SEC Tokenized Guidance

Strategic Compliance Memo · Three-Module Architecture

Release No. 33-11412 (March 17, 2026) · Joint Staff Statement (January 28, 2026) · Subsequent Authority

Groovy Company, Inc. · Version 10.0 · May 2026

Executive Summary

Release No. 33-11412 (March 17, 2026), jointly issued by the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission, is the most legally significant federal guidance on digital asset classification in U.S. regulatory history. Unlike the January 28, 2026 Joint Staff Statement on Tokenized Securities (which carried Staff-level persuasive weight), Release No. 33-11412 is a Final Rule and Interpretation carrying the full legal weight of an official SEC and CFTC interpretation under the Securities Act of 1933 and the Securities Exchange Act of 1934.

The release is highly favorable for RWA Tokens' three-module architecture. Digital Securities issued through Module 1 (Equities), Module 2 (Real Estate), and Module 3 (CORECM) all map cleanly to Category 5 — the only category under SEC jurisdiction. The GROO utility/governance token is classified outside Category 5 entirely. The Category 1 Model B architecture, originally designed for the equity-tokenization use case, applies identically to all three modules and is now backed by binding interpretive authority rather than Staff guidance.

Strategic conclusion: Release No. 33-11412 confirms that the unified-kernel compliance architecture is the correct structure for tokenized real-world assets across asset classes. Each of the three modules sits in the same regulatory home (Category 5 Digital Securities), under the same custodian (Empire Stock Transfer), with the same Transfer Hook controls — and the GROO utility token sits cleanly outside SEC jurisdiction.

Key Findings

Finding	Impact
Module 1, 2, and 3 tokens all classify as Category 5 Digital Securities under Release No. 33-11412	Confirms unified-kernel architecture across all three modules
Category 1 Model B architecture is now backed by binding interpretive authority	Stronger legal footing for all RWA Tokens compliance positions
GROO utility token classifies outside Category 5 — Category 1 (Digital Commodity) or Category 3 (Digital Tool)	GROO is not a security; offering structure for the Groovy Security Token (STO) is structurally separate
The five-category taxonomy provides a complete federal classification map	Eliminates ambiguity about how the platform's various tokens are classified
Nasdaq tokenization approval (Release No. 34-105047) does not extend to CEDEX	CEDEX trading venue path remains on its own track
Innovation exemption rulemaking from the SEC is favorable to platforms with mathematically-enforced safeguards	RWA Tokens 42-control Transfer Hook architecture exceeds sandbox safeguard threshold

Part 1 — The SEC–CFTC Regulatory Framework

Definition of Digital Securities

Per the January 28, 2026 Joint Staff Statement, retained verbatim in Release No. 33-11412:

"A tokenized security is a financial instrument enumerated in the definition of 'security' under the federal securities laws that is formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks."

Fundamental Regulatory Principle — Now Binding

"The format in which a security is issued or the methods by which holders are recorded (on-chain vs. off-chain) does not affect application of the federal securities laws."

This technology-neutral principle is binding interpretive authority under Release No. 33-11412 — not Staff guidance. It is the foundational doctrine supporting the Category 1 Model B architecture used across all three RWA Tokens modules: Empire Stock Transfer maintains the authoritative master securityholder file off-chain, while Solana serves as the operational notification layer.

The Five-Category Taxonomy

Release No. 33-11412 establishes five formal categories of crypto assets under U.S. federal law:

Category	Name	Securities?	RWA Tokens Relevance
1	Digital Commodities	No — CFTC jurisdiction	GROO utility/governance token may qualify
2	Digital Collectibles	No	Not applicable to current RWA Tokens products
3	Digital Tools	No	GROO utility token may alternatively qualify (protocol access credential)
4	Payment Stablecoins	No — GENIUS Act	Confirms USDC and PYUSD settlement of Digital Securities trades is not a securities transaction
5	Digital Securities	Yes — SEC jurisdiction	All three RWA Tokens modules — Equities, Real Estate, CORECM — produce Category 5 Digital Securities

Category 5 Digital Securities — The Three-Module Home

All Digital Securities issued through the RWA Tokens platform are unambiguously Category 5. The backing instrument differs by module but the regulatory classification is identical:

Module	Backing Instrument	Category 5 Basis
Module 1 — Equities (ST22)	1:1 issuer Common Class B shares (Empire custody)	Common stock is a security under Securities Act §2(a)(1)
Module 2 — Real Estate	Common Class B shares in property-holding Nevada corporation (Empire custody)	Common stock of an investment-purpose corporation is a security under §2(a)(1) and supplemental SEC guidance on real-estate-holding corporations
Module 3 — CORECM	Operator Common Class B shares or royalty assignment units (Empire custody)	Royalty interests in mineral production are investment contracts and / or fractional undivided interests under §2(a)(1)

SEC Chair Paul Atkins, March 17, 2026 DC Blockchain Summit: "This distinction returns the Commission to its core mission — and statutory authority — of protecting investors involved in securities transactions. We are not the Securities and Everything Commission, anymore."

Investment Contract Termination Framework

Release No. 33-11412 introduces a concept absent from the January 28, 2026 Joint Staff Statement: investment contract status can terminate. A non-security crypto asset that was initially distributed under an investment contract ceases to be subject to that investment contract when (1) the issuer fulfills its representations and promises (e.g., the protocol becomes functional), or (2) the issuer demonstrably fails to fulfill those representations.

Application to RWA Tokens: directly applicable to the GROO utility/governance token. The Company should document the specific point at which the Solana program suite became functional (CEDEX mainnet launch, Q3 2026) and that any investment contract obligations attached to GROO at distribution are extinguished as of that operational milestone. This eliminates ongoing securities obligations for the GROO utility token and is independent of the Category 5 Digital Securities obligations applicable to the three module products.

SEC–CFTC Joint Harmonization Initiative

On March 11, 2026, the SEC and CFTC signed a Memorandum of Understanding establishing a Joint Harmonization Initiative co-led by Robert Teply (SEC) and Meghan Tente (CFTC). This initiative coordinates oversight across policymaking, examination, and enforcement, and is intended to reduce frictions for dually regulated entities. RWA Tokens should monitor this initiative for implications affecting the GROO utility token (Category 1 / CFTC jurisdiction) and CEDEX trading venue analysis (Category 5 / SEC jurisdiction).

Part 2 — RWA Tokens Compliance Status

The following compliance positions apply uniformly across all three modules and are backed by binding interpretive authority under Release No. 33-11412.

Core Architecture Compliance Status

SEC Requirement	RWA Tokens Implementation	Authority
Issuer authorization	Board resolution required for any module-tagged token minting	Binding interpretation
Shareholder register integration	Empire Stock Transfer master file (authoritative for all three modules)	Binding interpretation
SEC-registered custody	Empire Stock Transfer (Exchange Act §17A registered)	Binding interpretation
True equity / asset backing	1:1 backing — Common Class B (Modules 1, 2) or operator Common B / royalty units (Module 3) — irrevocable Empire custody	Binding interpretation
Token standard	SPL Token-2022 with 42 baseline + module-conditional Transfer Hook controls	Binding interpretation
Digital Securities classification	All module tokens classified as Category 5 Digital Securities	Binding interpretation
Category 1 Model B architecture	Solana as notification layer; Empire as authoritative master file (all modules)	Binding interpretation
CUSIP assignment	Common Class B shares receive official CUSIP at issuance	Binding interpretation
Protective conversion triggers	Auto-conversion on specified adverse events (see below)	Binding interpretation
Tripartite legal structure	Issuer + Groovy Company, Inc. + Empire Stock Transfer agreement	Binding interpretation

Protective Conversion Triggers

The protective conversion triggers built into the Common Class B backing instrument across all three modules directly address the counterparty and bankruptcy risk concerns Release No. 33-11412 flags for Category 2 (third-party-mediated) tokenization models. Conversion triggers are not policy — they are share-class terms embedded in the issuer's Certificate of Designation.

Trigger Event	Investor Protection
Issuer bankruptcy filing (any chapter)	Auto-conversion of backing Common Class B to common stock
SEC enforcement action against the issuer	Auto-conversion to common stock
Criminal indictment or conviction of issuer officers	Auto-conversion to common stock
Loss of Empire Stock Transfer custody services	Auto-conversion to common stock
Material breach of token holder rights by issuer	Auto-conversion to common stock
Sustained appraisal cadence failure (Module 2 only)	Auto-conversion to common stock in property-holding Nevada corporation
Sustained reserve attestation failure (Module 3 only)	Auto-conversion to common stock in operator entity

Part 3 — Open Compliance Workstreams

The following workstreams remain open as of May 2026. Each is identified by category, scope, and current status.

1. GROO Utility Token Formal Classification

Priority: MEDIUM

Release No. 33-11412 establishes the regulatory framework, but formal classification of the GROO utility/governance token under the five-category taxonomy requires legal counsel review. Two viable classifications exist:

• Category 1 — Digital Commodity: if GROO operates as a network-native asset whose value derives from protocol operation. CFTC jurisdiction.

• Category 3 — Digital Tool: if GROO functions as a governance credential and protocol access tool. Outside both SEC and CFTC jurisdiction.

The investment contract termination framework introduced by Release No. 33-11412 may also apply, extinguishing any residual securities obligations attached to GROO at initial distribution once the protocol is functional (CEDEX mainnet launch, Q3 2026).

Required actions:

• Engage securities counsel to formally classify GROO under the five-category taxonomy

• Document investment contract termination analysis tied to CEDEX mainnet launch

• Update GROO disclosures to reflect the distinction between GROO (Category 1 or 3) and Module 1/2/3 Digital Securities (Category 5)

2. CEDEX Trading Venue Status

Priority: HIGH

The Nasdaq tokenization approval (Release No. 34-105047, March 18, 2026) applies exclusively to DTC Eligible Securities — securities with functioning clearing and settlement infrastructure within the Depository Trust Company. By definition, this framework does not extend to:

• Module 1 OTC microcap issuers without DTC eligibility

• Module 2 property-holding Nevada corporations (privately-held by definition)

• Module 3 operator entities and royalty units (private securities)

CEDEX therefore remains on its own regulatory path. The consolidated no-action letter requesting Staff confirmation that CEDEX does not require ATS registration is the principal pending workstream.

Option	Description	Current Status
Consolidated No-Action Letter	Filed with SEC Division of Trading and Markets — requests CEDEX operating confirmation	Pending Staff response
ATS Registration	Register CEDEX as an Alternative Trading System under Reg ATS	Evaluate based on no-action response
Innovation Exemption	Apply for SEC innovation exemption sandbox upon rulemaking publication	See workstream 4 below
Reg D / Reg S / Reg CF Distribution	Maintain offering exemption distribution while CEDEX status is resolved	Currently operative across all three modules

3. Module-Specific Issuer Disclosure Standards

Priority: MEDIUM

Release No. 33-11412 does not change disclosure obligations for Digital Securities issuers. Tokenized securities require the same disclosures as traditional securities. The three-module architecture requires module-differentiated disclosure standards because each module's underlying asset class triggers different regulatory disclosure regimes:

Module	Disclosure Regime	Required Action
Module 1 — Equities (SEC-reporting)	Existing 10-K / 10-Q / 8-K filings + token offering disclosure	Token offering documents reference existing periodic filings
Module 1 — Equities (non-reporting)	Standardized disclosure package — material business information, risk factors, financials, management, use of proceeds	Standardized package in development
Module 2 — Real Estate	Property-specific disclosures + USPAP appraisal report + Nevada corporation governance documents	USPAP appraiser engagement protocol; appraisal cadence enforced on-chain (90/180/365 days by property class)
Module 3 — CORECM	S-K Subpart 1300 reserve disclosures + SPE-PRMS or CRIRSCO-aligned reserve report + operator entity disclosures	Qualified petroleum / mining engineer engagement protocol; reserve attestation cadence enforced on-chain (90 days)

4. Innovation Exemption Rulemaking

Priority: MEDIUM — Strategic Opportunity

Release No. 33-11412 was explicitly described by SEC Chair Atkins as "a first step rather than a final answer." The innovation exemption rulemaking would allow companies to test novel business models under principles-based safeguards rather than full compliance with existing rules.

Why RWA Tokens Is a Strong Candidate

• Mathematically-enforced safeguards: the 42 baseline + module-conditional Transfer Hook controls execute atomically inside the Solana runtime on every transaction across all three modules — exceeding the safeguard threshold any innovation exemption sandbox would require

• Investor participation limits already satisfied: all Digital Securities offerings are limited to verified investors under Reg D (US accredited), Reg S (non-US), and Reg CF (US retail with per-investor SEC limits)

• Non-custodial CEDEX architecture: Groovy Company, Inc. holds no user funds — Empire Stock Transfer holds all backing instruments; the Global Unified CEDEX Liquidity Pool is protocol-owned with LP tokens burned at initialization

• Real-time regulator visibility: on-chain settlement provides regulators with real-time, immutable transaction visibility superior to the periodic reporting obligations sandbox participants would otherwise need to satisfy

• Cross-module application: any innovation exemption granted to RWA Tokens applies uniformly across all three modules — the unified compliance kernel design is itself an argument for sandbox eligibility

Required actions:

• Monitor SEC rulemaking publication

• Engage securities counsel to evaluate eligibility upon rule publication

• Prepare innovation exemption application in parallel with no-action letter response process

• Position the 42-control Transfer Hook architecture as the operational model for principles-based safeguards

5. Documentation Updates

Priority: HIGH (regulatory documents) · MEDIUM (marketing materials)

Document	Required Update	Status
Whitepaper	Five-category taxonomy citation; Release No. 33-11412 throughout; three-module Category 5 framing	Complete (V8 → V10)
Lightpaper	Three-module architecture; Common Class B backing; rwatokens.net contact	Complete (V10)
Mutual NDA	Wyoming governing law; Atlanta address; three-module Purpose checkboxes	Complete (V10)
Competitive Analysis	Module-specific competitor mapping; Securitize ERC-3643 vs ST22 framework	Complete (V10)
Issuer Agreements	Module-specific terms; Category 5 Digital Securities classification acknowledgment; Release No. 33-11412 reference	In progress
Risk Disclosures	Module-specific risk factors; five-category taxonomy framing	In progress
Marketing Materials	Category 5 Digital Securities messaging; remove any obsolete classification language	In progress
Technical Specifications	SPL Token-2022 Transfer Hook documentation reflects Release No. 33-11412 Digital Securities requirements	Complete

Part 4 — Competitive Position Under Release No. 33-11412

The five-category taxonomy strengthens RWA Tokens' competitive position by drawing sharp regulatory lines around competing models that the binding release flags as non-compliant or jurisdictionally incorrect.

Disfavored Models Under the Binding Release

• Synthetic equity products without issuer authorization: Category 2-style products including third-party tokenized stock wrappers are explicitly characterized as security-based swaps that cannot trade off-exchange to retail investors

• Custodial receipt models (ADR-type tokens without direct issuer involvement): investors face counterparty risk, bankruptcy risk, and no direct issuer relationship — all conditions the SEC's taxonomy is designed to flag

• Unclassified tokens claiming non-security status: tokens that do not clearly fit one of the five categories are presumptively investment contracts under Howey

RWA Tokens Position

Advantage	Basis
Regulatory Moat	All three modules align with binding Release No. 33-11412, not Staff guidance
Cross-Module Compliance Map	The same five-category taxonomy classifies Module 1 / 2 / 3 tokens (Category 5) and the GROO utility token (Category 1 or 3) cleanly
Risk Mitigation	Protective conversion triggers across all three modules specifically address risks flagged in Release No. 33-11412
Institutional Appeal	The taxonomy gives institutional investors a clear compliance map for evaluating each of the three modules
Joint Regulatory Clarity	SEC–CFTC harmonization means the GROO utility token has a clean Category 1 (CFTC) or Category 3 (no agency) home — no jurisdictional ambiguity
Innovation Exemption Eligibility	42 Transfer Hook controls + module-conditional logic + non-custodial architecture = best-in-class safeguards across asset classes

Strategic Messaging Under Release No. 33-11412

Message	Authority
RWA Tokens Digital Securities are Category 5 under binding Release No. 33-11412 — the only category under SEC jurisdiction	Federal interpretive release
The GROO utility/governance token is classified outside SEC jurisdiction — Category 1 (CFTC) or Category 3 (no agency oversight)	Pending counsel-formalized classification
The Category 1 Model B architecture applies uniformly to all three asset-class modules — Equities, Real Estate, CORECM	Application of binding architecture to multi-module platform
RWA Tokens aligns with binding Release No. 33-11412 — the only comprehensive federal crypto asset classification with full legal authority	Release No. 33-11412

Part 5 — Priority Action Plan (May 2026)

The following actions reflect the current open work as of May 2026. Each is ranked by priority, with complexity and timeline estimates.

Priority	#	Action Item	Complexity	Status
HIGH	1	CEDEX no-action letter — pursue Staff response and pre-filing call with Division of Trading and Markets	Medium	Active
HIGH	2	Module-specific issuer agreements — finalize Module 2 (Real Estate) and Module 3 (CORECM) issuer agreement templates with Category 5 Digital Securities classification language	Medium	In progress
HIGH	3	Module-specific risk disclosures — finalize Module 2 (USPAP appraisal risk) and Module 3 (SPE-PRMS reserve revision risk) disclosure standards	Medium	In progress
MEDIUM	4	GROO utility token formal classification under five-category taxonomy — engage securities counsel	Medium	Open
MEDIUM	5	Innovation exemption rulemaking — monitor publication; prepare RWA Tokens application materials in parallel with no-action process	High	Open
MEDIUM	6	GROO investment contract termination analysis tied to CEDEX mainnet launch (Q3 2026)	Medium	Open
MEDIUM	7	Standardized issuer disclosure package — non-reporting issuers across all three modules	Medium	Open
LOW	8	Empire Stock Transfer blockchain integration documentation — formalize reconciliation procedures between on-chain and off-chain records	Low	Open
LOW	9	SEC–CFTC Joint Harmonization Initiative — monitor for implications affecting GROO classification and CEDEX jurisdictional analysis	Low	Ongoing

Conclusion

Release No. 33-11412 is the most consequential federal regulatory development for RWA Tokens since the platform's architectural design phase. The five-category taxonomy resolves the platform's classification map cleanly: all three modules produce Category 5 Digital Securities under SEC jurisdiction; the GROO utility/governance token sits in Category 1 (CFTC) or Category 3 (no agency oversight) outside SEC jurisdiction.

The binding nature of Release No. 33-11412 upgrades the entire RWA Tokens compliance position from "aligned with Staff guidance" to "aligned with binding federal interpretation" — a meaningful difference when speaking with institutional investors, issuers, and regulators across all three modules.

Three Strategic Questions Remain Open

• CEDEX trading venue status: awaiting consolidated no-action letter response and innovation exemption rulemaking publication

• GROO utility token formal classification: requires counsel engagement under the five-category framework, with investment contract termination analysis tied to CEDEX mainnet launch

• Innovation exemption eligibility: RWA Tokens should position proactively for sandbox consideration upon rule publication

On all three open questions, the existing architecture — 42 baseline + module-conditional Transfer Hook controls, Empire Stock Transfer Category 1 Model B custody across all three modules, permanently locked Global Unified CEDEX Liquidity Pool, non-custodial CEDEX exchange — represents the strongest possible starting position.

Compliance Summary

Binding Release Alignment	In Progress	Adjustments Needed
Category 5 Digital Securities classification (all three modules)	CEDEX no-action letter response	GROO utility token formal classification
Category 1 Model B architecture (all three modules)	Innovation exemption monitoring	Trading venue path resolution
SEC-registered transfer agent custody (Empire Stock Transfer)	Module-specific issuer disclosure standardization	Broker-dealer determination (per-module)
1:1 Common Class B backing (all three modules)	Module 2 USPAP and Module 3 SPE-PRMS attestor network expansion
CUSIP assignment	Issuer agreement templates (Module 2, Module 3)
Protective conversion triggers (all three modules)
Tripartite legal structure
42 Transfer Hook compliance controls + module-conditional logic
Reg D / Reg S / Reg CF offering structure
GENIUS Act stablecoin settlement (USDC / PYUSD)
Non-custodial CEDEX architecture

Key Regulatory References

Document	Date	Legal Weight
Release Nos. 33-11412; 34-105020 — SEC–CFTC Joint Interpretive Release on Crypto Asset Classification	March 17, 2026	Binding — Final Rule and Interpretation
Release No. 34-105047 — SEC Approval of Nasdaq Tokenized Securities Rule	March 18, 2026	Binding — Exchange rule approval
Joint Staff Statement on Tokenized Securities — Division of Corp. Fin., Div. Inv. Mgmt., Div. Trading & Markets	January 28, 2026	Persuasive — substantially incorporated into Release No. 33-11412
SEC Staff Statement on Covered User Interface Providers	April 13, 2026	Staff guidance — relevant to CEDEX user-interface analysis
SEC–CFTC Memorandum of Understanding — Joint Harmonization Initiative	March 11, 2026	Operative agreement
Innovation Exemption Rulemaking	Pending publication	Forthcoming

Disclaimer

This memo is prepared for internal strategic and investor relations use only and does not constitute legal or investment advice. Market participants should consult qualified securities counsel regarding specific compliance requirements. Statements regarding the GROO utility / governance token classification are preliminary and subject to formal counsel determination under the five-category taxonomy. Statements regarding CEDEX trading venue status are subject to the pending consolidated no-action letter response and any forthcoming innovation exemption rulemaking. Groovy Company, Inc. is a Wyoming Corporation (CIK: 1499275; OTC: GROO).

© 2026 Groovy Company, Inc. · All Rights Reserved · Version 10.0 · May 2026 · Internal / Investor Relations