SEC Issues Crypto Securities Disclosure Statement as IRS DeFi Broker Rule Repealed

The Securities and Exchange Commission (SEC) Division of Corporation Finance issued a new statement about SEC staff’s experience with SEC disclosure requirements for crypto-related offerings that qualify as securities. The statement distinguishes between tokens that are themselves securities, those sold as part of investment contracts, and those falling completely outside SEC jurisdiction, but does not purport to give guidance on the application of the Howey test. This statement follows the SEC’s recent statements on memecoins, proof-of-work mining and stablecoins, continuing the SEC’s efforts to provide incremental clarity on the regulation and classification of digital assets.[1] 

Separately, President Donald Trump eliminated the controversial Internal Revenue Service (IRS) digital asset broker reporting rule, which would have required decentralized finance (DeFi) platforms (including front-ends) to collect and report taxpayer information like traditional brokers, despite their fundamental technological differences.[2]

SEC Division of Corporation Finance Provides Disclosure Information for Crypto Securities

The SEC’s Division of Corporation Finance issued a statement sharing its observations and recommendations on disclosure practices for crypto-related securities. Rather than creating new requirements, the Division explained how existing disclosure frameworks apply to two scenarios: companies issuing traditional (debt or equity) securities while operating in the crypto space, and offerings involving cryptoassets that constitute investment contracts.

Notably, the Division clarified that “[n]othing in this statement is intended to suggest that registration or qualification is required in connection with an offering of a crypto asset if the crypto asset is not a security and not part of or subject to an investment contract,” acknowledging the diverse nature of cryptoassets and again confirming that coins or tokens can be offered outside the SEC registration regime.

The Division’s observations focused on how companies have applied disclosure requirements across various SEC forms and regulations to crypto offerings (including forms used by foreign private issuers and Regulation A offerings). For business description disclosures, the Division has observed effective practices that explain network architecture, consensus mechanisms, transaction validation, and governance systems. Similarly, for risk factor disclosures, companies have addressed technology vulnerabilities, cybersecurity concerns and regulatory uncertainties specific to crypto operations.

Regarding securities descriptions, the Division highlighted examples of effective practices it has observed, including detailed explanations of holder rights, technical specifications for accessing and transferring assets, and information about token supply mechanisms. The guidance also addressed disclosures about directors and executive officers, noting that even if a crypto entity lacks traditional management roles, disclosure about those performing similar functions is still required.

Commissioner Hester Peirce issued a separate statement characterizing the Division’s observations as “a small step in identifying relevant disclosures so that investors have material information about the projects and businesses in which they are investing.”  She noted that the statement might be helpful for four specific categories of companies: (1) those developing a blockchain and issuing debt or equity; (2) those registering the offering of an investment contract in connection with initial coin offerings; (3) those issuing crypto assets that themselves are securities; and (4) those integrating non-fungible tokens into video games and is issuing debt or equity.

Presidential Action Ends Controversial IRS DeFi Broker Rule

President Trump signed legislation eliminating the IRS’s digital asset broker reporting rule, becoming the first US president to sign a crypto-specific bill into law. The rule, finalized in the closing days of the Biden administration, would have required DeFi platforms to comply with tax reporting requirements designed for traditional brokers. The rule had previously been challenged in a December 2024 lawsuit filed by three digital asset organizations, which argued it violated the Fourth and Fifth Amendments and exceeded the IRS’s statutory authority.[3]

[1]See Katten’s Quick Reads posts on the Division’s recent guidance here and here.

[2]See Katten’s Quick Reads post on the IRS digital asset broker reporting rule here.

[3]Id.