SEC staff gave crypto projects hoping to repurchase their own tokens the go-ahead on Friday, though networks that aren’t finished yet come with a caveat.
The guidance appeared in a fresh batch of FAQs from the Division of Corporation Finance. For crypto systems that are functional, the staff explained, “an issuer’s announcement of a non-security crypto asset buyback program would not constitute a representation or promise to undertake essential managerial efforts.”
The phrasing is significant. Under the Howey test, a pledge of essential managerial effort is what can convert a token sale into an investment contract, and a token that qualifies as an investment contract is treated as a security.
The catch for networks still under construction
Networks that haven’t gone live fall outside that green light. Where a network isn’t yet functional, the staff cautioned that an identical buyback announcement might go too far “if the issuer presents the buyback as creating yield or return for token holders.”
In other words, the buyback on its own isn’t the dividing line. What counts is when it happens and how it’s pitched. Any team marketing repurchases as a holder return before its network actually works is running the risk the staff pointed to.
This isn’t an abstract debate. A growing number of crypto projects are putting revenue toward buying back their own tokens, much like public companies repurchase their shares. Ethena put forward a buyback program in late August. What such teams lacked was a straight answer on whether announcing one could make their token resemble a security.
Liquid staking tokens get sorted, too
Staking receipt tokens, which users receive after depositing assets with a liquid staking provider, are also covered in the FAQs.
According to the staff, those tokens are digital tools when they serve as receipts for a digital commodity that isn’t itself subject to an investment contract. If the token is issued by a protocol-based liquid staking provider, it may qualify as a digital commodity in its own right.
That stops short of a blanket exemption. How the token is classified hinges on the asset behind the receipt and on who issued it.
Paying for upgrades doesn’t make a token a security
Another of the answers may carry more weight over time. The staff said that once a network is functional, efforts to secure, maintain or improve it, funding development projects included, don’t amount to the managerial effort that turns a token into a security.
The agency has aired this position before. It appeared in the SEC’s proposed Regulation Crypto Assets in August, and the FAQs now attach the staff’s name to it.
Not every answer is a loosening
Parts of the guidance point in the opposite direction. When another party assumes an issuer’s promises, the token remains subject to the original investment contract, so passing obligations to a new entity doesn’t reset anything.
Exchanges also got more clarity. A trading platform listing a token is treated as its promoter only if it meets Rule 405’s definition of a promoter under the Securities Act.
Where this fits
The FAQs expand on the interpretation the SEC released on March 17, which the CFTC also joined. That interpretation grouped crypto assets into categories such as digital commodities and digital tools. At the time, SEC Chair Paul Atkins said it recognized that “most crypto assets are not themselves securities.”
Teams shouldn’t overhaul their token plans around this just yet, because the document itself flags an important limit. These are staff views rather than a Commission rule, and the division said they “have no legal force or effect.” Anyone planning a buyback should read the FAQs as a signal of the staff’s thinking, not as legal protection. And if your network isn’t functional yet, don’t sell the buyback as yield.