SEC Staff Publishes Observations on Crypto Issuer Disclosures

The Staff highlights a range of disclosure matters it identified during its reviews of the digital asset markets.

On April 10, 2025, the Securities and Exchange Commission’s (SEC’s) Division of Corporation Finance (the Staff) published a Statement on Offerings and Registrations of Securities in the Crypto Asset Markets (the Statement). The Statement addresses the application of certain disclosure requirements under the Securities Act of 1933 (Securities Act) and the Securities Exchange Act of 1934 (Exchange Act) to disclosure documents relating to securities in the digital asset markets. The Statement provides general guidance on offerings of equity or debt securities of issuers whose operations relate to networks, applications, and/or digital assets, as well as offerings of digital assets themselves as part of an investment contract.

The Statement is the Staff’s fourth publication on how it views the federal securities laws applying to a specific aspect of the digital asset economy since President Trump issued an executive order on digital assets (for more information, see this Latham blog post) and the SEC established a Crypto Task Force (for more information, see this Latham blog post).

The Statement is not prescriptive but descriptive and does not append absolute or relative value to the various disclosures the Staff has chosen to highlight. “Each issuer,” the Staff noted, “should consider its own facts and circumstances when preparing its disclosures.”

Staff Observations on Crypto-Related Disclosures

Description of Business: Issuers of securities in general must provide a narrative description of the material aspects of their business in clear, concise, and understandable language.

Business descriptions that the Staff observed include descriptions of:

• the material aspects of the issuer’s current or proposed business, noting that this should not include generic descriptions of networks, digital assets, or other technologies that are not specific or relevant to the issuer’s own business;
• the issuer’s current stage of development, while identifying any forward-looking or future development plans;
• any relevant milestones that may be necessary to fully implement the issuer’s business or underlying network or application (including estimated timing and cost requirements, and a description of how these costs will be funded);
• plans to generate revenue or increase profitability or value, and whether the issuer will continue to be involved with network operations following launch;
• for issuances of digital assets as part of investment contracts, a description of whether the digital asset underlying the security has any function in the operation of the business; and
• the network or the application that the issuer is building, including technical information, information relating to governance, and information relating to tokenomics and any reward mechanism.

The Statement notes that these descriptions should be consistent with the issuer’s public statements, white papers, and promotional materials. Issuers should carefully review public facing materials to ensure consistency.

Risk Factors: Issuers of securities in general must disclose the material factors that make an investment in the issuer or the offering speculative or risky.

Risk factor disclosures that the Staff observed include:

• the issuer’s planned business operations (e.g., technology and cybersecurity);
• the issuer’s reliance on another network or application;
• for issuances of digital assets as part of investment contracts, the unique characteristics of the digital asset (e.g., form, price volatility, governance rights, valuation and liquidity, supply, custody, etc.)
• other laws and regulations that may apply to the issuer or offering (e.g., obligations under the Financial Crimes Enforcement Network (FinCEN), the Commodity Futures Trading Commission, state money transmission and virtual currency laws, etc.)

Description of Securities: Issuers of securities in general must provide a materially complete description of the securities, including a description of the terms, rights, and characteristics of the security in its specific context.

The Staff noted that it had observed the following types of disclosures:

• Rights, Obligations, and Preferences:
  • The rights that security holders have and do not have (e.g., with respect to dividends, payments, profit sharing, distributions, and voting rights)
  • The rights security holders have to enforce their rights, preferences, and obligations
  • The voting rights security holders may have, and how the issuer intends to comply with applicable proxy rules
  • The rights that security holders may have regarding transactions that impact the issuer or the network (e.g., liquidation, bankruptcy, sale, merger, network forks, or other similar events)
  • The term or maturity of the security
  • Restrictions on transferability
  • How the digital asset security may be redeemed, retired, or burned
  • If the digital asset security may be loaned or pledged
  • How the rights of the security holders are memorialized
  • How characteristics of the security are memorialized
  • How such rights and characteristics convey when the security is transferred
  • Whether, when, and by whom such rights and characteristics can be modified
• Technical Specifications:
  • The network or application associated with the security or underlying cryptoasset
  • Whether the underlying code can be modified, how, when, and by whom
  • The technical requirements for holding, accessing and transferring the security or underlying cryptoasset
  • If a record of ownership exists and who maintains it
  • Whether the underlying cryptoasset can be divided
  • Whether the security, underlying cryptoasset, or underlying smart contracts or code have undergone a third-party security audit to identify vulnerabilities and ensure compliance with industry standards
• Supply:
  • The rules governing the total supply of the security or underlying cryptoasset
  • The method for minting or generating the security or underlying crypto asset
  • Rules and responsibilities around the total supply of the security or underlying cryptoasset
  • Issuer arrangements with market makers to distribute or provide liquidity for the security or underlying cryptoasset

Note that even though the Staff sometimes refers to a description of “the security,” the description should in each case also include information regarding the digital asset underlying the security.

The Staff also noted that similar disclosures may be appropriate for cryptoassets that themselves are not securities if the issuer’s business involves such assets, even if not offered as part of or subject to an investment contract.

Directors, Executive Officers, and Significant Employees

Issuers of securities in general must disclose “information relating to the identity and experience of those entrusted with the management of the issuer, including executive officers, directors, and certain significant employees who are (or are expected) to make a significant contribution to the issuer’s business.” This requirement applies whether or not the individuals hold formal titles or positions as executive officers or directors.

Employment disclosures that the Staff observed or raised include:

• If a third party is performing policymaking functions typically performed by executive officers and directors (e.g., the sponsor of certain trusts, such as the spot crypto exchange-traded products)
• Executive compensation, such as fees paid by the issuer to a third party for performing policymaking functions.

Financial Statements

The Staff notes that issuers of securities in general are required to provide financial statements that comply with applicable securities laws. The Staff suggests that issuers consult with the appropriate Office of the Chief Accountant within the SEC on accounting and financial reporting questions involving unusual, complex, or innovative transactions.

Exhibits

Issuers of securities in general must file as an exhibit any instrument defining the rights of security holders.

Exhibits observed by the Staff include the code of smart contracts, networks, or applications if the rights, preferences, and obligations of security holders are memorialized in such smart contracts or code.

Limitations on the Statement

The Staff noted that the Statement:

• does not apply to digital assets that are not securities or otherwise part of or subject to an investment contract;
• may not identify all possible material disclosures;
• discusses disclosures that may not be relevant or applicable for all issuers;
• does not replace issuers using their judgment in determining whether any particular disclosure (or the scope of any particular disclosure) is appropriate; and
• does not preclude scaled (i.e., less extensive) disclosure accommodations for smaller or newly public companies under the securities laws with respect to any applicable disclosure requirements.

In addition, unlike the statements on Meme Coins, Proof of Work Mining, and Stablecoins, however, this Statement does not provide the Staff’s view on what may or may not be a security subject to the SEC’s jurisdiction.

Further, like all Staff guidance, the Statement has no legal force or effect and is not binding on the SEC.

Commissioner Peirce Supports the Statement

Commissioner Hester M. Peirce, leader of the SEC’s Crypto Task Force, was supportive of the Statement. However, she noted that it “is not a definitive how-to guide” on the registration of digital asset securities, but “is a small step in identifying relevant disclosures so that investors have material information about the projects and businesses in which they are investing.” More interesting is what Commissioner Peirce heralded in a footnote: “The Crypto Task Force and other Commission staff are working on providing guidance about when and whether crypto asset issuers have to “come in and register” and what registration would entail.”

Commissioners Peirce and Mark Uyeda have been highly critical of the previous administration’s invitation to digital asset companies to “come in and register.” They held that such invitation was “manifestly unsatisfying” in the absence of any clear guidance from the SEC as to which digital assets it would consider securities or as part of an investment contract or the disclosures that would be required under the securities laws.

With the SEC’s Crypto Task Force quickly delivering on its objective to clarify the status of digital assets under the securities laws, the SEC’s “definitive how-to guide” on digital asset securities and registration could be forthcoming.

Coming Attractions?

The Statement noted that Acting Chairman Uyeda formed a Crypto Task Force to help the SEC develop a comprehensive and clear regulatory framework for cryptoassets, including addressing applicable registration and disclosure requirements, and that the Staff was issuing the Statement to provide views while these deliberations are pending. No doubt the Staff’s observations will be useful in developing that framework.