SEC’s Paul Atkins Redefines Crypto Tokens Rule

In a landmark speech on Wednesday, Paul Atkins, the newly appointed Chair of the Securities and Exchange Commission (SEC), delivered his most detailed public remarks to date on how the regulator will treat digital assets in the emerging crypto-economy. His message was clear: many crypto tokens should not be regulated as securities under U.S. law — and the SEC intends to draw precise lines.

A Shift in Tone — But The Legal Test Still Holds

Atkins opened his remarks by acknowledging the longstanding ambiguity around digital asset regulation. “If you are tired of hearing the question ‘Are crypto assets securities?’ I very much sympathize,” he said. He made two foundational points: first, whether something is a security depends on substance, not labels; second, tokens may change status over time. He emphasized that even though blockchain-based assets have new form, the core legal principle remains the same: under the 1946 Howey Test, an “investment contract” exists if there is an investment of money in a common enterprise with a reasonable expectation of profits derived from the efforts of others. In Atkins’s words:

“Economic reality trumps labels. Calling something a ‘token’ or an ‘NFT’ does not exempt it from the current securities laws if it in substance represents a claim on the profits of an enterprise and is offered with the sorts of promises based on the essential efforts of others.”
“Conversely, the fact that a token was once part of a capital-raising transaction does not magically convert that token into a stock.”

The takeaway: while the framework is evolving, the core test remains. But Atkins is moving the SEC’s posture away from treating all crypto tokens as securities by default.

Atkins’s Four-Tier Token Taxonomy

One of the most headline-grabbing elements of the speech was Atkins’s proposal of a token taxonomy — a classification system to help distinguish which digital assets fall under SEC oversight and which may sit outside of it. His proposed four categories:

1. Network Tokens (aka “digital commodities”) – These are tokens tied to a functioning decentralized protocol, where value is derived from the operation of the network rather than the promise of profit from the efforts of others. Atkins said these are not securities, in his view.
2. Digital Collectibles – Tokens that represent artwork, in-game items, internet memes, or characters. Again, he counts these outside the securities regime.
3. Digital Tools – Utility tokens used for membership, access, credentialing or tickets (for example), whose value derives from a practical use rather than profit expectation from issuer efforts. Also treated as non-securities in his framework.
4. Tokenized Securities – Digital representations of real financial instruments (stocks, bonds, other securities) preserved on a blockchain. These remain squarely within SEC jurisdiction.

This taxonomy marks a notable pivot from the SEC’s earlier posture, which often signalled that many crypto tokens might be securities by default. Now, under Atkins, the message is that most tokens “are not themselves securities.”

What This Means for Popular Tokens & Platforms

Atkins’s remarks carry significant implications for well-known digital assets and the platforms that support them. Although he did not list specific tokens by name in this speech, his taxonomy suggests that many major decentralized network tokens (such as Ethereum, Solana or XRP) could fall outside the securities category — assuming they meet his criteria for decentralization and network function. The speech explicitly referenced similar groups of tokens. He stressed that tokens should not be treated as securities just because they once were offered via an investment contract. He explained that once a network is live, decentralized, and the issuer’s role diminishes, the token may cease to be subject to securities laws.

This opens the possibility that tokens once treated as securities might “graduate” into a non-security status. For example, a token that initially raised capital as part of an investment contract might later lose its “securities” label if the issuer’s efforts cease to drive value. For crypto trading platforms, this can mean a regulatory shift: non-security tokens might be traded outside the conventional SEC-regulated frameworks, or through “super-apps” that combine custody/trading of both securities and non-securities. Atkins called for exploring such platforms.

Balancing Innovation and Investor Protection

While signalling a lighter regulatory touch for certain token categories, Atkins was explicit that this does not mean a free-for-all. He reaffirmed that the SEC will continue enforcing anti-fraud provisions — and that tokens tied to investment contracts will not evade oversight just because they are digital. He also noted that the regulatory framework is evolving in parallel with legislative efforts in Congress. He said that while the SEC can provide clarity under existing law, a statutory framework would provide greater certainty and permanence. On the investor-protection front, he emphasised that the SEC’s mission is not being abandoned:

“Congress made the securities laws to fix specific problems … They were never meant to regulate every new form of value, digital or not.”

And in his remarks he added that while the SEC’s role continues to cover capital formation, the agency should not “block innovation or limit investors’ choices by forcing assets to trade in only one kind of regulated system.”

Chairman Paul Atkins’s message is a significant departure from the historically cautious, enforcement-heavy approach of the SEC toward digital assets. By articulating a clear taxonomy and emphasising that most crypto tokens are not securities, the agency is signalling a more innovation-friendly stance — while maintaining guardrails for investor protection. As regulators, issuers and market participants digest this shift, the coming months will be critical as legislation, rule-making and enforcement actions bring this vision into practice. The crypto ecosystem may well be entering a new phase of clarity and opportunity.

Disclaimer: CryptopianNews shares this for learning and info only. It’s not meant to be financial or investment advice. Crypto markets change a lot and move quickly. Investing in them can be risky. You should always look into things yourself. Talk to a trained financial advisor before making any choices about investing.