SEC Follows CFTC With Staff Guidance on Crypto Assets
The US Securities and Exchange Commission has updated its staff FAQ to clarify how federal securities law applies to token issuers, staking receipt tokens, and crypto network services. The move mirrors guidance released days earlier by the Commodity Futures Trading Commission and arrives in the immediate aftermath of a failed Senate cloture vote on the CLARITY Act, the legislation that many had expected to formally divide regulatory jurisdiction over digital assets between the two agencies. For firms preparing crypto financial statements and managing ongoing compliance obligations, the practical question is straightforward: what, precisely, did the SEC say, and what does it mean for how digital assets are classified on the balance sheet?
Background: Why the Timing Matters
The Senate's failure to advance the CLARITY Act left the existing, contested jurisdictional boundary between the SEC and the CFTC intact. Both agencies regulate parts of the digital asset market under pre-existing statutory frameworks, and the absence of new legislation means that boundary remains governed by judicial precedent and staff-level interpretation rather than statute. Against that backdrop, both agencies chose the same week to publish non-binding staff guidance. The coordination is notable even if the documents themselves carry no legal weight.
The CFTC Moved First
The CFTC published its own staff answers to token-issuer questions in the days before the SEC acted. That sequence matters because it signals a degree of inter-agency alignment on where each regulator sees its jurisdiction starting and stopping, at least at the staff level. Neither document has legal force, but together they sketch a working map that compliance teams and auditors can use while waiting for Congress to act.
What the SEC FAQ Actually Says
The SEC was explicit that its updated FAQ is non-binding staff guidance. The agency stated that the document has "no legal force or effect," does not amend applicable law, and creates no new obligations. That caveat matters enormously for how firms should treat it in their audit files: it is interpretive context, not a safe harbour.
Token Buyback Programs
The SEC addressed one of the most commercially significant questions in the market: whether a protocol's token buyback mechanism constitutes an investment contract under the Howey test. The agency's position is that buybacks conducted by a token issuer do not automatically satisfy the Howey criteria where a crypto system is genuinely functional and no central party controls it. The logic tracks the broader "sufficiently decentralised" framing the SEC has applied in prior enforcement actions: if there is no central party making managerial efforts on behalf of token holders, then a buyback mechanism may not represent the kind of entrepreneurial undertaking that Howey requires. The word "necessarily" carries the analytical weight here. The SEC is not granting a blanket exemption; it is describing a factual threshold that must be demonstrated case by case.
Network Services and Functionality
The FAQ extends a similar framework to services that secure, maintain, improve, or enhance a crypto network, or that facilitate network effects. Where a system is functional, the provision of those services does not, in the SEC's current view, automatically satisfy the Howey test's managerial-efforts prong. Again, the operative word is "necessarily." Firms providing infrastructure services, node operation, or liquidity provision should document the functional status of the underlying network at the time of any assessment rather than relying on a general reading of this guidance.
Staking Receipt Tokens
The guidance also touched on staking receipt tokens, the instruments issued to users who delegate assets to a staking protocol in return for a liquid representation of their position. The SEC stated these instruments would not always classify as securities. That is a meaningful softening of the enforcement posture that had previously treated many staking arrangements as unregistered securities offerings. It does not, however, resolve the question entirely: "not always" still leaves room for fact-specific determinations, and the analysis will depend on the degree of centralisation and the nature of the return generated.
Hester Peirce's Departure and the Commission's Composition
Commissioner Hester Peirce, known informally as "Crypto Mom" for her consistent advocacy of clearer, more permissive digital asset regulation, announced on the same Friday that she would leave the SEC effective 2 October. She is expected to join the Regent University law school in Virginia as an associate professor from November. Her departure reduces the five-member commission to three: Chair Paul Atkins and Commissioner Mark Uyeda, both Republicans, alongside one Democratic seat. The two remaining Democratic seats and Peirce's seat were unfilled as of the following Monday, with no announcement from President Trump on potential nominees.
What a Reduced Commission Means for Rulemaking
A three-person commission can still act, but the bipartisan character of the agency is materially reduced for the period before new commissioners are confirmed. Major rulemaking typically requires a full or near-full commission to carry political legitimacy and withstand legal challenge. The practical effect is that formal, binding crypto rulemaking is unlikely to move quickly in the near term, making staff-level guidance the primary signal available to the market. Firms should treat that signal as useful but inherently provisional.
Accounting and Reporting Implications for B2B Readers
For accounting firms, CFOs, and auditors working on digital asset portfolios, the SEC's updated FAQ has several layers of relevance to crypto financial statements and classification decisions.
Securities Classification and ASC 350-60
Under US GAAP, the accounting treatment for a digital asset depends in part on whether it is a security. Assets classified as securities fall under different measurement and disclosure regimes than those treated under ASC 350-60, which applies the fair value model introduced by FASB. The SEC's guidance, while non-binding, informs the legal analysis that underpins that classification decision. Auditors reviewing management's classification of a staking receipt token or a governance token with an active buyback programme now have a staff-level SEC position to reference when documenting the Howey analysis in their working papers.
It is worth being precise about the limits here. ASC 350-60 itself does not depend on SEC staff guidance; it applies to qualifying crypto assets regardless of how the SEC characterises them. But the securities-or-not question often arises in parallel during an audit, particularly for assets that were acquired on secondary markets or issued by entities with ongoing development programmes. This guidance gives auditors a contemporaneous regulatory data point, even if it is not dispositive.
Staking Receipts on the Balance Sheet
The treatment of staking receipt tokens under crypto US GAAP accounting has been an open question for some time. If a receipt token is not a security, it is more likely to be evaluated as a crypto asset under ASC 350-60 or, depending on its characteristics, as a financial instrument or a contractual right. The SEC's position that these instruments do not always constitute securities narrows the range of classification scenarios that auditors need to evaluate, though it does not eliminate the need for a detailed fact-specific analysis. For firms with material staking positions, the guidance supports a more structured internal classification policy backed by written documentation of each token's functional attributes.
Wrapped Tokens and Network Service Tokens
The SEC's commentary on network service providers has indirect relevance to wrapped token arrangements. Wrapped tokens often exist precisely to facilitate network interoperability and liquidity, and the entities or protocols that issue them frequently provide exactly the kind of maintenance and network-enhancement services the FAQ addresses. Where a wrapped token issuer can demonstrate that the underlying system is functional and decentralised, the SEC's current framing suggests the issuer's activities are less likely to be characterised as the provision of managerial efforts to investors. That characterisation matters when assessing whether the wrapped token itself could be treated as an investment contract, and therefore whether it triggers broker-dealer registration or securities disclosure requirements that would affect a holding firm's balance sheet presentation.
Practical Steps for Compliance Teams
Given the non-binding nature of the guidance, the appropriate response is methodical documentation rather than a wholesale reclassification of existing positions.
Immediate Actions
First, review any digital asset positions where the securities classification was previously uncertain, particularly staking receipt tokens and governance tokens associated with buyback mechanisms. Document the functional status of the underlying network at the assessment date and cross-reference the SEC FAQ as part of the Howey analysis in audit working papers. Second, ensure that the CFTC's parallel guidance is reviewed alongside the SEC's, since the two documents together define the current inter-agency framing. Third, note the non-binding status explicitly in any internal memoranda: this guidance can be withdrawn or revised at any time, and its absence of legal force should be reflected in how reliance on it is characterised in client-facing documents.
For firms using digital asset accounting software, the classification flags assigned to staking receipt tokens and governance tokens should be reviewed against this updated regulatory context. Any software-driven classification that has been treating these assets as presumptive securities may now warrant manual review, but the review should be documented as a judgement call, not as an automatic consequence of the FAQ.
For a detailed breakdown of how ASC 350-60 interacts with the fair value measurement requirements that apply once an asset clears the securities question, see our earlier analysis of FASB's crypto fair value rules and what ASC 350-60 means for financial statements. The SEC FAQ also connects directly to the staff positions analysed in our coverage of the SEC's earlier FAQ on token buybacks and network upgrades.
Frequently Asked Questions
Is the SEC's updated FAQ legally binding?
No. The SEC stated explicitly that the FAQ has no legal force or effect, does not alter applicable law, and creates no new obligations. It reflects the current interpretive position of SEC staff and can be revised at any time.
Does this guidance mean staking receipt tokens are definitely not securities?
No. The SEC said staking receipt tokens "would not always" be classified as securities, which preserves fact-specific analysis. Whether a particular token qualifies depends on the degree of centralisation of the staking arrangement and the nature of any return generated.
How does the failure of the CLARITY Act affect this guidance?
The CLARITY Act, had it passed, would have established a statutory framework dividing jurisdiction between the SEC and CFTC. Its failure means that boundary remains contested and governed by precedent. The staff guidance from both agencies is partly a response to that legislative vacuum, but it carries far less durability than a statute would.
How should auditors reference this FAQ in working papers?
Auditors should cite the FAQ as a contemporaneous regulatory data point in the Howey analysis for any asset where securities classification is at issue. The non-binding status must be noted. The FAQ supports but does not replace a detailed fact-specific legal analysis, and reliance on it should be characterised accordingly in audit documentation.
What does Hester Peirce's departure mean for upcoming SEC crypto rulemaking?
With the commission reduced to three members, all Republican, the bipartisan composition expected for major rulemaking is absent until new commissioners are confirmed. Formal binding rules on crypto are unlikely to advance quickly in that environment, making staff guidance the primary regulatory signal in the near term.
Source: Cointelegraph