Since 23 March 2026, the SEC has read the Howey test through a joint SEC–CFTC interpretation that sorts crypto assets into five categories and supersedes the staff’s 2019 framework. A token that is not itself a security can still be sold under an investment contract. The exemptions designed for that sale, up to $5 million over four years or $75 million a year, were still proposals as of October 2026.
Who decides this
The general counsel owns the securities analysis and the choice of offering route, and answers to the board for both. The board owns something harder to delegate: what the company and its people say in public about the token, because those statements now carry most of the legal weight. This guide describes the rules as they stood in October 2026. It does not advise on any token. Structuring and the offering itself sit with securities counsel.
What does the Howey test ask of a token launch in 2026?
The test still asks whether buyers invested money in a common enterprise expecting profits from the efforts of others. That definition comes from SEC v. W.J. Howey Co., 328 U.S. 293 (1946), and the courts’ case law under it remains binding precedent.
What changed is how the SEC applies it. On 17 March 2026 the SEC issued an interpretive release on crypto assets (Release No. 33-11412), effective 23 March 2026. The CFTC joined it and said it will administer the Commodity Exchange Act consistently with it. The release states that it supersedes the staff’s Framework for “Investment Contract” Analysis of Digital Assets from April 2019.
The practical shift, in Gibson Dunn’s reading, is that the 2019 framework’s factors would seem no longer to apply. The analysis now centres on what the issuer represented or promised about its own essential managerial efforts. The release also confirms that a common enterprise is a required element, citing recent appellate decisions.
Three limits matter. The release is an interpretation, not a rule, and the SEC has said it may refine it. Commentators note that it could face judicial challenge, since courts apply Howey themselves. And Congress has not settled the question: the CLARITY Act (H.R. 3633) passed the House on 17 July 2025 and, as of early October 2026, was still pending in the Senate. Law firm commentary in September 2026 described it as a bill that could change the framework if passed.
The enforcement backdrop has also moved. In 2025 the SEC dismissed its actions against Coinbase and Binance, created a Crypto Task Force, and issued staff statements on meme coins (27 February), certain stablecoins (4 April) and protocol staking (29 May).
Is the token a security, or is it sold under an investment contract?
Four of the SEC’s five categories are not securities, but the sale of such a token can still be a securities transaction if the issuer’s promises create one. The release treats the asset and the sale as separate questions.
The SEC’s fact sheet sets out five categories. Digital commodities draw value from the programmatic operation of a functional crypto system and from supply and demand; Orrick counts 16 assets named in the release, including Bitcoin, Ether and Solana. Digital collectibles are designed to be collected or used, and the SEC’s description extends to tokens referencing internet memes. Digital tools perform a practical function, such as a membership, ticket or credential. Stablecoins issued by permitted issuers under the GENIUS Act are not securities. Digital securities, meaning recognised securities formatted as tokens, are securities whether issued on-chain or off.
A token in one of the first four categories becomes subject to an investment contract when the issuer induces purchasers to invest money in a common enterprise through representations of essential managerial efforts. Those promises must lead buyers to reasonably expect profit. The release says promises weigh more when they are explicit, detailed enough to show the issuer can deliver, and explain how the issuer’s work will produce returns.
Vague aspirations count for less. Statements with no milestones, funding plan or resources behind them are unlikely, on the SEC’s reading, to create a reasonable expectation of profit. That is not a licence to say nothing. Silence about the roadmap rarely survives contact with a fundraising round.
Our view: the classification memo should answer two questions on its own page each. Which category is the asset in? Which of our statements, if any, created an investment contract around it?
Which offering route could fit the raise?
Today, an offer of an investment contract must be registered or rely on an existing exemption, and the release says so plainly. The SEC’s August 2026 proposal would add tailored routes. On 18 August 2026 it proposed Regulation Crypto Assets (Release No. 33-11434). Comments were due by 20 October 2026. Nothing below is final law.
| Proposed route | Size limit | Who may use it | Main conditions |
|---|---|---|---|
| Startup exemption | $5 million over up to four years | Generally once per issuer and affiliates; issuer need not be US-organised | Form NOR filed before reliance; narrative disclosures on a website; filing at the end of the period |
| Fundraising exemption, Tier 1 | $20 million per 12 months | US-organised issuer with a US-centred business | Form 1-CRYPTO qualified by the SEC before any sale; ongoing reporting |
| Fundraising exemption, Tier 2 | $75 million per 12 months | Same as Tier 1 | Audited financial statements; ongoing reporting |
| Investment contract safe harbor | Not a size limit | Any issuer that meets the conditions | All promised essential efforts completed or permanently ceased; Form TR filed with supporting analysis |
Several details matter for planning. According to Greenberg Traurig’s summary, the startup exemption allows non-accredited buyers and general solicitation, with no rule-based resale restriction. The fundraising exemption would cap a non-accredited investor at 10% of income or net worth. It would also require a US-organised issuer, with more than half its assets in the US and a majority of its officers or directors US citizens or residents. Akin Gump’s summary notes that the startup exemption also covers certain airdrops and network incentive distributions, and that both exemptions carry bad-actor disqualification.
Both exemptions would share one principles-based disclosure rule. It covers the contract terms, the promised managerial efforts, the asset, management, the network, tokenomics, governance and risks, and it must be consistent with what the issuer says in public. Anti-fraud liability stays in place either way. The proposal would also preempt state registration for these offerings and, while the issuer stays current in its filings, for certain secondary trades.
A foundation based outside the US should note the eligibility split. As proposed, the larger exemption is built for US issuers. Whether a non-US foundation’s raise fits any route, including any existing exemption, is a question for counsel. Our SAFT guide, linked below, covers how pre-launch agreements interact with these routes.
When does the investment contract end?
On the SEC’s reading, the investment contract ends when the issuer fulfils its promises, or when it fails or abandons them so that buyers can no longer reasonably expect them.
Secondary trading follows the same logic. The release says a non-security token is not subject to the investment contract in secondary trades where buyers would not reasonably expect the issuer’s promises to remain attached. Where they would, secondary sales can remain securities transactions until the token separates from those promises.
Definitions are the trap. If an issuer promised “decentralization” or “functionality”, the release says fulfilment is judged by how the issuer itself defined those words, not by market usage. The release gives its own definition elsewhere: a system is decentralized when it runs autonomously and no person or group holds operational, economic or voting control. The SEC encourages issuers to describe their planned efforts in detail, set a timeline and milestones, name the resources needed, and publicly disclose when they are done.
The proposed safe harbor would turn that into a filing. The issuer would certify, on Form TR with supporting analysis, that it has completed or permanently ceased every essential managerial effort it promised and has made no new such promises. The SEC would keep the power to challenge the certification.
Our view, on the commercial side: put on the public roadmap only milestones the team can later evidence as complete. A roadmap is now also a draft of your exit filing. Our DAO legal structure guide, linked below, covers how a foundation documents who holds control after launch.
What must be on file to support the position?
The file must show what was promised, by whom, through which channel, and when, because the release ties the analysis to exactly those facts.
The release counts statements by the issuer, its affiliates, agents and promoters. Documents clearly attributable to the issuer, such as a white paper, count, and so can official websites and social accounts that the issuer uses in a regular pattern. Statements by unaffiliated third parties generally do not count, unless the issuer authorised them and they reached buyers. Timing matters too: the statements must come before or at the time of sale, and statements made after a sale do not turn that sale into an investment contract.
That gives counsel a records list. Keep every dated version of the white paper, website and token pages. Keep a register of which social accounts are official, and archive their posts. Keep written terms for every ambassador, promoter and paid influencer. Record sale dates by round and channel. Keep the milestone plan, its changes and each completion notice. For any exemption, keep the evidence for each condition, such as investor counts and investment limits.
What goes wrong: the question you could not answer
The failure is rarely a wrong legal theory. It is a regulator, exchange or acquirer asking a factual question two years after launch that the company cannot answer from its own records.
What did the website say about the roadmap on the day of the public sale? Did the foundation authorise the influencer whose thread promised a token buyback? When the white paper said “decentralized”, what did it mean, and where is the evidence that the promise was kept? Which exemption did the 2025 round rely on, and how many buyers were there?
Under the 2026 interpretation, those answers decide whether the investment contract ever ended. If the only record is a deleted post and a former employee’s memory, the company cannot prove its position, however sound the theory. The fix is a dated representations log, owned by the general counsel and reviewed by the board each quarter.
How Alcyone approaches it
The securities analysis and the offering belong to counsel; Alcyone does not list legal structuring among its services. Alcyone works on the commercial facts that analysis depends on. That means the token’s design and allocation, the fundraising plan, and a launch roadmap with milestones the team can actually evidence. That work sits within Alcyone’s tokenomics and fundraising advisory. It begins with a fixed-scope, fixed-fee assessment, and every plan names an owner for every part, including the representations log.