The SEC’s new token taxonomy gives founders and finance teams a more structured way to think about crypto assets that are not designed to function like traditional investment products. Two of the most commercially relevant categories in that framework are digital collectibles and digital tools. In the SEC’s fact sheet, both are placed on the non-security side of the taxonomy. Digital collectibles are described as crypto assets designed to be collected or used, including assets tied to artwork, music, videos, trading cards, in-game items, and internet culture. Digital tools are described as crypto assets that perform a practical function, such as a membership, ticket, credential, title instrument, or identity badge.
For founders, that is helpful. But it is not the end of the analysis.
These two categories matter because they cover a wide range of modern token use cases: NFTs, community assets, fan engagement products, creator-linked digital goods, access passes, token-gated experiences, onchain credentials, and identity rails. The SEC is clearly signaling that not every blockchain-based asset should be treated as a security. At the same time, the release is equally clear that a non-security crypto asset can still create securities-law exposure if the structure, economics, or marketing begin to look like an investment scheme.
That is the real line founders need to understand. A collectible or tool can sit outside the securities bucket, but only if the facts actually support that treatment.
What the SEC means by a digital collectible
The SEC defines a digital collectible as a crypto asset designed to be collected or used and that may represent or convey rights to artwork, music, videos, trading cards, in-game items, or digital references to memes, characters, current events, or trends. The release gives examples including CryptoPunks, Chromie Squiggles, Fan Tokens, WIF, and VCOIN. It also explains that digital collectibles do not have intrinsic economic rights such as passive yield or rights to future income, profits, or assets of a business enterprise or other obligor.
That framing is important because it focuses on what the holder is actually acquiring. In the SEC’s view, a digital collectible is closer to an onchain collectible, cultural asset, or consumer item than to a financial claim on a promoter or issuer. The holder is not supposed to be acquiring a stake in an enterprise. The holder is supposed to be acquiring something collectible, usable, expressive, or culturally meaningful.
The release also recognizes that many digital collectibles carry limited intellectual property rights or usage rights. For example, creators may allow holders to display or commercialize acquired artwork under an end-user license. Consumer platforms and games may also use digital collectibles to reward users, deepen engagement, and build network effects. Badges, in-game skins, and rewards points are all part of the picture the SEC is painting here.
Why the SEC says digital collectibles are not securities
The SEC’s reasoning is relatively straightforward. A digital collectible, as described in the release, is not a security because it does not have the economic characteristics of one of the financial instruments enumerated in the federal securities laws. The release says a digital collectible does not represent a digitized form of stock, a note, or an investment contract. Instead, it generally has artistic, entertainment, social, cultural, or other consumer value. The purchase of a digital collectible is not treated as an investment in a business enterprise or other obligor associated with the creator.
The SEC also makes a useful comparison to physical collectibles. A collectible may increase in value because of popularity, scarcity, demand, or cultural relevance, but that does not mean the holder is relying on essential managerial efforts in the securities-law sense. The release says buying a digital collectible with the hope that its popularity or scarcity will increase its price is analogous to buying art and hoping the market will eventually value it more highly.
That does not eliminate all risk, but it gives founders a clearer framework. If the asset is genuinely collectible, genuinely consumer-facing, and not tied to enterprise-style economic rights, the SEC is signaling that it belongs outside the traditional securities analysis.
Creator royalties do not automatically turn a collectible into a security
One of the most useful clarifications in the release involves creator royalties.
The SEC explicitly states that the existence of an automated creator royalty does not turn a digital collectible into a security where the holder does not receive a share of that royalty and does not have rights in a related business enterprise. In the SEC’s framing, creator royalties are a payment stream to the creator, not an economic interest for the holder. That distinction matters because it gives more room for creator economies and branded collectible structures without automatically forcing them into securities treatment.
For founders building in digital media, brand-linked collectibles, entertainment products, or creator commerce, this is an important point. A royalty feature by itself is not the same thing as revenue sharing. The key question is who benefits from the royalty and whether the holder is being given rights that begin to look like a passive financial interest.
The trapdoor for digital collectibles: fractionalization
If creator royalties are one of the SEC’s clearest comfort signals, fractionalization is one of its clearest warning signals.
The release states that the offer and sale of a digital collectible that is fractionalized, or otherwise enables people to acquire a fractional ownership interest in a single collectible, could constitute the offer or sale of a security because it may involve essential managerial efforts from which purchasers would reasonably expect to derive profits. In other words, the underlying collectible may not be a security, but the structure built around it can still create securities-law risk.
This is one of the most important practical points in the entire category. Many founders think about collectibles only at the asset level. The SEC is telling the market to look at the packaging layer too. Pooling, slicing, managed resale programs, and structures that turn a single collectible into a financialized shared-interest product can move the analysis in a very different direction.
For Veritas Global’s audience, the takeaway is simple: a collectible can stay a collectible, or it can be engineered into something much closer to an investment product. Once the design starts to look like the latter, the legal risk changes quickly.
Meme coins and cultural assets still need honest classification
The release also addresses a category many founders and operators have struggled to place: meme-linked assets.
The SEC notes that some digital collectibles may have limited or no functionality. It gives meme coins as an example of crypto assets inspired by memes, characters, events, or trends and says they are typically acquired for artistic, entertainment, social, or cultural purposes, with value driven by supply and demand rather than essential managerial efforts. The release also notes that a meme-linked asset may begin as a culturally driven collectible with no functional role in a crypto system and later become a digital commodity if it becomes functional within an associated system.
That observation is important because it reinforces the SEC’s broader point that classification is driven by facts, not branding. A token may begin in one category and evolve into another if the product and use case change. Founders should not assume that the first narrative they attach to a token will remain the right one forever.
What the SEC means by a digital tool
If digital collectibles sit closest to culture, community, and consumer use, digital tools sit closest to functionality.
The SEC defines a digital tool as a crypto asset that performs a practical function, such as a membership, ticket, credential, title instrument, or identity badge. The release says digital tools are commonly issued for use in connection with crypto systems, are designed to perform practical functions within those systems, and often are non-transferable or “soul-bound.” Their value is described as being derived from their practical functionality rather than from passive yield or enterprise-style economic rights. The SEC gives examples including Ethereum Name Service domain names and CoinDesk’s NFT-based Consensus ticket concept.
This is one of the most commercially significant categories for operating companies because it maps well onto access, identity, community, credentialing, and ticketing products. It is particularly relevant to founders building consumer apps, enterprise verification tools, token-gated ecosystems, onchain reputation systems, or digital membership layers.
The strongest digital tool cases are the ones where the token clearly does a job. It grants access. It verifies identity. It confers membership. It operates as a credential. It functions as a title record. The weaker cases are the ones where the “tool” language is mostly cosmetic and the real pitch is still centered on upside, speculation, or future enterprise value.
Why the SEC says digital tools are not securities
The SEC’s reasoning on digital tools is as practical as the category itself.
The release says a digital tool is not a security because it does not have the economic characteristics of one. It does not represent a digitized form of an enumerated security, including an investment contract. The SEC explains that people acquire digital tools for their functional utility and do not have rights or interests in a business enterprise or other obligor merely by acquiring the tool. It uses a museum membership analogy to make the point: a person buying a museum membership does not ordinarily expect to realize profits from the essential managerial efforts of the museum’s operators.
The release also states that even if a digital tool may be resold, the resale price is based on functional utility rather than on an expectation of profits from the developer’s essential managerial efforts. That is a very useful piece of language for founders. It suggests that transferability alone is not fatal. What matters is whether the value is really tied to the asset’s utility or whether the entire structure is being pushed toward passive investment expectations.
Where founders can get into trouble with digital tools
The most common mistake in this category is over-financialization.
A tool category works best when the asset is plainly tied to a functional role. The risk rises when a company adds passive yield, enterprise-linked economics, or marketing narratives that make the holder sound less like a user and more like an investor. If the asset is supposed to be a credential, membership, pass, or access layer, it should be structured and described like one. Once it begins to act like a speculative vehicle, the label becomes less credible.
This is also where operational design matters. If transferability is wide open, resale is heavily emphasized, scarcity is managed as a value driver, and communications repeatedly point to appreciation, the product begins to move away from the simple museum-membership logic the SEC is using. That does not automatically make the asset a security, but it makes the “tool” position harder to defend.
The bigger point: neither category is immune from investment-contract risk
The SEC’s release repeatedly emphasizes that digital collectibles and digital tools are not themselves securities as described, but a non-security crypto asset can still be offered and sold subject to an investment contract. The fact sheet says the Commission addressed how a non-security crypto asset may become subject to, and later cease to be subject to, an investment contract. That matters here because founders sometimes hear “not a security” and stop reading too early.
That is not the lesson of this release.
The real lesson is that category, economics, and messaging must align. A collectible that is fractionalized and promoted like a managed upside product can create risk. A tool that carries passive yield or is marketed around appreciation can create risk. The token itself may sit in a non-security category, but the way the business structures and sells it can still change the analysis.
For founders, CFOs, and GC teams, that means token design and token marketing should never be handled in isolation. What the asset does, what rights it carries, how it transfers, and what purchasers are told to expect all need to support the same story.
What founders should do now
Businesses building with digital collectibles or digital tools should start with a simple classification exercise. Is the asset genuinely collectible, cultural, artistic, or community-based? Or is it genuinely functional, like a membership, credential, pass, or identity layer? If the answer is unclear, that ambiguity itself is worth pausing over.
Next, review the economics. Digital collectibles should not quietly evolve into pooled financial products. Digital tools should not quietly evolve into yield-bearing or enterprise-linked claims. If the product strategy depends on adding those features, the business should assume it is moving into a more sensitive legal zone.
Then review public statements. The SEC’s broader interpretation makes clear that the way a product is described to the market matters. A collectible should be described like a collectible. A tool should be described like a tool. Once the narrative starts to sound like “buy this because management will make it more valuable,” the securities analysis becomes harder, not easier.
Finally, prepare for diligence. Exchanges, custodians, institutional partners, and strategic investors are likely to use this taxonomy in their review processes. Companies that can clearly explain why an asset is a collectible or a tool, and can show that the product and messaging support that classification, will be in a much better position than teams relying on labels alone.
Final thoughts
The SEC’s treatment of digital collectibles and digital tools is one of the most useful parts of the new token framework because it recognizes a basic market reality: not every blockchain-based asset is a securities product. Some assets are cultural. Some are functional. Some are consumer-facing. Some are simply part of how a digital system works.
But that clarity comes with a discipline requirement. If a company wants to stay in one of these non-security lanes, it needs to build and communicate accordingly. Collectibles should remain collectibles. Tools should remain tools. Once a business starts adding financialized mechanics or investment-style promises, it may be creating the very risk it hoped to avoid.
At Veritas Global, this is where legal strategy becomes operational strategy. Businesses that classify tokens honestly, design them carefully, and align product reality with market narrative will be in a far stronger position for launch, diligence, fundraising, and long-term growth.
