rely on “substitute compliance”, satisfying one agency’s rules satisfies equivalent requirements of the other. Importantly, the MOU does not itself change any existing rule or legal requirement, its commitments are aspirational and operational, not legally binding in the statutory sense. Actual changes require separate rulemakings or formal agency orders. The CLARITY Act, when passed, would provide the full statutory framework.
Q4: What is the Howey Test and how is it applied to crypto tokens?
The Howey Test is a four-part standard from the 1946 Supreme Court ruling SEC v. W.J. Howey Co. determining whether a transaction is a security: (1) investment of money, (2) in a common enterprise, (3) with expectation of profits, (4) primarily from others’ efforts. Bitcoin fails tests two and four, no central company drives its value, so it is not a security. Most ICO tokens pass all four tests because investors fund centralized teams expecting those teams to build value. The SEC continues to apply this test case-by-case for altcoins and new token offerings.
Q5: What is the CLARITY Act and has it been passed?
The Digital Asset Market CLARITY Act (H.R. 3633) passed the U.S. House of Representatives on July 17, 2025 with a 294-134 bipartisan vote. It establishes a full legislative framework for crypto regulation, defining digital commodities, investment contract assets, and stablecoins, and splitting jurisdiction between the CFTC and SEC. As of March 2026, it remains stalled in the Senate due to disagreements over stablecoin yield provisions and banking opposition. Ripple CEO Brad Garlinghouse placed passage odds at 80% in a Fox Business interview on February 20, 2026, briefly raising it to 90% following a White House meeting between crypto and banking leaders the next day, before settling back to 80% as of early March 2026, per CoinDesk reporting.
Q6: How do these SEC OTC rule changes affect crypto traders on exchanges?
For everyday crypto traders, the immediate impact is positive. The Rule 15c2-11 proposal reduces compliance burdens for broker-dealers, potentially expanding the range of crypto assets available for OTC trading. The MOU’s commodity classification of Bitcoin and Ethereum provides institutional certainty that supports deeper liquidity and continued ETF growth. The remaining risk is altcoin classification, tokens that meet the Howey Test remain securities, and exchanges listing them without proper registration could face enforcement action under mechanisms outside Rule 15c2-11.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency regulations are evolving rapidly. Always conduct your own research and consult a qualified legal or financial professional before making investment decisions.