Crypto is at a crossroads. After trillions in value destruction, a cascade of bankruptcies – including FTX’s implosion – and millions of defrauded believers, many are wondering whether the sector has a future. Regulators, meanwhile, aren’t taking chances, “carpet bombing” crypto with legal actions. The stakes could not be higher. Yet, consensus regarding first-order questions – including, what is crypto? – could not be lower. Part of the problem, this Article posits, is that we have largely been thinking about crypto incorrectly. Rather than a single asset type, crypto represents a highly heterogenous, 10,000-instrument universe, encompassing distinctive features and economic characteristics. One size cannot possibly fit all. This Article’s essential contribution to the literature is a novel unifying framework to taxonomize the crypto sector based on asset-specific economic substance and legal attributes. The taxonomical framework is a powerful tool for understanding market structure, illuminating abusive industry practices and identifying areas for regulatory action – findings with critical implications for policymakers, regulators and jurists. In particular, the Article shines a light on crypto’s murkiest corner: so-called “utility tokens,” which it finds most economically analogous to loyalty programs, such as airline miles. However, the Article uncovers a day-and-night mismatch between regulatory guidance and market practice around these instruments, which it terms the “Pre-Utility Token Problem.” Pre-Utility Tokens are legally problematic instruments (i) labeled as “utility tokens,” (ii) marketed like stocks, but (iii) offering minimal legal rights – most akin to digital trinkets. Unfortunately, such “assets” are quite common, creating multi-layered classification incongruencies that harm all stakeholders – exploiting investors, ensuring poor governance and facilitating accounting shenanigans.Fortunately, the most acutely problematic aspects of the status quo can be alleviated. First, regulators must enforce asset-level delineations for crypto while emphasizing long-neglected consumer protection. Second, the accounting mismatches for company-created tokens must be remedied to ensure financial stability and appropriate incentives. Finally, calls for relaxing crypto regulatory standards should be met with skepticism, given proponents’ unpersuasive arguments and significant risks to the public
