U.S. Securities and Exchange Commission staff narrowed their new guidance on crypto token buybacks on Monday, three days after first publishing it, by limiting the answer to networks that are both functional and have no central party.
The SEC’s Division of Corporation Finance revised its crypto FAQ on Sept. 28 and added the phrase "and has no central party" to its response on buybacks. In the updated version, staff said that where a system meets both conditions, an issuer’s announcement of a buyback program for a non-security crypto asset would not constitute a representation or promise to undertake essential managerial efforts.
That kind of promise is one path by which a token sale can become an investment contract, and therefore a security, under the Howey test. The rest of the answer was unchanged.
Non-functional networks remain a separate case
For a network that is not yet functional, staff still say a buyback announcement could count as such a promise if the issuer presents the buyback as creating yield or return for token holders.
What changed from the first version
When the division first published the FAQs on Friday, Sept. 25, the buyback answer required only that the crypto system be functional. The SEC also posted a comparison with the prior version alongside the revision.
The buyback answer itself does not define what counts as a central party. A neighboring answer in the same FAQ explains why the concept matters: once a functional system has no central party, issuer statements likely would not create a new investment contract because no one controls the functional crypto system in a way that would let them take action affecting the system’s failure or success.
Jennings backs the revision
Miles Jennings, general counsel and head of policy at a16z crypto, had raised concerns about the original wording. Journalist Eleanor Terrett, who reported the update on X, noted that Jennings said last week the earlier text could allow an issuer to announce a buyback program without that announcement itself creating an investment contract.
On Monday, Jennings praised the change. In a post on X, he wrote: "The narrowing of Friday’s guidance will bolster its durability, while guarding against attempts to misconstrue it by those that wish to circumvent securities laws. Pragmatic and clear rules are all crypto needs to succeed, and the SEC just delivered again."
Buybacks are becoming more common
More crypto projects are using revenue to repurchase their own tokens. Ethena proposed a buyback program in late August.
The FAQs build on the interpretive release the SEC issued on March 17. The division said the document reflects staff views, not a Commission rule, and has no legal force or effect.