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On Jan. 28, 2026, the Division of Corporation Finance, Division of Investment Management and Division of Trading and Markets of the U.S. Securities and Exchange Commission issued a joint staff statement clarifying the application of federal securities laws to tokenized securities.
The core message is a reaffirmation of technology neutrality: The SEC maintains that the format in which a security is issued, whether on a legacy database or a public blockchain, does not alter its fundamental legal status or the regulatory obligations of its issuers. This guidance arrives as the SEC, under Chair Paul Atkins’ “Project Crypto” initiative, seeks to replace an enforcement forward approach with a more structured, predictable taxonomy for digital assets.
Key Takeaway: Format Does Not Change Legal Status
The SEC staff’s position is unambiguous in stating that putting a security on a blockchain does not strip it of its status under federal law. Regardless of the offering format, the Securities Act requires every offer and sale of a security to be registered with the Commission unless a specific exemption from registration is available. Furthermore, stock remains an “equity security” under both the Securities Act and the Exchange Act, whether it is issued in traditional or tokenized form. The staff clearly proclaimed that the methods by which holders are recorded, such as on-chain versus off-chain records, simply do not affect the application of the federal securities laws.
Two Primary Tokenization Models Identified by the SEC
The statement distinguishes between how securities are brought on-chain by identifying different risk profiles for various models. In an issuer-sponsored model, an issuer or its agent integrates Distributed Ledger Technology directly into its master securityholder file. This direct integration means that a transfer of a crypto asset on a network functionally results in a transfer of the security on the official master file. Alternatively, an issuer may use a crypto network indirectly to notify the issuer to record a transfer on off-chain database records. Under these models, a single class of securities can be issued in multiple formats, and if a tokenized security confers substantially similar rights as its traditional counterpart, it may be considered the same class for regulatory purposes.
The SEC also identified risks associated with third party-sponsored tokenized securities, where unaffiliated entities tokenize an existing security. In a custodial model, a third party holds the underlying security in custody and issues a crypto asset representing that ownership interest, though this format does not change the application of securities laws. In a synthetic model, a third party issues a crypto asset that provides synthetic exposure to an underlying security, often taking the form of a linked security or a security-based swap. These instruments carry additional regulatory considerations, as security-based swaps may not be offered to non-eligible contract participants unless they are registered and effected on a national securities exchange.
Practical Implications and Strategic Outlook
While the SEC enforces “technology neutrality” at the classification level, market participants must remain mindful of persistent operational challenges. The existing securities framework was not originally designed for on-chain market structure, and the staff statement does not resolve whether on-chain ledgers can legally replace traditional books and records for transfer agents or registered custodians. Additionally, third-party tokenization introduces unique counterparty risks, such as the potential bankruptcy of the third-party issuer, which would not necessarily affect holders of the underlying security.
The SEC’s statement provides important clarity intended to assist market participants as they prepare necessary registrations. However, market participants should expect ongoing regulatory development and rulemaking as agencies continue to clarify the boundaries between securities, digital commodities and other tokenized instruments. This is particularly relevant given that the Senate Agriculture Committee’s draft legislation on digital commodities explicitly excludes assets that represent an interest in a security, ensuring that most real-world asset tokenization structures remain subject to existing securities regimes rather than a new commodity framework.
Broader Implications of SEC Jurisdiction
This guidance reads as a commonsense discussion of how securities regulation can aspire to be technology neutral. A traditional security recorded or transacted using blockchain technology remains a security.
That is separate from the fluid state of SEC jurisdiction over crypto asset offerings that could arguably be considered securities as investment contracts under Howey. The regulatory authorities and jurisdiction of the SEC, the Commodities Futures Trading Commission and other regulators for crypto assets that might previously have been seen as linked to investment contracts are being debated in Congress and at those agencies.
Beyond its taxonomy framework, this guidance sends a clear message that for traditional and clearly defined securities transacted using blockchain technology, the SEC’s jurisdiction is settled, and market participants should focus on how the SEC will apply rules. That is in sharp contrast to crypto assets subject to investment contract analysis, where jurisdiction itself remains unsettled, and which are not substantively addressed by this guidance.
For questions about this alert, contact the authors or your McGuireWoods contact. McGuireWoods’ Securities Enforcement & Regulatory Counseling Practice Group is a national leader in securities enforcement defense and broker-dealer and investment adviser regulatory counseling. Anchored by former SEC and Financial Industry Regulatory Authority attorneys from enforcement and trading and markets as well as prominent federal prosecutors, the team manages complex securities investigations at every stage — from informal inquiries and routine exams through investigations, litigation and appeals — all while staying at the forefront of developing issues confronting the securities industry.