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
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