SEC proposes 'token taxonomy' for interpreting crypto under securities laws

The U.S. Securities and Exchange Commission (SEC) has submitted a regulatory proposal to the White House that could significantly alter the government's approach to enforcing federal securities laws concerning cryptocurrencies. This proposal, sent to the White House’s Office of Information and Regulatory Affairs, outlines a "commission interpretation on application of the federal securities laws to certain types of crypto assets and certain transactions involving crypto assets." This move is seen as providing interpretative guidance around "token taxonomy," which will help determine which tokens fall under the SEC's regulatory authority as securities.

Unlike standard rulemaking, which involves public notice and comment periods, this proposed interpretative application of federal securities laws is expected to carry more weight than previous staff-level statements. SEC leadership, including Chair Paul Atkins and Commissioner Hester Peirce, had previously indicated at ETHDenver in February the agency's intention to clarify how tokenized securities align with existing federal securities laws.

Regulatory Landscape and Pending Legislation

As of Thursday, the SEC's proposal was under review by the White House office. Concurrently, Trump administration officials have engaged in discussions regarding a crypto market structure bill progressing through the U.S. Senate. This legislation, if enacted, is anticipated to have a substantial impact on the oversight of digital assets by both the SEC and the Commodity Futures Trading Commission (CFTC).

In a separate development, the CFTC submitted its own guidance on prediction markets to the White House on Monday. Michael Selig, who chairs the CFTC, has asserted that the agency possesses "exclusive jurisdiction" over the oversight of such markets.

Commissioner Vacancies at Regulatory Agencies

As of Thursday, both the SEC and the CFTC are operating with fewer commissioners than their normal five-member bipartisan structure. The SEC is currently led by three commissioners, while the CFTC has one. Notably, the current commissioners at both agencies, including Selig, Atkins, Peirce, and Mark Uyeda at the SEC, are all Republican appointees, with no Democratic representation. President Donald Trump has not made any public announcements regarding nominations for additional commissioners to either agency.