The United States Securities and Exchange Commission’s latest guidance on digital assets has sparked criticism, as legal experts argue that, despite some improvements, the core regulatory standards remain ambiguous for market participants.
Howey test requirements questioned in legal analysis
Attorneys from the law firm Gibson Dunn & Crutcher, in a detailed evaluation letter, highlighted that the SEC failed to clarify the requirement for contractual obligations within the framework of the Howey test—an important legal standard used to determine whether certain assets qualify as investment contracts.
The Gibson Dunn & Crutcher attorneys emphasized in their letter that the SEC has not clearly articulated the contractual obligation requirement when applying the Howey test.
They further noted that the Commission continues to rely heavily on fact-specific analyses and circumstantial evaluations. This approach, the letter argues, does not clearly incorporate key precedents, such as the Ripple case, especially regarding secondary market transactions.
Ongoing uncertainty over token classification
The attorneys warned that the SEC’s approach could further prolong confusion over whether digital tokens are to be regarded as securities, making it harder for industry players to achieve compliance and regulatory certainty.
The analysis pointed out that the current approach may extend ambiguity over whether tokens should be treated as securities.
Moreover, the letter underscored the pressing need for the digital asset sector itself to play a more active role in contributing to clear and lasting regulatory standards, suggesting that more collaborative policymaking is essential to move the landscape forward.
At the heart of the ongoing discussion lies the issue that, despite recent improvements in the SEC’s digital asset guidance, the market still lacks the comprehensive and definitive framework it urgently requires.
