This has been the SEC's stance since at least 2020 when they went after Ripple (XRP) for selling "unregistered securities" in their ICO.

It's the SEC's position that you can issue tokens, but they have to be "registered," specifically with them.

https://www.sec.gov/ICO

That seems like the obvious interpretation though, rather than a surprise. What does a hypothetical exchange-issued token look like that could “fail” the Howey test?

Wasn't this already the SEC's position?

The original position was that cryptocurrencies were commodities not securities, and that is what allowed all the bullshit to flourish. In July of 2017 the SEC issued a ruling that any coin issued via ICO could be considered a security on a case by case basis. Yesterday is the first time I've seen the SEC make the argument that exchange native tokens are investment contracts and therefore securities.

Exchange tokens are amongst the more obvious securities IMO. I think they tick all marks of the Howey Test:

    - An investment of money
        (Send money/BTC, get token)
    - In a common enterprise 
        (the exchange)
    - With the expectation of profit
        (Token burns)
    - To be derived from the efforts of others
        (Exchange pays with profits for token burns)

https://www.investopedia.com/terms/h/howey-test.asp

They offered margin trading and all kinds of other things, the pitch being "like an exchange but with crypto". Why would anyone think it's not securities?

The tokenomics are important. They could create as many PoW blockchains as they wanted without the coins being securities. The important part is that they created all tokens themselves and then sold them via ICO with funding rounds to investors who expected to make a profit from it.

https://www.coingecko.com/en/coins/ftx-token/tokenomics

I think it is more of a stretch to call FTT a cryptocurrency than calling it a security.

This is just a jurisdictional turf war. SEC calls them securities and CFTC calls them commodities. The courts will decide. Re FTX via CFTC:

"The complaint charges all three defendants with fraud and material misrepresentations in connection with the sale of digital commodities in interstate commerce."

https://www.cftc.gov/PressRoom/PressReleases/8638-22

> This is just a jurisdictional turf war. SEC calls them securities and CFTC calls them commodities.

Doesn't seen to be a turf war; SEC seems to be saying the FTT token and direct investment in FTX were securities (and thus, decieving investors in those waa securities fraud), CFTC is saying that the bulk of the crypto traded on FTX were commodities (and thus, decieving people trading in them was commodities fraud), and DoJ—which has included both in the criminal charges as well as each regulatory agency filing civil charges for offenses with their respective civil area of jurisdiction—agrees with both.

FTT was clearly a security because something like 25% of FTX revenue was used for FTT buybacks. Other crypto tokens don't entitle you to a share of some businesses money, so less clear if they're securities.

> all exchange native tokens more or less work the same way, that would mean they are all securities... If this holds, the crypto exchange game is over.

Exchanges don't need tokens to be a place to swap and park coins. I don't see Kraken or Coinbase using a house token/security. Some exchanges will be okay.

Can someone enlighten me on why exchanges created their me-too coins in the first place? As a way to move out of crypto into a sort of non-fiat purgatory before taking a position again later on? Like, why does BNB even need to exist?

BNB and FTT exist(ed) so their exchanges can raise/create a lot of money. It's a little similar to why stocks exist, which is why they are clearly securities.