Author | Asher (@Asher_ 0210)
On October 20, Chainlink Labs, Cardano Foundation, Hedera, Aptos Labs, Ava Labs, and Stellar Development Foundation jointly submitted comments to the U.S. Securities and Exchange Commission (SEC), requesting that the definition of "digital commodities" and their non-security status be explicitly written into the text of the proposed "Crypto Asset Regulatory Rules."
It is worth noting that the tokens associated with the above six institutions—LINK, ADA, HBAR, APT, AVAX, and XLM—have already been classified as digital commodities in an interpretive document released by the SEC in March of this year. Since there is already classification recognition, why are the six institutions still jointly requesting changes to the rules?
From Regulatory Interpretation to Formal Provisions, What Is the Difference?
On March 17 of this year, the U.S. SEC released a crypto asset regulatory interpretation, listing digital commodities as one of five categories of crypto assets and citing BTC, ETH, and the six tokens corresponding to the institutions in this joint submission. According to that document, the value of digital commodities mainly comes from network operation and market supply and demand, rather than from expectations of profits based on the key managerial efforts of the project team.
On August 18, the U.S. SEC further proposed the "Crypto Asset Regulatory Rules," intending to establish a dedicated issuance regime for certain investment contracts involving crypto assets, including arrangements such as registration exemptions. The proposal aims to clarify what rules crypto projects should follow when raising funds through transaction arrangements involving securities law. However, the definition of digital commodities and their non-security status appear only in explanatory content such as the preamble of the proposal and have not yet been explicitly written into the formal provisions.
The "preamble" mainly explains the background and rationale for the regulator's rulemaking, while the formal provisions directly set out the scope of application and specific requirements of the rules. The six institutions hope that the definition of digital commodities and their non-security status can become part of the formal provisions.
This request concerns the stability of the existing classification. The U.S. Administrative Procedure Act in principle requires substantive rules to go through notice-and-comment procedures, while interpretive rules are generally not subject to the same procedural requirements. Incorporating the digital commodity classification into formal rules would help raise the procedural threshold for future adjustments to the relevant provisions and reduce market concerns about changes in regulatory stance.
For development teams, trading platforms, and ecosystem service providers, a more stable classification helps reduce compliance uncertainty in long-term operations. Although writing it into the formal text cannot rule out future revisions or judicial challenges, it can give the existing classification a clearer rule-based foundation.
If Tokens Are Not Securities, How Are Related Transactions Determined?
Another core demand of the six institutions is that the U.S. SEC clearly distinguish between the token itself and the investment contract formed around the token. Even if a digital commodity was once sold as the subject matter of an investment contract, the token itself should not be deemed a security on that basis. For example, a project sold tokens in its early stage to raise development funds and promised to create returns for purchasers through team building; such a sales arrangement may constitute an investment contract. However, after the relevant promises have been fulfilled or are no longer valid, whether token transactions between third parties still constitute an investment contract should be judged separately.
In response to this issue, the six institutions suggest that, in principle, when the issuer's promises regarding key managerial efforts are no longer valid, secondary market transactions between third parties should be presumed not to constitute an investment contract. This concerns whether the legal relationship formed by the token's early financing will continue to affect subsequent market transactions. In addition, the six institutions also proposed that a project's token transactions should not be deemed to constitute an investment contract merely because the project did not adopt the compliance protection mechanism provided in the proposal. Whether an investment contract is constituted should still be judged based on the specific transaction arrangement.
Staking activities likewise require clear criteria for judgment. Even if the underlying token is a digital commodity, whether the staking arrangements provided by service providers involve securities law still needs to be analyzed in light of their duties and return promises. The six institutions therefore request that the U.S. SEC further clarify the rules applicable to the relevant activities.
In a staff FAQ released in September, the U.S. SEC has provided supplementary explanations on issues such as staking receipt tokens, but these guidelines do not have legal effect. For the market, after asset classification, what still needs to be resolved is which transactions and services are subject to securities law and under what conditions the relevant constraints terminate.
Legislation Stalled, the Importance of Administrative Rules Further Rises
The six institutions' demand for rule stability is also related to the progress of U.S. crypto market structure legislation. With Congress not yet having passed a comprehensive regulatory framework, how the U.S. SEC formulates rules will directly affect how much legal certainty the industry can obtain in the near term.
On September 15, the Senate voted on a procedural motion to advance the "Digital Asset Market Clarity Act" (CLARITY Act), with 49 votes in favor and 50 against, falling short of the required 60-vote threshold, and the bill's advancement was blocked. International law firm DLA Piper analyzed that, considering the remaining time in the current Congress and other legislative priorities, the possibility of completing legislation on the bill within the year has been greatly reduced. If it cannot be passed before the end of the current Congress, it would typically need to be reintroduced and advanced in the new Congress in 2027.
Against the backdrop of a stalled legislative process, the final text of the "Crypto Asset Regulatory Rules" becomes even more important. For the six institutions and their ecosystem participants, while waiting for legislative progress, pushing the U.S. SEC to incorporate the existing classification into formal provisions is a realistic choice to reduce current regulatory uncertainty.
How Much of the Six Institutions' Demands Can Ultimately Be Implemented?
The demands of the six institutions are not entirely opposed to the U.S. SEC's current regulatory direction. When releasing the classification interpretation in March of this year, U.S. SEC Chairman Paul Atkins stated that most crypto assets themselves are not securities and that investment contract relationships can also terminate. He also positioned this interpretation as a transitional arrangement while Congress advances market structure legislation. What the six institutions are pushing for this time is to give this regulatory stance more stable rule-based protection.
However, endorsing the direction of classification does not mean that the U.S. SEC has agreed to write it into formal provisions. As of now, the modification requests raised in this joint submission are still awaiting a response. Especially after congressional legislation was blocked, how many boundaries the U.S. SEC is willing to clarify through its own rules will be key to whether the six institutions' demands can be implemented.
Around this proposal, parties still differ on how the U.S. SEC should advance this set of rules. Bitwise and the Hyperliquid Policy Center hope to further clarify token classification, expand the scope of compliance protection, and clarify rules on airdrops and token buybacks. These views share common ground with the demands of the six institutions, all hoping that the U.S. SEC will translate its regulatory shift into more specific and reliable standards. Former U.S. SEC enforcement official John Reed Stark and Duke University scholar Lee Reiners, by contrast, demand that the proposal be withdrawn, arguing that it exceeds the U.S. SEC's authority and weakens investor protection.
Writing the definition into the formal text can improve the stability of the classification, but the rules themselves still need to be grounded within the U.S. SEC's statutory authority. The above objections target the entire proposal rather than specifically the demands of the six institutions, but they also show that even if the relevant demands are adopted, the final rules may still face legal challenges. The long-term certainty the six institutions hope to secure depends both on how the U.S. SEC puts it into writing and on whether these provisions can withstand subsequent judicial review.
