What changed, and what didn’t

The headline this week is that U.S. regulators have declared Bitcoin, Ethereum and XRP are not securities. That is true, but it isn’t new. CFTC Chairman Michael Selig surfaced the claim in an October 5 speech at a symposium at Fordham University School of Law, pointing back to a joint SEC-CFTC interpretation the SEC adopted on March 17 and that took effect March 23, according to Komposite News. What’s actually new is what Selig attached to it: a CFTC rulemaking proposal for how retail crypto trading gets regulated going forward, plus an advance notice of proposed rulemaking covering margin, leverage and lending that the agency opened for public comment the same day, according to MarketIV.

The distinction matters because the March interpretation is doing a lot of regulatory work on its own, and because it can be undone more easily than a law passed by Congress.

Key Takeaways

  • The SEC and CFTC’s joint interpretation, adopted March 17 and effective March 23, sorts crypto assets into five categories: digital commodities, digital collectibles, digital tools, stablecoins and digital securities.
  • Digital commodities, including Bitcoin, Ethereum, XRP, Solana, Stellar and Tezos, are “not securities in principle” because their prices come from a functioning system and supply and demand, not managerial effort, per MarketIV.
  • CFTC Chairman Michael Selig cited the interpretation on October 5 while unveiling a new federal framework for retail crypto trading and an advance notice of proposed rulemaking on margin, leverage and lending.
  • A crypto asset can still trigger securities law if it is sold as part of an investment contract, and a 2023 federal ruling found Ripple’s direct institutional XRP sales qualified as such, according to 24/7 Wall St.
  • The interpretation is a Commission interpretation, not a formal rulemaking, meaning a future SEC could withdraw it without going through notice-and-comment rulemaking.

What the interpretation actually says

The joint interpretation’s core move is a taxonomy, not a blanket exemption. It splits crypto assets into five buckets, and the first three, digital commodities, digital collectibles and digital tools, are treated as not securities in themselves, per MarketIV. Digital commodities are defined by where their value comes from: a functioning crypto system and supply and demand, rather than the managerial efforts of a company. MarketIV lists Bitcoin, Ethereum and XRP, alongside Solana, Stellar and Tezos, as examples. Komposite News reports a longer list drawn from the original March release, Release No. 33-11412, that also includes Aptos, Avalanche, Bitcoin Cash, Cardano, Chainlink, Dogecoin, Hedera, Litecoin, Polkadot, Shiba Inu, Algorand and LBRY Credits, the token tied to a company the SEC had previously sued.

The interpretation carries an explicit limit: it “does not supersede or replace the Howey test, which is binding legal precedent,” per the release text cited by Komposite News. It also warns that an asset classified as a digital commodity can still fall under securities law if it’s sold as part of an investment contract, a point both MarketIV and 24/7 Wall St. flag. Komposite News notes the three sitting SEC commissioners, Paul Atkins, Hester Peirce and Mark Uyeda, voted for it with no dissent, and that it was exempt from standard notice-and-comment procedure because it is interpretive rather than a rule, even though the White House budget office designated it a “major rule.”

The rulemaking built on top of it

Selig used the March interpretation as the foundation for a new retail trading structure he outlined October 5. Under the proposal, spot exchanges would remain centered on state money-transmitter rules, while exchanges offering margin, leverage or lending move to federal oversight, and derivatives venues such as perpetual futures platforms form a third tier, according to Digital Today. MarketIV describes this as a proposed “Crypto Asset Market” segment that would let eligible exchanges operate under federal regulation, with exchanges that commingle customer assets required to show proof of reserves. 24/7 Wall St. adds that the CFTC has split its proposals into two parts, one for leveraged retail trading through licensed brokers and another letting exchanges register as designated contract markets, and that both remain drafts pending a public comment period before publication in the Federal Register.

Why XRP’s status isn’t fully settled

XRP’s inclusion drew the most attention among the named assets, but outlets diverge on how final that status is. MarketIV and Digital Today both report XRP named alongside Bitcoin and Ethereum as a digital commodity not a security in principle. 24/7 Wall St. adds the caveat that a 2023 federal judge ruled Ripple’s direct institutional sales of XRP qualified as investment contracts, meaning some categories of sales could still draw securities scrutiny even with the commodity label attached. Komposite News goes further, arguing the “not a security” framing circulating this week describes a March decision, not a new one, and that because it’s an interpretation rather than a binding rulemaking, a future commission “could withdraw it without a rulemaking.”

What to Watch

The CFTC’s advance notice of proposed rulemaking on margin, leverage and lending is open for public comment, with Digital Today reporting a 60-day comment window following Federal Register publication. 24/7 Wall St. notes the broader exchange-registration and retail-trading proposals remain drafts that will only carry legal force once the CFTC adopts a final version after that comment period closes.

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