The Securities and Exchange Commission has begun drawing a clearer line between blockchain tokens that are securities and those that aren’t. For the first time in years, it’s possible to launch a compliant token in the US without treating enforcement risk as a material cost of doing business or relocating entire operations overseas.
This shift in clarity is already influencing how teams design, launch, and, most importantly, communicate about tokens.
Functional tokens aren’t inherently securities. As demonstrated in the latest no-action letters to DoubleZero and Fuse from the SEC’s Division of Corporation Finance, tokens fall outside the securities laws as long as they aren’t marketed, explicitly or implicitly, as speculative investments. Think Howey prong three: A commodity token holder doesn’t expect to profit due to the seller’s efforts.
It is rare, and frankly commendable, for any regulator to acknowledge that a category of activity falls outside its jurisdiction. That concession isn’t a loss of authority; it’s the proper exercise of it.
Functional Purpose
Commodity tokens must have real utility. Even in crypto’s darkest regulatory days, lawyers and regulators found common ground in one area: their shared dislike of the phrase “utility token.” The term carries historical baggage from the initial coin offering boom of 2017–2018, when projects confidently announced that their tokens were utility tokens and therefore weren’t securities.
The SEC indicated two central components in the no-action letters to DoubleZero and Fuse. First, what is the token’s inherent purpose within the system, and is that purpose functional rather than aspirational? Calling it a duck isn’t enough; it must also quack. Second, does marketing lead purchasers to expect profits based on the efforts of others? Howey’s third prong is triggered when purchasers are invited to price in a duck before the egg has hatched.
SEC Chair Paul Atkins has emphasized that tokens, as a class, aren’t presumptively securities. Tokens are mechanisms for accessing goods or services with close to zero legal rights, not passive income streams with legal protections. They are far closer to airline miles or arcade credits than to shares of stock. The critical distinction is that no one is promised returns for merely holding them.
Marketing Tokens
People often buy concert tickets intending to resell them at a higher price. Yet we don’t regulate concert tickets as securities. The reason is that Taylor Swift isn’t promising to increase ticket prices through her managerial efforts. She works hard to deliver an excellent show, but her marketing is all about the product rather than the ticket price.
This is where many blockchain projects struggle. Teams often obsess over token price as much as their communities do, and founders regularly fall into the trap of commenting on future token value in connection with milestones.
The SEC has made clear, starting from the Munchee order in 2017, that a team’s statements about future token appreciation as an intended result of protocol activity can establish an expectation of profit under Howey. As a result, even a thoughtfully designed token functionality can cross the regulatory line through undisciplined marketing.
Can we even mention tokens in marketing? You must. If the token is an integral part of the protocol, its functionality must be described in the finest detail. If not, why was the token created? Tokens should be described for what they are: instruments of use within a system, not vehicles for passive return.
Statements by non-issuer ecosystem participants and informal supporters shouldn’t be decisive in assessing the regulatory status, though they may bear on the analysis of a particular transactional relationship involving that ecosystem participant.
When analyzing marketing, regulators and courts will look at the full public record, beyond formal disclosures. An encouraging trend is that projects want to disclose more, not less. The move toward fuller disclosure aligns with consumer protection principles aimed at accuracy and fairness in how products are presented, not at insulating purchasers from bad choices.
Legal Structure
The success strategy is no longer to exclude the US by default. It is to be intentional and decisive about whether the created token is intended to be regulated as a security or commodity—and then to comply with the appropriate framework.
In 2026, both pathways can be compliant with different rules regarding, for example, purchaser qualifications and secondary trading venues. A year ago, regulators and the crypto industry were worlds apart.
Now, an alignment is taking shape. First, a token that is functional for its intended purpose, with factually accurate marketing, isn’t presumed to be a security. Second, some token-related transactions are investment transactions.
A commodity token can be involved in both securities and non-securities transactions. It’s advisable to create a clean separation between capital formation and the token—for example, through instruments such as token warrants. The warrant transaction is an investment (that is, security), while the underlying functional token is a commodity.
That is how oil futures work. In that framework, investment transactions comply with securities law, while commodities and consumer protection rules govern the use of tokens within a protocol.
Looking Ahead
Tokens that are functional at launch and marketed with a focus on their actual use within a protocol can operate in accordance with US regulatory expectations today. This clarity allows builders to once again focus on building.
As SEC Commissioner Hester Peirce put it, this will “help infrastructure providers spend their time deep in the weeds of building out infrastructure, not knee-deep in parsing the nuances of securities laws.”
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
Author Information
Mari Tomunen is general counsel at DoubleZero and an adjunct professor at Boston College Law School.
Write for Us: Author Guidelines