FIT-21 is US legislation designed to draw a clearer line between digital assets that are securities and those that are commodities, assigning oversight to the SEC or CFTC accordingly. It is the most significant attempt yet to resolve the classification uncertainty that shapes every US token issuance decision.
FIT-21 is not just future law to ignore. Its decentralization test mirrors the factors courts already weigh under Howey, so designing toward it is designing toward a defensible position now.
How it works
FIT-21 passed the US House in May 2024. Its central purpose is a clear statutory line for when a digital asset is a security under the SEC and when it is a digital commodity under the CFTC. It uses a functional test keyed to network decentralization rather than a purely economic one.
A digital asset on a blockchain that meets the statutory definitions of functional and decentralized would be a digital commodity under CFTC spot-market jurisdiction. One that does not meet those standards, or that is offered under an investment-contract relationship, stays a security. The bill also creates a pathway for an asset to transition from security to commodity status as its network decentralizes, a concept absent from existing law.
Design consequence
The decentralization pathway gives teams a forward-looking target: reduce founding-team control over protocol development, distribute governance meaningfully, and document the network's functional maturity over time. Teams are already using this as target architecture because it lines up with what courts find persuasive under Howey.
Example
A protocol that launches with a founding team controlling upgrades and treasury sits in a security-adjacent position under both Howey and FIT-21 logic. The same protocol two years later, with on-chain governance over upgrades, a distributed validator set, and no team treasury, moves toward the FIT-21 commodity standard. The token design at launch determines how fast that transition is reachable.
See Token Classification Strategy Guide for how this applies in practice.
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