SEC vs. CFTC: Defining "Commodity" vs. "Security" for Business Treasuries
The Executive Verdict
1. The Core Definition: The Safe Harbor Line
The "Sufficiently Decentralized" Standard (Hinman). When a network has no central manager (like Bitcoin), it transforms from Security to Commodity. The SEC/CFTC "Turf War" creates this bifurcation.
Spectrum of Control. Left (Green): Bitcoin (Commodity). Middle (Yellow): Ethereum (Transition). Right (Red): ICO Token (Security).
2. The Howey Test vs. The Commercial Reality
Prongs: Investment of Money, Common Enterprise, Expectation of Profit, Efforts of Others. Secondary Market Nuance: Buying on Coinbase lowers risk vs. buying from a Foundation, but Delisting Risk remains.
3. The Asset Matrix: What is Safe to Hold?
Bucket A (Green): BTC, LTC (Commodities). Bucket B (Amber): ETH (Commodity, but don't stake via exchange). Bucket C (Red): Exchange Tokens, Low-Cap Alts (Security Risk).
4. Stablecoins: The Payment vs. Investment Battle
Type 1: Fiat-Backed (USDC) - Payment Instrument. Type 2: Yield-Bearing - Unregistered Security (Money Market Fund). Policy: Don't hold yield coins unless accredited/KYC'd.
5. Staking: The "Service" Trap
Staking-as-a-Service (Exchange) is a security offering. Solo Staking (Non-Custodial) is network participation (Commodity). Action: Hire a Node Provider, don't click "Stake".
6. The "Delisting" Risk: Why Classification Matters
If SEC sues, exchanges delist immediately. Liquidity drops to zero. You hold a "Ghost Asset." Price risk is manageable; Liquidity risk is fatal.
Liquidity Drain Flowchart. 1. Wells Notice. 2. Market Makers Pull Liquidity. 3. Exchange Delists. 4. Treasury holds Ghost Assets.
7. Operational Strategy: Building a Defensible Treasury
Adopt a "Commodity-First" Policy. Use the ETF Proxy Strategy (IBIT/ETHE) to shift regulatory risk to BlackRock/Fidelity.
8. Summary Checklist: The Regulatory Stress Test
1. CFTC Status (Court filings?). 2. Decentralization Check. 3. Yield Source (Emissions vs Marketing). 4. Exchange Support (Fidelity/Coinbase Prime?). 5. Spot ETF (Green light).
š¦ The Asset Safety Check
F.A.Q // Logical Clarification
Is XRP a security?
"Complicated. Sold to institutions = Security. Sold on exchange = Not Security. High litigation risk compared to BTC."
Can CFTC and SEC regulate the same asset?
"Yes (Dual Jurisdiction). CFTC regulates the "Futures" market; SEC regulates the "Spot" token if deemed a security."
What about Utility Tokens?
"SEC largely rejects this defense. If traded for speculation, it's a security. Only closed-loop tokens (airline miles) escape."
Module ActionsCW-MA-2026
Institutional Context
"This module has been cross-referenced with Legal & Regulatory / Federal Jurisdiction standards for maximum operational reliability."