ANALYSIS: Are Tokens Securities? SEC Staff Issues Framework

The SEC’s Strategic Hub for Innovation and Financial Technology (FinHub) today released a 13-page framework for market participants to analyze whether a digital asset is a type of security known as an “investment contract.” The framework analysis is rooted in the Supreme Court’s Howey decision, a case decided nearly 73 years ago. Under Howey, an “investment contract” exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.

The FinHub staff framework builds on familiar principles and uses well-known precedents. By issuing the framework, ...