SEC & CFTC Declare Ethereum a Commodity: Institutional Crypto Boom Incoming?

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SEC & CFTC issued regulatory clarity

Back in 2018, on April 29th, I discussed Ethereum (ETH) and explained why it could be considered a commodity under US law, based on insights from a crypto industry leader, Dr. Emin Gun Sirer.

Historically, the biggest obstacle to large institutions investing in ETH and other digital assets has been unclear regulations. The lack of clarity about whether these assets are considered securities or commodities created legal concerns, made secure storage difficult, and complicated efforts to meet regulatory requirements, ultimately causing investors to be cautious.

Summary

  • SEC and CFTC issued a joint memorandum formally classifying most decentralized digital assets, including Ethereum, as commodities under US law.
  • The framework shifts oversight toward the CFTC and signals a move away from enforcement-driven regulation toward clearer, principles-based guidance.
  • Regulatory clarity is expected to ease compliance concerns and open the door for greater institutional participation in crypto markets.

As a researcher following the crypto space, I was particularly interested in William Hinman’s speech a couple of months after I published my article on June 14, 2018. He was the former Director of Corporation Finance at the SEC, and in his speech, he stated that, due to how decentralized the Ethereum network is, the buying and selling of Ether (ETH) at that time didn’t qualify as securities transactions. This was a significant development, suggesting ETH was behaving more like a commodity than a security and offering some much-needed, though temporary, clarity on its legal status.

Litigation to Determine ETH’s Legal Classification

Without clear rules from the SEC or CFTC, legal disputes arose questioning whether ETH and similar digital assets should be classified as regulated securities or commodities.

Recent lawsuits from 2023-2024, like those against KuCoin by New York’s Attorney General and the SEC’s cases involving companies offering liquid staking, created confusion about whether ETH and staking services should be legally considered securities. Initially, courts seemed likely to classify them as such, but developments in 2025 suggested a change in thinking – viewing staking as a simple service rather than a security. This shift has implications for how ETH and related assets are regulated.

The SEC & CFTC Issued a Memorandum of Understanding (MOU)

In March 2026, the SEC and CFTC released a significant agreement that finally clarifies how digital assets, including ETH, are regulated in the U.S. This agreement officially classifies ETH as a commodity – a key step that removes a major obstacle that had been preventing widespread use by institutional investors since my article on the topic eight years prior, and the initial interpretations that followed.

The new guidance represented a change in approach, moving away from strict enforcement and toward a system based on core principles. It clearly stated that most digital assets aren’t considered securities, which meant they would be regulated by the CFTC instead of the SEC. This allowed these assets to be traded on established derivatives markets.

The CFTC has signaled it will consider digital tokens as commodities if they operate without central control. They define a truly decentralized system as one where no single person or group controls how it works or makes decisions. Importantly, the agency recognizes that a token initially offered as an investment can become a commodity if the network backing it becomes sufficiently decentralized and operational.

Digital commodities are assets built into a working system, and currently, 16 digital assets fall into this category. This is a change from how these assets were previously viewed, as they were often considered securities instead.

By late March 2026, just 16 cryptocurrencies made up roughly 78-80% of the entire cryptocurrency market value. Despite the existence of over 37 million unique cryptocurrencies and digital tokens as of early 2026 (according to The Motley Fool), a small number dominate the market.

While there are thousands of cryptocurrencies, only around 10,000 to 17,000 are regularly used or monitored on popular tracking sites like CoinGecko. Many others are either abandoned, fraudulent, or no longer functioning. Bitcoin (BTC) and Ethereum (ETH) dominate the market, making up almost 70% of all cryptocurrencies.

The remaining 14 tokens contribute a combined share of roughly 8% to 10%. 

  1. Bitcoin (BTC)
  2. Ethereum (ETH)
  3. Solana (SOL)
  4. XRP (XRP)
  5. Cardano (ADA)
  6. Chainlink (LINK)
  7. Avalanche (AVAX)
  8. Polkadot (DOT)
  9. Hedera (HBAR)
  10. Litecoin (LTC)
  11. Dogecoin (DOGE)
  12. Shiba Inu (SHIB)
  13. Tezos (XTZ)
  14. Bitcoin Cash (BCH)
  15. Aptos (APT)
  16. Stellar (XLM) 

According to the agreement, tokens that are essential to how a decentralized cryptocurrency system works – like those used to pay for transactions or allow users to vote on changes – usually aren’t considered investments under the legal definition of a ‘security.’

Sign’s CEO, Xin Yan, believes the new joint regulations from the SEC and CFTC will be a major benefit to the market. He expects this framework to unlock significant investment from institutions and help mature the industry, moving it away from its early, unregulated stage.

As an analyst, I’ve been closely following the recent MOU from the SEC and CFTC, and it’s a big deal for the NFT collectible space. Essentially, they’ve established a framework – a ‘token taxonomy’ – that generally categorizes most digital collectibles as *not* being securities. However, it’s not a blanket exemption. If a collectible is divided into fractional ownership pieces, or if buyers are led to believe profits will come from someone else managing the asset, those could still be considered securities under this guidance.

As a crypto investor, I’ve been following the SEC’s guidance on NFTs closely. Basically, they’ve said that just because an NFT has royalties built in doesn’t automatically make it a security. However, if a project *promises* you’ll earn money passively, or that they’ll actively manage the NFT to generate profits for you, then the SEC could view it as an investment contract – and therefore a security. It all comes down to how the NFT is marketed and what kind of returns are promised.

The NFT market is shifting towards greater stability. The initial boom of speculative profile picture NFTs has slowed, but we’re now seeing more NFTs focused on practical uses, like representing real-world assets, boosting brand connections, and facilitating sports betting.

Digital tools are useful assets like membership passes or digital credentials, and they aren’t considered securities.

Stablecoins that meet the requirements of the GENIUS Act will not be legally considered securities.

In March, the total value of stablecoins reached a new high of $320 billion. However, a report by the Financial Action Task Force (FATF), citing data from Chainalysis, revealed that stablecoins were linked to 84% of illegal activity involving virtual assets in 2025. This often involved transactions with unregulated wallets and sophisticated methods to hide where the money came from.

Xin Yan, CEO of the Singapore-based firm Sign, which is developing infrastructure for national digital currencies, believes the Federal Reserve’s cautious approach to launching a Central Bank Digital Currency (CBDC) – even with over 49 similar projects happening worldwide – allows private stablecoins to thrive. He explains that this slow adoption also means U.S. banks can keep their control over the financial system and maintain their dominance in the market, rather than being challenged by a government-backed digital currency. Yan believes this is leading to a global division of financial systems.

China is developing its own digital currency, the e-CNY, primarily to strengthen government control, whereas the U.S. is focusing on stablecoins to keep the dollar as the world’s main currency. This difference in approach is largely seen as a way for the U.S. to protect its current position in the global payment system from potential competition from China.

Digital securities are traditional financial instruments represented in a digital, or ‘tokenized,’ form. Importantly, even though they exist on a blockchain, they are still legally considered securities.

Safe Harbors for Blockchain Activities

According to our shared understanding, certain basic actions typically aren’t considered securities transactions.

Protocol Mining: Proof-of-work validation and mining pool participation.

As a researcher, I’ve been looking into protocol staking, which essentially involves using proof-of-stake validation. This can include options like custodial and liquid staking, but it relies on service providers primarily handling the administrative tasks. It’s less about them actively validating and more about them managing the process.

Wrapping: Depositing assets for one-to-one redeemable tokens across chains.

Airdrops: Distributions where recipients provide no consideration (money or services) in exchange. 

Coordination of Digital Asset Legislation and its impact on Tokenization 

As a researcher following the US digital asset space, I’ve observed a significant shift in how these assets are regulated. The passage of the GENIUS Act on July 18, 2025, along with a new agreement and understanding between the SEC and CFTC, marks a historic change in this field.

With the potential passage of the CLARITY Act, the long-standing disagreements about which government agencies oversee digital assets are coming to an end. This change is expected to create more stable markets and bring crypto business back to the United States – the world’s biggest crypto market, currently accounting for around 23.6% of global revenue and projected to grow in 2025 – and will also speed up the process of turning traditional financial assets into digital tokens.

Wojciech Kaszycki, Chief Strategy Officer at BTCS SA (formerly Vakomtek S.A.), a Polish technology company based in Warsaw and the first company in Europe focused on managing digital assets as a treasury function, says the recent clarity from the SEC and CFTC is a positive development. He believes it will accelerate the process of tokenizing global financial markets, making it possible to buy fractions of valuable assets – like private loans, property, and infrastructure – that were previously difficult to trade. This tokenization will simplify investing, potentially helping more people achieve financial security and participate in economic growth.

Looking at the digital asset market as of early April 2026, we’re seeing a lot of price swings. Bitcoin is currently fluctuating between $65,000 and $69,000, largely due to increased geopolitical tensions in the Middle East and a general pullback from riskier investments. However, I’m noticing that projects centered around Artificial Intelligence and the tokenization of Real-World Assets are holding up surprisingly well, often performing *better* than the market as a whole. The commitment from industry leaders like BlackRock CEO Larry Fink, who views tokenized funds as the future of finance, really highlights the potential of this technology.

In his 2026 letter to investors, Larry Fink likened the current development of tokenization to the early days of the internet in 1996. He believes tokenization will significantly reshape the global financial system, making investments quicker, less expensive, and easier for everyone. This will change how ownership of assets is tracked and exchanged.

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2026-04-03 18:04