When are crypto assets securities? The SEC’s proposed Regulation Crypto Assets, which builds upon an SEC/CFTC Joint Interpretation, seeks to address this fundamental issue — one that has dogged crypto assets since their creation.

The proposal would add some clarity but also raises questions when applied to the trading of fungible assets.

Reinterpreting Howey for Digital Assets

To accommodate crypto within the existing regulatory regime, the Securities and Exchange Commission is reinterpreting the Howey test, a 1946 US Supreme Court-created test to determine which financial instruments are securities regulated by the Commission and which are not.

The Howey Court …