Former SEC Chair Clayton Says 'Vast Majority' of Crypto Tokens are Securities – Here's What You Need to Know
Jay Clayton – former chairman of the U.S. Securities and Exchange Commission (SEC) – expressed a view of the crypto market on Wednesday that largely mirrors that of his current successor, Gary Gensler.
“I’ve said this for a long time: I think the market has evolved, but many, if not the vast majority, of the tokens that were sold for cash would fall within the definition of a security in America,” said Clayton, while speaking at the R3 CordaDay conference on Wednesday, according to TechCrunch.
As Clayton explained, the definition of a “security” is “intentionally broad and flexible.” That said, regulators often use the “Howey Test” as a basic benchmark for identifying whether a given financial asset qualifies as an investment contract, and therefore a security.
To pass the test, an asset must be sold to raise money from investors, who have an expectation of profits based on the efforts of others.
For identifying securities, the SEC has given little public guidance beyond reference to this test. However, the commission’s recent lawsuits against Binance and Coinbase alleged that a host of large-cap cryptos trading on their platforms were securities, including Solana (SOL), Cardano (ADA), Polygon (MATIC), BNB, and Binance USD (BUSD).
Not all should be lost for crypto securities, however: according to Clayton, some assets once labeled as securities shake that label over time if it develops the right utilities.
The ex-chairman cited Broadway show tickets as an example. If someone bought 1000 tickets for $10, then told their friends and family that they could resell them for 10X that price later, then that’s a security. “But if you just buy the ticket 10 years later, it’s just a ticket,” he explained.
“The confusion around that,
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