Both the SEC and private cryptocurrency attorneys assume that if a crypto token—for example, a bitcoin—is a security when issued, then it is a security when traded on exchanges like Coinbase, Gemini, and Circle. Based on that assumption, the SEC regularly threatens exchanges with enforcement for unlicensed trading. While the literature increasingly examines cryptocurrency’s appropriate regulatory treatment, this baseline assumption has gone unquestioned. This Article suggests that assumption is incorrect. A fundamental difference separates a token when issued by a developer from a token when traded on an exchange: an issuer promises further development and price appreciation, while the exchange promises neither. Unlike stocks and bonds, crypto tokens fall under a different category in the securities laws, regulating “investment contracts.” To be an “investment contract,” a commodity like a crypto token must be accompanied by this extra promise for further development or price appreciation. For that reason, when traded on exchanges, tokens are no longer securities.

This conclusion—that exchanges are not subject to the securities laws—has profound practical implications. The crypto market is worth hundreds of billions of dollars. To avoid SEC jurisdiction, exchanges like Coinbase, Gemini, and Circle have significantly limited the tokens they will trade. If exchanges are not subject to SEC jurisdiction, then the business conducted by these exchanges could increase substantially and immediately.