United States: Don’t HODL the Questions: SEC Staff Answers Questions on Crypto Taxonomy

By Thoreau A. Bartmann, Lance C. Dial, and Sarah V. Riddell

The SEC and its staff continue their efforts to clarify the somewhat murky regulatory environment for crypto assets. On Friday, 25 September 2026, the staff of the SEC’s Division of Corporation Finance issued new FAQs on its March Taxonomy (the “Crypto FAQs”).

Some of the key issues addressed in the Crypto FAQ include:

Role of “Functional” and “Decentralized”

The taxonomy defines “functional” and “decentralized” for purposes of classifying crypto assets; the Crypto FAQs clarifies that these definitions are not meant to replace the issuer’s own descriptions of the milestones associated with its own development work. Each issuer may establish its own thresholds of functional and decentralized, which may differ from the SEC’s definitions.

Life After Launch

Software is never finished, and a functional network still needs upgrades and development. That raised the concern that ongoing issuer support could extend an investment contract indefinitely. The Crypto FAQs makes clear that once a system is functional, services to secure, maintain, improve, or enhance it, or to facilitate network effects, including by funding development, are not “essential managerial efforts” (a key element of an investment contract).

In addition, the Crypto FAQs makes clear that promoting current utility of a project or making indefinite aspirational statements that say nothing about profit, likely are not essential managerial efforts.

No Exit by Handoff

The Taxonomy allows a non-security crypto asset to separate from its investment contract when purchasers can no longer reasonably expect the issuer to deliver on its promises. The Crypto FAQs clarifies that separation does not occur if another party assumes those promises, whether affirmatively or by operation of law. This reaches acquisitions and bankruptcy successions, not just handoffs.

Receipts Must Be Receipts

The Crypto FAQs defines a “receipt” as an instrument evidencing ownership of a deposited asset without changing its rights or adding benefits. If the issuer can lend, pledge, or rehypothecate the asset, the instrument is not a receipt. Structures that fail this test lose the receipt treatment the release gives Staking Receipt Tokens and Redeemable Wrapped Tokens.

The Crypto FAQs address some critical issues left open from the Taxonomy, and show that the Staff is willing to offer further guidance as new questions arise.