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SEC Clarifies What Crypto Asset Securities Means

2 mins
Updated by Ali Martinez
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In Brief

  • SEC clarifies "crypto asset securities" as contracts tied to sales, not the crypto assets themselves.
  • Ripple criticizes SEC for inconsistent stance, sparking legal uncertainty in crypto cases.
  • Clarification impacts ongoing litigation and could reshape regulatory outlook on crypto assets.
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The US Securities and Exchange Commission (SEC) has clarified the term “crypto asset securities.” The agency attempts to resolve confusion surrounding its use in ongoing litigation against Binance.

The SEC issued an amended complaint highlighting that it does not consider crypto assets themselves to be a security. Rather, the term refers to the contracts, expectations, and understandings surrounding the sale and promotion of these assets.

SEC Defines Crypto Asset Securities

This clarification stems from the SEC’s use of the term in past cases, notably in Footnote 6 of its amended complaint against Binance. The SEC stated that while the term was helpful as shorthand, it may have inadvertently created misunderstandings.

Referring to its previous case, the Commission emphasized that the securities in question are not the crypto assets themselves but the investment contracts tied to their sale and distribution.

“To avoid any confusion, the PAC no longer uses the shorthand term, and the SEC regrets any confusion it may have invited in this regard,” the court document read.

Ripple’s Chief Legal Officer, Stuart Alderoty, reacted critically to the SEC’s clarification, remarking on the agency’s inconsistent stance.

“So the SEC finally admits that 1/ ‘crypto asset security’ is a made-up term and 2/ to prove a ‘crypto asset security’ is an investment contract, the SEC needs evidence of a bundle of ‘contracts, expectations, and understandings,’” Alderoty noted.

The debate continues as critics argue that the SEC’s stance has fostered legal uncertainty. John E. Deaton, a candidate for the US Senate in Massachusetts, added that “The SEC loves for the law to be vague,” reflecting frustration from previous cases like the Ripple litigation.

Read more: Crypto Regulation: What Are the Benefits and Drawbacks?

This clarification could have significant implications for the crypto industry as regulatory agencies and market participants adjust to these interpretations of crypto asset classifications.

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Ali Martinez
Ali Martinez is the Global Head of News at BeInCrypto, specializing in market analysis, emerging trends in the crypto industry, Bitcoin’s four-year cycle, and macroeconomic developments. Previously, he covered the altcoins market for Crypto Briefing, CryptoSlate, CCN.com, and NewsBTC. His reporting focused on the ICO boom, Ethereum's evolution, Bitcoin halvings, and network upgrades like hard forks and soft forks, emphasizing the impact on digital asset valuations. At Binance and FXStreet...
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