SEC Crypto Regulation in 2026: What's Changed and What Compliance Teams Need to Know

For the better part of four years, the Securities and Exchange Commission under Gary Gensler pursued a strategy that the crypto industry called "regulation by enforcement." Rather than writing clear rules, the SEC filed lawsuit after lawsuit — against Coinbase, Binance, Ripple, Kraken, Genesis, and dozens of others — treating nearly every token as an unregistered security until proven otherwise in federal court.

That era is over. Paul Atkins was confirmed as SEC Chair in early 2025, and by Q1 2026, the regulatory posture has shifted substantially. Enforcement actions have slowed, SAB 121 has been rescinded, a dedicated Crypto Task Force has been issuing actual guidance, and the SEC has signaled it intends to work with — rather than against — legitimate market participants.

But "shifted" doesn't mean "gone." The Howey Test still applies. Registration requirements haven't disappeared. State regulators are filling the federal vacuum with their own frameworks. And for compliance teams, the stakes of getting it wrong remain enormous.

This article breaks down exactly what has changed, what hasn't, and what your compliance function should be doing right now.

The Regulatory Pivot: Gensler Era vs. Atkins Era

To understand where we are in 2026, it helps to understand precisely what the SEC's prior posture was — and what it wasn't.

Under Gary Gensler (2021–2025), the SEC took the position that most digital assets were securities under the Howey Test, that most crypto trading platforms were unregistered national securities exchanges, and that the path to compliance was to "come in and register" — even though the existing registration framework had no meaningful accommodation for digital assets. This created what critics called a "Catch-22": register, but the registration process doesn't work for you; or don't register, and face enforcement.

Gensler's SEC filed 46 enforcement actions against crypto firms between 2021 and 2024, extracted over $4.68 billion in penalties, and contributed to the bankruptcy or departure from the US market of multiple exchanges. It also produced landmark court decisions — most notably SEC v. Ripple Labs — that actually pushed back against the SEC's broadest interpretations.

The Atkins SEC has taken a different approach on almost every dimension:

• Enforcement posture: The new SEC dismissed, paused, or declined to pursue over 46 pending enforcement matters within its first 90 days. While it has not abandoned enforcement entirely — fraud and manipulation cases continue — it has deprioritized cases premised solely on "unregistered securities" theories.
• Guidance over litigation: The Crypto Task Force (discussed below) is issuing written staff guidance, no-action letters, and frameworks — the kind of prospective clarity the industry had been asking for since 2017.
• Open dialogue: The SEC has held public roundtables with industry participants, including discussions on custody, DeFi, stablecoins, and tokenized securities. This is a dramatic departure from the Gensler era's relative insularity.
• Rescission of SAB 121: Perhaps the single most concrete regulatory change. More on this below.

What hasn't changed: the SEC still has jurisdiction over securities, and the threshold question of whether a given digital asset is a security has not been legislatively resolved. The Howey Test remains the operative framework. The Commission still expects entities offering or selling tokens that qualify as securities to comply with registration and disclosure requirements — or obtain an exemption.

The shift is one of posture, pace, and philosophy. It is not a wholesale deregulation of digital assets. Compliance teams that interpret the new environment as "anything goes" will find themselves caught off guard when enforcement does come — because it will, selectively, where the facts are egregious.

SAB 121 Rescission: What It Means for Custodians and Banks

Staff Accounting Bulletin No. 121, issued in March 2022, was one of the Gensler era's most consequential and controversial pieces of guidance. SAB 121 required entities that safeguard customers' crypto assets to record a corresponding liability on their balance sheet — essentially treating custodied crypto as a balance sheet item, even though the assets don't belong to the custodian.

The practical effect was devastating for banks and broker-dealers who might otherwise have offered crypto custody services. Under standard banking capital rules, holding a liability on the balance sheet requires holding capital against it. SAB 121 effectively made it economically unviable for federally regulated banks to custody crypto on behalf of clients — even though crypto custody is precisely the kind of service that would bring digital assets under robust prudential supervision.

The rescission via SAB 122 has had immediate downstream effects:

• Bank custody expansion: Several major US banks — including institutions that had previously declined to offer crypto custody citing regulatory uncertainty — have announced or accelerated custody service rollouts following the rescission.
• Broker-dealer re-entry: FINRA-regulated broker-dealers that had avoided crypto custody are now reassessing their capabilities, particularly for institutional clients seeking qualified custody of digital assets under the Investment Advisers Act.
• Reduced counterparty risk concentration: Institutional crypto assets have historically been concentrated with a small number of dedicated crypto custodians. SAB 122 accelerates diversification of custody infrastructure.
• Compliance implications for RIAs: Registered Investment Advisers managing client crypto assets must ensure their custodial arrangements qualify under the Advisers Act's custody rule. The expanded pool of qualified custodians — now including traditional banks — gives RIAs more options, but the due diligence requirement remains unchanged.

For compliance teams, the SAB 121 rescission is not merely a technical accounting change — it restructures the institutional custody market and requires reassessment of existing custodial arrangements, counterparty risk frameworks, and client disclosure documents that may have referenced the old guidance.

The SEC Crypto Task Force: Key Guidance Issued So Far in 2026

In January 2025, SEC Commissioner Hester Peirce — long the Commission's most crypto-sympathetic voice — was appointed to lead a newly formed Crypto Task Force. Unlike the informal Digital Assets Working Group that existed under Gensler, the Task Force has been given a clear mandate: develop a coherent, practical regulatory framework for digital assets and communicate it clearly to market participants.

The Task Force's output through Q1 2026 has been substantial by SEC standards:

Staff Guidance on Token Classification

The Task Force issued a multi-factor framework for assessing whether a digital asset constitutes a security under the Howey Test, with particular attention to the "investment contract" prong. The framework introduces a concept of "functional sufficiency" — the idea that a token may cease to be a security when its underlying network is sufficiently decentralized and the token's utility function is primary. This echoes arguments the industry has long made (and that the SEC under Gensler largely rejected) but now carries formal staff-level endorsement.

No-Action Letters for Certain Token Offerings

The Task Force has issued a handful of no-action letters providing comfort to token issuers who structured their offerings with clear utility characteristics, meaningful disclosure, and resale restrictions. While each letter is fact-specific, they establish useful precedent for structuring compliant offerings without full securities registration.

DeFi Guidance Concept Release

The SEC published a concept release soliciting public comment on how existing securities laws apply — or should apply — to decentralized finance protocols. This is a precursor to formal rulemaking, and while it creates no immediate obligations, it signals where the Commission may eventually draw lines on protocol governance tokens, automated market makers, and lending protocols.

Stablecoin Clarity

The Task Force issued guidance clarifying that payment stablecoins — those backed 1:1 by US dollar reserves and used primarily for payment — are not securities. This brings the SEC's position into alignment with long-standing industry arguments and with the regulatory approach being developed under parallel Congressional stablecoin legislation. Algorithmic stablecoins and yield-bearing stablecoins remain in a grayer area.

The overall picture from the Task Force is a Commission that is actively trying to build a framework rather than fight rearguard actions in court. For compliance purposes, Task Force guidance — while not legally binding — represents the best available signal of how the SEC will exercise its discretion in the near term.

Securities vs. Commodities: The Howey Test and Why It Still Matters for Tokens

The Howey Test — derived from the 1946 Supreme Court case SEC v. W.J. Howey Co. — defines an "investment contract" (and thus a security) as a transaction involving: (1) an investment of money, (2) in a common enterprise, (3) with an expectation of profits, (4) predominantly from the efforts of others.

Despite years of industry lobbying for a new legal framework, the Howey Test remains the primary tool for determining whether a digital asset is a security subject to SEC jurisdiction. The CFTC has concurrent jurisdiction over spot commodity markets (including Bitcoin and Ether, which are widely treated as commodities), and the intersection of the two creates ongoing ambiguity for tokens that don't fit neatly into either category.

What the 2026 Landscape Looks Like

The Ripple decision and subsequent cases have refined how courts apply Howey to crypto. Key developments:

• Programmatic sales: The Southern District of New York held in SEC v. Ripple that programmatic sales of XRP on exchanges were not necessarily investment contracts because buyers had no direct relationship with the issuer and thus no expectation of profits from Ripple's efforts specifically. This created a two-track analysis that the Task Force has since incorporated into its guidance.
• Decentralization as a defense: The functional sufficiency concept acknowledges that as a network matures and its development becomes genuinely decentralized, the "efforts of others" prong of Howey weakens. Ethereum's post-Merge treatment as a commodity by the CFTC, and the SEC's tacit acceptance of ETF filings without securities law challenges, signals practical acceptance of this view.
• Secondary market trading: The Task Force has indicated that secondary market trading of tokens is less likely to trigger securities analysis where the issuer is no longer actively promoting the token and the network is operational. This is not a blanket exemption — it's a factor.

The commodity vs. security question has enormous practical consequences. Securities must be registered or exempt from registration. Securities intermediaries must register as broker-dealers or investment advisers. Custodians of securities face different rules than custodians of commodities. Getting the classification wrong — in either direction — creates substantial compliance exposure.

Registration Requirements and the "Functional Sufficiency" Debate

Even under the more permissive Atkins regime, digital asset offerings that qualify as securities require either: (a) full registration under the Securities Act of 1933, (b) an applicable exemption (Reg D, Reg A+, Reg CF, or Rule 144A for institutional offerings), or (c) a no-action letter from the staff.

The "functional sufficiency" framework introduced by the Task Force is the most significant conceptual development of 2025–2026. In essence, it posits that a token can start its life as a security (sold to fund development of a network) and graduate out of securities status once the network achieves sufficient functionality and decentralization that purchasers are no longer relying on the issuer's efforts.

What "Functional Sufficiency" Means in Practice

The Task Force has identified several factors relevant to functional sufficiency determinations:

• Whether the network is operational and provides genuine utility to token holders
• Whether development is distributed across multiple independent teams or governed by a foundation rather than a single controlling entity
• Whether the token's price movements are predominantly driven by network utility rather than speculative expectations about the issuer's future efforts
• Whether secondary market trading is available and the issuer has ceased promotional activities directed at token appreciation
• Whether the issuer has made adequate disclosure about the transition and filed a "maturity notice" with SEC staff (a new optional filing the Task Force has proposed)

The debate in the industry centers on who makes this determination and when. The Task Force's position is that issuers can seek comfort through no-action requests or informal staff guidance, but that the ultimate determination remains a legal question — and the SEC retains the right to disagree. This leaves compliance teams in the uncomfortable position of making judgment calls that the regulator may later second-guess.

State-Level Crypto Laws Filling the Federal Vacuum

While Washington has been recalibrating its approach, states have moved aggressively to fill regulatory gaps — sometimes with crypto-friendly frameworks, sometimes with stricter requirements than federal law.

Wyoming: The Crypto-Friendly Pioneer

Wyoming has been the most aggressive state in building a permissive but structured crypto framework. Its Special Purpose Depository Institution (SPDI) charter allows entities to hold crypto assets on behalf of customers without federal deposit insurance but also without the capital constraints of conventional banking. Wyoming has also enacted legislation specifically addressing Decentralized Autonomous Organizations (DAOs), giving them legal entity status — a first in the US.

By Q1 2026, Wyoming's SPDI framework has attracted several crypto-native firms seeking a US regulatory home, and its DAO legislation has been adopted as a model by at least three other states. For compliance teams, Wyoming entities offer an option for crypto-specific operations that want a recognized regulatory structure without full federal bank charter obligations.

Texas: Digital Asset Licensing and Bitcoin Reserve

Texas enacted comprehensive digital asset legislation in 2025 that created a state-level Digital Asset Service Provider (DASP) license. The license covers exchanges, custodians, and certain DeFi-adjacent services operating with Texas nexus. Texas also passed legislation authorizing the state comptroller to hold a reserve of Bitcoin — a symbolic but legally significant act that normalizes state-level Bitcoin holdings.

For compliance teams operating nationally, Texas's DASP license adds to the patchwork of state-level money transmission and digital asset licenses that must be tracked. Failure to hold the required Texas license when operating with Texas residents can trigger state enforcement independent of federal action.

New York: BitLicense Remains the Gold Standard (and Burden)

New York's BitLicense — introduced by the NYDFS in 2015 — remains one of the most rigorous state-level crypto licensing requirements in the world. It has not been relaxed under the new federal posture. If anything, the NYDFS has continued to issue enforcement actions and impose compliance requirements on BitLicense holders, most recently in the areas of cybersecurity (aligned with NYDFS Part 500) and stablecoin reserves.

Any crypto firm serving New York residents without a BitLicense risks NYDFS enforcement regardless of its federal regulatory status. The NYDFS has demonstrated willingness to impose nine-figure fines on non-compliant entities. Compliance teams should treat BitLicense requirements as independent of — and in addition to — any federal crypto framework.

The broader state-law picture is one of increasing complexity: 23 states have enacted or are actively developing crypto-specific frameworks, each with different scope, licensing thresholds, and requirements. Compliance teams at nationally operating firms must maintain a state-by-state regulatory map that they update as legislation evolves — a task that manual monitoring makes nearly untenable at scale. See RegPulse's regulatory monitoring features for how automated tracking can help here.

What Compliance Teams Should Do Right Now

The regulatory environment in Q1 2026 is more navigable than it was two years ago, but navigating it still requires active, structured effort. Here are five concrete steps every crypto compliance team should be working through.

Why Ongoing Monitoring of SEC Guidance Is Non-Negotiable

The single most important lesson from the Gensler-to-Atkins transition is that regulatory posture can change faster than most compliance programs are built to track. In 2021, the SEC's position was that crypto exchanges should register or face enforcement. By 2025, that position had been partially reversed, with enforcement actions dropped and new guidance frameworks issued. By the time this article is published, new no-action letters or concept releases may have already shifted the landscape further.

Manual monitoring — reading SEC press releases, scanning the Federal Register, reviewing trade publication summaries — is no longer sufficient for firms with meaningful crypto exposure. The volume of regulatory output across federal agencies and 50 state jurisdictions is simply too high for any compliance team to track comprehensively without tooling support.

This is exactly the problem RegPulse is built to solve. Our platform monitors the SEC, CFTC, FinCEN, OCC, FDIC, and all 50 state financial regulators in real time, surfacing relevant guidance, proposed rules, enforcement actions, and legislative developments as they happen. AI-powered relevance scoring means your compliance team sees only what matters to your specific business — not a firehose of regulatory noise.

The current environment rewards compliance teams that stay ahead of guidance rather than reacting to enforcement. When the SEC issues a no-action letter that creates a new safe harbor, the firms that know about it immediately are the ones who can structure transactions to take advantage of it. When the NYDFS issues a supervisory guidance letter that imposes new cybersecurity requirements on BitLicense holders, the firms that catch it early have time to remediate before the examination cycle begins.

For context on how regulatory monitoring fits into a broader compliance framework, see also our coverage of MiCA compliance in 2026 — the EU's comprehensive crypto framework is now fully in force, and for firms operating transatlantically, the compliance obligations stack.

The regulatory environment for crypto in 2026 is more structured, more navigable, and more clearly signposted than it was during the enforcement-heavy years of the Gensler era. But it is not less complex. The number of applicable rules — federal, state, international — has increased. The pace of regulatory change has increased. The sophistication required to stay compliant has increased.

Compliance teams that invest in systematic monitoring infrastructure now will be positioned to move quickly when the guidance environment creates opportunities and to avoid exposure when it tightens. Those that continue to rely on ad hoc monitoring will find themselves perpetually reactive — which, in a regulatory environment this dynamic, is a risk position few boards of directors would knowingly accept.