One of the most technically significant parts of the SEC’s March 2026 crypto guidance is its framework for how a non-security crypto-asset can temporarily become subject to securities law — and then escape that status. It’s a nuanced position that rejects two competing extremes that have dominated industry debate for years.

The Core Framework

The guidance establishes that a crypto-asset which is not itself a security — say, a digital commodity or a digital tool — can still be sold subject to an investment contract. If a purchaser is induced to invest money in a common enterprise based on an issuer’s representations or promises of essential managerial efforts, and those representations create a reasonable expectation of profit, then the transaction is a securities offering — even if the underlying asset is not a security.

Once that condition is met, secondary-market sales of that asset also constitute securities transactions.

The key factors the guidance uses to assess whether an expectation of profit is “reasonable” include:

  • The source of representations and promises (who made them, and in what capacity)
  • The timing of those representations relative to the sale
  • The specificity of commitments to take managerial actions
  • The channels through which representations were made

The Exit: “Separating From” an Investment Contract

Critically, the guidance provides that an asset’s securities status under this framework is not permanent. A crypto-asset “separates from” an investment contract — and secondary-market trading is no longer a securities transaction — when purchasers could no longer reasonably expect the issuer’s promises of essential managerial efforts to remain connected to the asset.

Three scenarios can trigger separation:

  1. The issuer fulfills its promises. Even if the issuer continues to engage in non-essential activity related to the network, the essential commitments are done.
  2. The issuer publicly announces it cannot complete the promised work.
  3. It becomes objectively clear the issuer will not complete the work.

In the latter two cases, the guidance adds a sting: issuers may face liability for material misstatements or omissions related to their failure to deliver.

What This Rejects: The Absolute Separation Theory

For several years, a growing segment of the crypto industry advanced what analysts call the “absolute separation theory” — the argument that secondary-market trading in crypto-assets is never subject to securities law, because secondary-market purchasers have no legal relationship with an issuer, and Howey requires such a relationship.

The guidance directly rejects this. By affirming that secondary-market transactions can fall within securities law when purchasers still reasonably expect essential managerial efforts from an issuer, the SEC is telling the industry that the issuer-purchaser relationship doesn’t need to be contractual in the traditional sense.

This surprised some observers. The Congressional Research Service noted that several commentators characterized the guidance as “a meaningful departure from what had been perceived as the current SEC position” — particularly given the agency’s broadly pro-crypto posture under the current administration.

What This Rejects: Permanent Decentralization Analysis

On the other side, the guidance also moves away from the 2019 staff guidance’s heavy emphasis on “decentralization” as the key factor determining whether secondary-market trading remains subject to securities law.

Under the 2019 framework, market participants had to monitor hard-to-observe changes in how centralized or decentralized a network was — a moving target that created compliance headaches for exchanges and other intermediaries.

The new framework centers instead on issuer representations and promises. That’s a more observable standard. If an issuer never made commitments tied to decentralization, the new framework may offer a cleaner path out of secondary-market regulation without having to prove decentralization was achieved.

The Practical Implication

For token issuers, the message is: your words at the time of launch matter. If you sold a token with promises to build out a network, those promises keep your token in investment-contract territory until you’ve delivered — or clearly failed. For developers who launch tokens with minimal promotional promises and let the market determine value based on utility, the path to avoiding securities status is cleaner.

Source: Congressional Research Service Legal Sidebar LSB11415, “SEC Issues Crypto Guidance as Congress Considers Market-Structure Legislation,” April 3, 2026.