SEC Crypto: SEC & CFTC Classify 16 Tokens as Digital Commodities

SEC Crypto: SEC & CFTC Classify 16 Tokens as Digital Commodities

The US Securities and Exchange Commission and Commodity Futures Trading Commission have jointly classified 16 cryptocurrency assets as digital commodities, providing the clearest regulatory framework to date for the industry’s largest tokens.

The Classification

The joint interpretive guidance, released as part of the agencies’ “Project Crypto” initiative, formally designates Bitcoin, Ethereum, XRP, Solana, Cardano, Dogecoin, and ten other major tokens as digital commodities rather than securities. This places them under CFTC oversight for spot market trading.

The classification ends years of uncertainty for tokens that faced potential SEC enforcement. XRP’s inclusion is particularly notable given Ripple’s protracted legal battles with the SEC over whether the token constituted an unregistered security.

What It Means

For exchanges and trading platforms, the designation creates a defined regulatory pathway. Digital commodity exchanges can now register with the CFTC rather than navigating the SEC’s securities framework-a process critics argued was designed for traditional financial instruments and poorly suited to crypto markets.

Institutional investors gain clarity on custody, reporting, and compliance requirements. Asset managers can structure products around commodities designation without fear of retroactive SEC enforcement.

The Five-Category Framework

Project Crypto divides digital assets into five categories:

. Digital commodities (CFTC jurisdiction)

. Digital asset securities (SEC jurisdiction)

. Payment stablecoins (regulated under GENIUS Act)

. Hybrid assets (dual jurisdiction based on use)

. Unclassified tokens (case-by-case determination)

The agencies emphasised that classification can change as a token’s characteristics evolve. Tokens that decentralise over time may transition from securities to commodities status.

Tax Implications

The commodity classification does not change federal tax treatment-digital assets remain property for income tax purposes. However, ETFs holding proof-of-stake commodities will now distribute staking rewards as ordinary income to shareholders, similar to dividend distributions from equity funds.

The classification also provides clearer guidance for cost basis reporting that brokers must begin providing to the IRS for 2026 transactions.

If you have any queries relating to digital commodity regulation or cryptocurrency and blockchain taxation more generally, then please do not hesitate to get in touch.

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It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.