It may be confusing, if you are not a lawyer with securities law background, to understand some of the current chatter about Crypto and whether it is a security such that it need be registered with the SEC.  Before the present administration, the SEC was aggressive in this area; the new SEC is attempting to make rules to guide people in the crypto industry.

Quick primer: a US Supreme Court case now almost a century ago (you may see this case referred to as Howey) defined a security as the offering of a reward for providing money to an organization managed by others and sharing in the profits.  Typically that security is a share of stock or a bond.  In Howey, the business was managing orange groves and the investor got a share of profits from the oranges; no “stock” or debt instrument was issued. It can be seen readily that the economic bargain is the same: I give you money, you make a profit from it and you give me money back and my interest increases in value– whether a stock certificate is generated is irrelevant.

Some early crypto-type interests were digital interest or NTFs (non-fungible tokens) issue by emerging enterprises.  You bought an NFT, the issuing company took your money and created a club or resort or restaurant, you had rights to go there, and by the way the NFT could be sold to third parties.  These NTFs were often hyped by celebrities and appreciated in value while the founders either or both of built a new enterprise and sold their own appreciated coins.  These deals often looked a lot like the Howey case (you didn’t get a stock or a return from the business, or a tiny return, but you earned money by selling the NTF), and the SEC was active against such schemes.

There is another category of digital assets, so-called meme coins, which are issued and are traded but do not create an investment in an enterprise.  These sometimes represent interests in works of art, comic images and the like. It may be that the new SEC will find these not to be securities.

The SEC is now doing a deep dive into identifying how to approach the almost endless variants of coin issuances and NTFs with a goal of creating predictability to the marketplace.