Token Security Assessment Tool
Token Security Assessment
This tool helps you assess whether your token might be classified as a security under the SEC's 2025 Project Crypto framework. Based on SEC guidance, tokens with centralized control or profit promises are likely securities requiring registration. This assessment is for informational purposes only and does not replace legal advice.
Assessment Results
Compliance with securities regulations isn’t just paperwork anymore-it’s the difference between staying open and getting shut down. In 2025, blockchain companies face a regulatory environment that’s more unpredictable than ever. What worked last year might get you fined today. The SEC under new Chairman Paul Atkins has shifted from aggressive crypto enforcement to a slower, more targeted approach. But don’t mistake that for a free pass. If you’re issuing tokens, running a DeFi protocol, or offering tokenized assets, you’re still in the crosshairs.
What Changed After January 2025?
The big shift came with the new administration. Under Gary Gensler, the SEC treated nearly every crypto token as a security. That led to 784 enforcement actions in 2024, over half of them targeting crypto projects. By mid-2025, that number had dropped by 42%. The tone changed too. Instead of saying "all tokens are securities," the SEC launched Project Crypto-a framework designed to clarify what actually counts as a security and what doesn’t. This isn’t deregulation. It’s redefinition. Now, regulators are asking: Did the project have a centralized team promising returns? Was there an expectation of profit from others’ efforts? If yes, it’s likely a security. If no, it might fall under commodities or utility tokens. The difference matters. One gets registered under the Securities Act of 1933. The other doesn’t.Five Compliance Areas You Can’t Ignore in 2025
Even with the shift, five areas remain high-risk for blockchain firms:- Token classification-The SEC now expects firms to document why their token isn’t a security. A whitepaper alone won’t cut it. You need legal analysis, community structure details, and evidence of decentralization.
- Regulation Best Interest (Reg BI)-If you’re advising investors on crypto purchases, you must prove you’re acting in their best interest. That means disclosing conflicts, avoiding misleading claims, and keeping records. In 2025, 63% of firms failed their Reg BI exams on disclosure alone.
- AI governance-Using AI to monitor transactions, flag suspicious activity, or automate compliance? You need a written framework. 78% of firms have AI tools, but only 32% can prove they’re properly supervised. The SEC doesn’t care if your AI is fancy-it cares if you can explain how it works and who’s responsible for it.
- Custody rules-If you hold clients’ crypto assets, you must follow SEC custody rules. That means using qualified custodians, getting independent audits, and distributing financial statements. One firm paid $115,000 in 2024 just for failing to send GAAP-compliant reports.
- State vs. federal conflict-California, New York, and Texas are rolling out their own crypto rules. Some require licensing. Others ban certain token sales. You can’t assume federal rules override state laws. Many firms are now hiring compliance staff just to track these differences.
How Enforcement Is Actually Working in 2025
The SEC isn’t gone. It’s just quieter. And more strategic. In August 2025, a private fund adviser paid $250,000 for violating Rule 105 of Regulation M-buying shares before a public offering and selling them right after. That’s not a crypto case. It’s a classic securities violation, and the SEC is still chasing these. Another firm got hit for failing to arrange surprise audits for six years. That’s not a technical glitch. That’s negligence. And it’s still being punished. The difference now? The SEC is targeting clear harm, not just innovation. They’re less likely to go after a decentralized protocol with no central team. But if you’re a startup promising 20% monthly returns on your token and collecting investor funds? You’re still on the list.
Real Costs of Getting It Wrong
Compliance isn’t cheap. For a mid-sized blockchain firm with $500 million in assets, annual compliance costs average $315,000. That’s mostly for:- Documentation systems for Reg BI
- AI monitoring tools ($250,000/year on average)
- Legal reviews for token structure
- Staff training and hiring
What Works: How Top Firms Stay Compliant
The firms that aren’t getting fined all do three things:- They talk to regulators early. One firm self-reported a Rule 105 violation and avoided enforcement by working with the SEC’s new Office of Risk and Strategy. They didn’t wait to be caught.
- They update quarterly. Top performers review regulatory changes every three months. They don’t wait for a notice from the SEC. They track rule proposals, court rulings, and state bills themselves.
- They document everything. If you can’t show it, it didn’t happen. That means meeting notes, policy versions, audit trails, and AI oversight logs. One firm had zero deficiencies in 2025 because their compliance folder had 1,200 pages of records.
RegTech Is No Longer Optional
You can’t do this manually anymore. The market for compliance technology (RegTech) is now worth $18.2 billion in 2025. Eighty-seven percent of broker-dealers and 76% of crypto advisers use AI-powered tools to track compliance. But not all tools are equal. The top five vendors-Advent, Charles River, Fidelity, Broadridge, and RegEd-control 58% of the market. Smaller firms often choose cheaper options, but they risk gaps. A KMK Law survey found 65% of firms struggled to integrate their AI tools with legacy systems. That’s a red flag for examiners. If you’re spending under $50,000 a year on compliance tech, you’re probably under-investing. The cost of one enforcement action can be 10 times that.The Future: More Uncertainty Ahead
The courts are starting to push back on the SEC. In July 2025, the Eleventh Circuit struck down the SEC’s funding rule for the Consolidated Audit Trail, calling it "arbitrary and capricious." That’s a big deal. It means regulators can’t just create rules without legal backing. Meanwhile, Congress is trying to cut the SEC’s budget by 7%. That could limit enforcement in areas like cybersecurity and climate disclosures. But here’s the catch: state regulators aren’t cutting anything. By Q2 2026, 14 states will have their own crypto rules. That means compliance costs could jump 2.3 times higher than if we had one national standard. The bottom line? The rules aren’t getting simpler. They’re getting more fragmented.What You Should Do Right Now
If you’re running a blockchain business in 2025, here’s your action plan:- Review your token structure with a securities lawyer. Don’t rely on a blog post or Reddit thread.
- Map out your Reg BI obligations. Are you giving advice? Are you disclosing conflicts? Are you keeping records?
- Document your AI tools. Who built them? Who monitors them? What happens if they make a mistake?
- Check your custody setup. Are you using an SEC-qualified custodian? Have you had a surprise audit in the last year?
- Track state laws. If you’re doing business in California or New York, you need a separate compliance checklist.
- Set up quarterly reviews. Don’t wait for an exam to find out you’re out of date.
Are all crypto tokens considered securities in 2025?
No. The SEC no longer assumes all tokens are securities. Under Project Crypto, they now look at specific factors: Was there a central team promising returns? Did investors expect profits based on others’ efforts? If yes, it’s likely a security. If the network is truly decentralized and the token is used for access or utility, it may not be. Firms must document this analysis clearly.
What happens if I don’t comply with Reg BI?
You risk fines, exam deficiencies, and enforcement actions. In 2025, 63% of firms failed Reg BI exams because they didn’t properly disclose conflicts of interest or document advice. Penalties range from $50,000 to over $250,000, depending on the scale and duration of the violation. Many firms also lose client trust, which can be more damaging than the fine.
Do I need AI compliance tools if I’m a small blockchain startup?
You don’t need fancy AI tools, but you do need documented oversight. Even small firms must show they’re monitoring for fraud, market manipulation, and conflicts. If you’re using any automated system-even a simple alert for large transactions-you need a written policy explaining how it works and who’s responsible. The SEC doesn’t require expensive software. They require proof you’re in control.
Can I ignore state crypto laws if I’m federally compliant?
No. Federal compliance doesn’t override state laws. California, New York, and Texas are already enforcing their own rules. If you accept investors from those states, you may need to register locally, restrict certain offerings, or even block users. Ignoring state laws has led to multi-state enforcement actions in 2025. Treat each state like a separate jurisdiction.
How often does the SEC audit blockchain firms in 2025?
Examination frequency has actually increased. Even though enforcement actions dropped, the SEC is auditing more firms. In 2025, average exam length was 22 business days-up from 18 in 2024. Firms with crypto exposure, private fund clients, or AI tools are being examined more often. The SEC is focusing on risk, not size. Even small firms with high-risk activities are on the list.
Reggie Herbert
December 4, 2025 AT 17:44Let’s be real-Project Crypto is just SEC spin. They didn’t change anything; they just stopped screaming long enough to rebrand the same old enforcement playbook. Token classification? You need legal analysis? Newsflash: most startups can’t afford a securities lawyer. So now you’re forced to either go dark or gamble with $300k in compliance costs. That’s not regulation-it’s a tax on innovation. And don’t get me started on AI governance. They want you to explain how your AI works? Cool. Now explain it to a non-technical examiner who thinks ‘blockchain’ is a type of cryptocurrency.
Meanwhile, the real fraudsters? The ones running unregistered hedge funds with tokenized private equity? They’re laughing all the way to the Caymans. The SEC’s targeting the wrong people. Again.
Sarah Locke
December 4, 2025 AT 18:07Y’ALL. I just read this and I’m SO inspired. 🙌 This isn’t just about avoiding fines-it’s about building something LEGITIMATE. For years, crypto felt like the Wild West, but now? Now we have a chance to build real trust. Yes, compliance is a headache. Yes, it costs money. But think about it: if you’re doing this right, you’re not just surviving-you’re becoming the kind of company that gets invited to the table with traditional finance. That’s POWER.
Document everything. Talk to regulators early. Train your team like they’re surgeons, not coders. I’ve seen startups turn into industry leaders just by treating compliance like their secret weapon. You got this. 💪
Tatiana Rodriguez
December 6, 2025 AT 13:16Okay, I just want to say how much I appreciate how this article doesn’t just throw fear at us-it gives us actual tools. Like, the part about quarterly reviews? That’s genius. I work at a small DeFi startup and we were just winging it until we started doing that. We now have a shared Notion doc where we track every new state law, every proposed SEC guidance, even court rulings. It’s not glamorous, but it’s saved us twice already-once when New York suddenly banned yield-bearing stablecoins and once when our AI flagged a weird wash trade that turned out to be a bot spamming our liquidity pool.
And the part about AI oversight? I used to think it was overkill, but now I get it. It’s not about the tech-it’s about accountability. If your AI messes up, who’s responsible? You? Your dev? Your lawyer? If you can’t answer that, you’re already in trouble. I’m telling my team to treat every compliance doc like a time capsule. Future us will thank us.
Also, I cried when I read about the firm with 1,200 pages of records. Not because I’m emotional-I’m just so tired of people acting like compliance is a chore. It’s the backbone of everything good in this space. We owe it to the users. 💙
Britney Power
December 7, 2025 AT 09:51It is deeply regrettable that the discourse surrounding regulatory compliance in the blockchain ecosystem has been reduced to a cacophony of ill-informed opinions and performative outrage. The notion that compliance is an impediment to innovation is not only empirically false, it is intellectually bankrupt. The SEC’s shift toward targeted enforcement reflects not weakness, but sophistication. One does not regulate a market by throwing darts in the dark; one does so by applying precise legal frameworks grounded in the Howey Test, the Reves Test, and the evolving jurisprudence surrounding asset classification.
Moreover, the suggestion that small firms cannot afford legal counsel is a red herring. The market for compliance-as-a-service is now robust and competitively priced. To claim otherwise is to abdicate professional responsibility. The fact that 63% of firms failed Reg BI exams is not a failure of regulation-it is a failure of governance. If you cannot articulate your fiduciary duties to investors, you do not deserve to operate in a capital market.
And let us not forget: the $315,000 average compliance cost is a bargain compared to the reputational and financial ruin that follows an enforcement action. One must ask: what is the true cost of being reckless? The answer, as evidenced by the 2024 penalty data, is catastrophic.
justin allen
December 7, 2025 AT 13:22USA vs. the world? We’re the only country that makes startups hire compliance officers just to sell a damn token. Meanwhile, Singapore, Switzerland, even Dubai are rolling out red carpets. And we’re over here treating blockchain like it’s a Ponzi scheme run by teenagers. This isn’t regulation-it’s American bureaucracy on steroids.
They want you to document your AI? Cool. Now document how many hours you spent filling out forms instead of coding. That’s the real cost. And don’t get me started on state laws. California wants you to register? Fine. But then they ban your token because it’s ‘too speculative.’ Wait, what? You can’t have it both ways.
They’re not protecting investors. They’re protecting Wall Street from competition. And if you’re a small dev trying to build something real? You’re just collateral damage.
Darlene Johnson
December 8, 2025 AT 19:18They’re lying. Project Crypto? It’s a trap. The SEC doesn’t want to clarify anything-they want to force everyone into registration so they can control who gets to operate. And don’t tell me about ‘decentralization’-they’ll just say your ‘community’ is a shell company. I’ve seen it happen. They’ll audit your Discord, track your GitHub commits, subpoena your DMs. It’s not about rules anymore. It’s about power.
And the AI tools? They’re not for compliance-they’re for surveillance. The moment you install that software, you’re handing them a backdoor into your operations. And who’s watching the watchers? No one. That’s why I’m shutting down. Better to vanish than be hunted.
They’re coming for the next one. You think you’re safe? You’re not. I’ve seen the lists. And you’re on it.
Ivanna Faith
December 9, 2025 AT 05:09So… the SEC just wants you to write stuff down? 😅 and pay $250k for AI? bro… i thought this was web3? like… decentralized? no central authority? lol
so we’re just doing finance 2.0 now? with more jargon and less freedom? 🤡
just make a token, send it to metamask, chill. why does it have to be so… complicated?
also who wrote this article? it sounds like a lawyer who got paid in ETH and now thinks they’re a prophet 🙃
Althea Gwen
December 10, 2025 AT 12:40Compliance isn’t culture. It’s capitalism with a suit on. You don’t build trust by filling out forms-you build it by being transparent, honest, and accountable. The fact that we need 1,200 pages of documentation to prove we’re not fraudsters says everything about how broken this system is.
And yet… I can’t deny it works. The firms that did the work? They’re still here. The ones who cut corners? Gone. So maybe the real lesson isn’t about regulation-it’s about maturity. We’re not kids with a whitepaper anymore. We’re a real market. And real markets need real rules.
But I still miss the days when the only compliance was ‘don’t rug pull.’ 😔