Cryptocurrency is not a stock. Under federal law, a share of stock is an ownership interest in a corporation, while a digital token is usually treated as a commodity, sometimes as a security, and in one narrow case (payment stablecoins) under a dedicated regime of its own. Almost no cryptocurrency represents equity in a company, and that classification difference drives everything else: the rights you hold, the protections you receive if something goes wrong, and how the IRS taxes your gains.
What a Share of Stock Actually Is
Buying stock buys you a fractional ownership stake in a corporation. That stake carries enforceable rights: voting on corporate matters like board elections, a proportional claim on any dividends the company pays, and a recognized position in line if the company is liquidated. Common shareholders sit at the back of that line under federal bankruptcy priority rules, behind secured creditors and various unsecured creditors, so a liquidation may leave nothing.1Office of the Law Revision Counsel. 11 U.S. Code 507 – Priorities Even so, the legal framework recognizes the claim exists.
What a Crypto Token Is Instead
A cryptocurrency token is an entry on a distributed ledger. Holding one does not make you a part-owner of a business. There is no board to vote for, no obligation on anyone to share revenue with you, and no legal claim on company assets. A token may grant access to a software platform or work as a medium of exchange, but neither function is ownership.
Because a token is not equity, the body of corporate law that automatically protects stockholders does not attach. Whether any federal protection applies depends on which regulatory box a given token falls into.
When a Token Is Treated as a Security
A digital token counts as a security when it fits the definition of an “investment contract” the Supreme Court laid out in SEC v. W.J. Howey Co. in 1946.2Justia U.S. Supreme Court Center. SEC v. Howey Co., 328 U.S. 293 (1946) The four elements:
- An investment of money (dollars, crypto, or other value).
- A common enterprise linking investors’ financial outcomes.
- An expectation of profits.
- Profits expected to come primarily from the efforts of others — a development team, founding company, or identifiable promoter.
If all four are present, the token is a security regardless of what its creators call it. It must be registered with the SEC before public sale, and the issuer must provide the same kind of financial disclosures a stock issuer would. Selling an unregistered security is a federal crime; a willful violation of the Securities Act of 1933 can carry a fine of up to $10,000 and up to five years in prison.3Office of the Law Revision Counsel. 15 U.S. Code 77x – Penalties
Being a security still isn’t the same as being stock. It means the token is regulated like a security, not that it confers ownership in a corporation.
When a Token Is Treated as a Commodity
Not every digital asset is a security. Bitcoin is the clearest example of one that isn’t. The Commodity Exchange Act defines “commodity” broadly to include goods, articles, services, rights, and interests in which futures contracts are traded, and the CFTC has determined that virtual currencies like Bitcoin fall inside that definition.4Office of the Law Revision Counsel. 7 U.S. Code 1a – Definitions5CFTC. Bitcoin Basics
The reason is decentralization. No single company or team controls the Bitcoin network in a way that satisfies the “efforts of others” element of Howey. Without a central promoter driving value, the investment-contract framework does not fit, and price moves on broad supply and demand more like gold or oil than like a corporate share. Oversight of these markets sits with the CFTC rather than the SEC.6Federal Register. Withdrawal of Interpretive Guidance: Retail Commodity Transactions Involving Certain Digital Assets
Stablecoins Sit in Their Own Category
Payment stablecoins — tokens designed to hold a steady value pegged to a currency like the U.S. dollar — are neither stock, security, nor commodity under current federal law. The GENIUS Act, signed in July 2025, created a dedicated federal framework for them, requiring 100% reserve backing in liquid assets like dollars or short-term Treasury securities, monthly reserve disclosures, and marketing rules against misleading claims about government backing.7The White House. Fact Sheet: President Donald J. Trump Signs GENIUS Act Into Law The Act also amended the Commodity Exchange Act to exclude payment stablecoins issued by permitted issuers from the “commodity” definition,4Office of the Law Revision Counsel. 7 U.S. Code 1a – Definitions and the SEC’s Division of Corporation Finance has said covered stablecoins are not securities because buyers use them for payments and value storage rather than for investment return.8U.S. Securities and Exchange Commission. Statement on Stablecoins
Crypto ETFs Are a Different Animal
One place crypto does sit inside the securities regime is a spot Bitcoin or Ethereum ETF. Bitcoin itself is not a security, but shares of a Bitcoin ETF are. When the SEC approved spot Bitcoin ETPs in January 2024, it described the products as covering “one non-security commodity, bitcoin,” while requiring the issuers and listing exchanges to comply with the Securities Act and Exchange Act.9U.S. Securities and Exchange Commission. Statement on the Approval of Spot Bitcoin Exchange-Traded Products
Buying that ETF through a brokerage account gives you the full set of securities-law protections, including registration disclosures and SIPC coverage on the account. Buying the same underlying Bitcoin directly on a crypto exchange does not. The asset is the same; the legal wrapper, and your rights, are not.
The Protections You Don’t Get With Crypto
The most concrete difference between owning stock and owning a token shows up when the platform holding your assets fails. If your stockbroker collapses, the Securities Investor Protection Corporation covers up to $500,000 in assets per customer, including up to $250,000 in cash.10SIPC. What SIPC Protects That coverage exists because stocks are held through registered broker-dealers subject to federal securities law.
Cryptocurrency held on an exchange has no equivalent backstop. The FDIC has stated that it “does not insure assets issued by non-bank entities, such as crypto companies” and that deposit insurance “does not protect against the default, insolvency, or bankruptcy of any non-bank entity, including crypto custodians, exchanges, brokers, wallet providers, and neobanks.”11FDIC. Fact Sheet: What the Public Needs to Know About FDIC Deposit Insurance and Crypto Companies Federal banking regulators have warned that when a crypto exchange commingles its own assets with customer funds, those customer assets may be treated as property of the exchange in bankruptcy, leaving customers as unsecured creditors.12FDIC, Federal Reserve, OCC. Crypto-Asset Safekeeping by Banking Organizations If a stock brokerage fails, a federal program helps make you whole. If a crypto exchange fails, you may stand in line in bankruptcy court.
Taxes Treat Crypto as Property, Not Stock
The IRS does not classify cryptocurrency as stock, currency, or any special category. Under Notice 2014-21, general property tax principles apply to virtual currency transactions.13Internal Revenue Service. Notice 2014-21 Practically, that means:
- Selling or exchanging crypto held as an investment triggers a capital gain or loss. More than one year of holding qualifies for long-term rates; one year or less is short-term.14Internal Revenue Service. Digital Assets
- Crypto received as payment for goods or services is included in gross income at its fair market value in U.S. dollars on the date received.13Internal Revenue Service. Notice 2014-21
- Your cost basis is what you paid, and your gain or loss on sale is sale price minus basis.
One consequence of the property classification is the wash sale rule. That rule bars you from deducting a loss on “stock or securities” if you buy back the same or a substantially identical position within 30 days. Because the IRS classifies cryptocurrency as property rather than stock or securities, the wash sale restriction generally does not apply to crypto as of the 2026 tax year. You can sell a token at a loss and immediately repurchase it while still claiming the deduction. Stock investors cannot.
Reporting is tightening. Beginning with sales after 2025, crypto brokers must report your transactions to the IRS on a new Form 1099-DA, showing gross proceeds for all digital asset sales and cost basis for tokens that qualify as covered securities. Basis reporting is voluntary for non-covered tokens. Digital asset payment processors have a small exemption when total payment-related sales for a customer are $600 or less for the year.15Internal Revenue Service. 2026 Instructions for Form 1099-DA Digital Asset Proceeds From Broker Transactions Gaps remain: for tokens on decentralized platforms or acquired before broker reporting took effect, tracking basis is on you.
The Disclosure Gap
Companies issuing stock to the public must register with the SEC under the Securities Act of 1933 and file a detailed statement covering financial data, risk factors, business operations, and management.16GovInfo. Securities Act of 1933 After going public they file annual reports on Form 10-K with audited financial statements, along with quarterly and event-driven disclosures.17U.S. Securities and Exchange Commission. Form 10-K
Most crypto projects face no comparable requirement. Unless a token is a security, no federal mandate forces audited financials, disclosure of how funds are used, or reporting of material events. Some exchanges vet tokens before listing, but internal reviews vary widely and don’t substitute for regulator-reviewed filings. Stock investors work from standardized, audited information. Crypto buyers often work from whitepapers and voluntary disclosures with no independent verification.