SEC's Token Classification Ignites Regulatory Dispute With CFTC Over Cryptocurrency Oversight

The U.S. Securities and Exchange Commission (SEC) is moving forward with a "token taxonomy" framework designed to clarify which digital assets are considered securities. Chairman Paul Atkins highlighted the importance of striking a balance between fostering innovation and enforcing strict measures against fraudulent activities. Drawing from the 1946 Howey Test, this initiative aims to sort digital tokens into four categories based on their characteristics and uses, which would exclude many tokens from being labeled as securities, according to a

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Atkins shared details of the proposal at the Federal Reserve Bank of Philadelphia's Fintech Conference, explaining that tokens linked to decentralized networks, digital collectibles,

and utility-based assets such as memberships would not fall under the definition of securities, as reported by a . Conversely, tokens that represent financial stakes would still be regulated by the SEC, the article states. The framework also recognizes that tokens initially classified as securities could lose that status over time as projects become more decentralized and issuers step back—a topic that has sparked debate within the crypto industry, according to a .

This taxonomy is intended to simplify compliance for both developers and investors, while aligning with ongoing legislative efforts in Congress. Several bills addressing market structure are advancing in both chambers, with bipartisan proposals suggesting that oversight of digital commodities should shift primarily to the Commodity Futures Trading Commission (CFTC), as noted by

. However, this transition has raised questions about whether the CFTC has the resources to manage these new responsibilities, given that the agency currently has only one active commissioner, as highlighted by .

The regulatory environment is further complicated by political factors. A bipartisan Senate bill, introduced by Senators John Boozman (R-AR) and Cory Booker (D-NJ), seeks to give the CFTC authority over spot cryptocurrency trading and includes measures to boost the agency’s workforce and funding, according to

. The legislation also requires cooperation between the SEC and CFTC to prevent regulatory loopholes, reflecting a growing consensus among lawmakers and industry leaders to create a unified regulatory system, as reported by a .

Meanwhile, Mike Selig, nominated by the Trump administration to chair the CFTC, is awaiting Senate confirmation amid slow legislative progress, as mentioned by

. Expanding the CFTC’s role fits into broader efforts to establish the U.S. as a leader in the crypto sector, including initiatives to allow spot crypto trading on futures exchanges and promote international regulatory alignment, as discussed by TradingView.

As regulatory frameworks continue to develop, industry stakeholders are watching for guidance on how these new rules will interact with existing laws. With the SEC and CFTC navigating overlapping responsibilities and Congress working toward comprehensive legislation, the final shape of crypto regulation is still uncertain, aiming to balance support for innovation with robust investor protections, as reported by

.