Staff of the U.S. Securities and Exchange Commission stated that maintaining and upgrading an operational cryptocurrency network generally does not constitute "necessary management efforts" under the Howey test.

The Howey test determines whether an investment contract exists based on whether the purchaser has a reasonable expectation of profits derived from the entrepreneurial or managerial efforts of others. Staff have adopted the court's interpretation, limiting "necessary management efforts" to actions that are sufficient to determine the success or failure of the enterprise, excluding administrative, transactional, and technical operations. Maintenance of protocols, code fixes, and routine upgrades on functional networks are categorized as the latter.

The SEC's March 2026 interpretive document defines digital commodities as those whose value comes from the programmed operation of functional cryptocurrency systems and supply and demand, rather than from the profit expectations based on the necessary management efforts of others, explicitly listing native tokens such as Bitcoin, Ethereum, Solana, and XRP. The document also states that efforts to promote network effects, incentivize developers, and build ecosystems are excluded from "necessary management efforts" in three footnotes.

Investment contracts can terminate with the fulfillment or failure of commitments: if the issuer completes the necessary management efforts of its commitments or fails to deliver, the purchaser no longer expects profits based on the efforts of others, separating non-securities crypto assets from investment contracts. The trigger point remains whether the issuer has made sufficiently specific and enforceable management commitments, rather than whether the network is still upgrading.

Earlier staff statements classified solo mining, mining pools, self-staking, and certain custodial staking as administrative activities that do not constitute securities offerings. This interpretation extends the same logic to the ongoing maintenance of functional networks.

In market mechanisms, funding shifts from the enforcement premium of "the team is still building, so the tokens are securities" to commodity trading and derivatives of functional networks. Buyers are market makers and institutions trading native assets on spot, perpetual, and tokenized tracks; sellers are non-functional projects that still rely on roadmaps and treasury narratives to maintain their securities status. The event-driven aspect comes from the interpretive document separating assets from transactions: assets can be commodities, and the management commitments at the time of issuance can still constitute investment contracts. Beneficiaries are networks that are operational, have no profit rights, and are priced based on protocol operation, while the burden falls on issuers whose valuations are still driven by upgrade commitments.

The public text emphasizes that administrative and technical labor, even if necessary for network operation, does not automatically satisfy the third prong of Howey.

Source: Public Information