Crypto projects got fresh guidance from staff at the U.S. Securities and Exchange Commission on Friday: token buybacks generally do not turn a crypto asset into a security if the network behind it is already functional.
In new FAQs, the SEC’s Division of Corporation Finance said that once a crypto system is operational, announcing a token buyback program does not amount to a promise of “essential managerial efforts.” That point matters because it is one of the components of the Howey test, the Supreme Court standard used to decide whether an arrangement is an investment contract and therefore a security.
Different treatment for non-functional networks
The staff drew a distinction for networks that are not yet functional. In those cases, a buyback announcement could create securities issues if the issuer presents it as a way to generate yield or returns for token holders.
The FAQs also say that, after a network is functional, promises to maintain, upgrade, or grow the system would not satisfy Howey. Promoting the network’s current uses, or making broad aspirational statements that do not pitch profit, likely would not meet that standard either.
Gabriel Shapiro says the guidance goes far
Gabriel Shapiro, a corporate securities attorney at MetaLeX Labs and former general counsel at Delphi Labs, said the SEC staff’s position goes a long way.
“The securities laws are starting to look opt-in now, at least as applied by the SEC to crypto,” he wrote on X. Referring to the buyback section, he added that it “goes further than I expected.”
In Shapiro’s reading, teams can keep building, support prices through buybacks, and capture many of the advantages of a public investment without giving holders shareholder-style rights. “They have opened a loophole in a regulatory regime whose whole point was supposed to be that you couldn't draft your way around economic reality,” he wrote.
He argued that crypto’s larger direction is not tokenized equity, but a push to “get all the benefits of equity with none of the burdens.”
Part of a broader SEC policy track
According to Decrypt, the FAQs do not carry legal force. Still, they build on the SEC’s interpretive release from March and its Regulation Crypto Assets proposal, which would allow projects to sell tokens without full registration.
The FAQs also follow the agency’s innovation exemption for tokenized stocks, introduced after the Clarity Act failed in the Senate.
SEC Chair Paul Atkins had said in July that the agency would step in if the bill stalled, and the Commodity Futures Trading Commission issued a similar warning in August.
Industry leans on regulators, with caveats
Decrypt said much of the crypto industry has come to see regulators as the most practical route forward, even though agency rules are easier to reverse than legislation. Shapiro made the same point in his reaction, writing: “A private plaintiff or a future SEC could have other ideas.”