George TsagkarakisCrypto teams that want to buy back their own tokens got a green light from SEC staff on Friday. It comes with a catch for any network that isn’t finished yet.
The Division of Corporation Finance put the answer in a new set of FAQs. Where a crypto system is functional, the staff wrote, “an issuer’s announcement of a non-security crypto asset buyback program would not constitute a representation or promise to undertake essential managerial efforts.”
That wording matters. A promise of essential managerial effort is what can turn a token sale into an investment contract under the Howey test. And once a token counts as an investment contract, it’s treated as a security.
The catch for networks still under construction
The green light doesn’t extend to networks that aren’t live yet. On a network that isn’t yet functional, the staff warned, the same buyback announcement could cross the line “if the issuer presents the buyback as creating yield or return for token holders.”
So the line isn’t really about the buyback itself. It’s about timing and framing. A team that pitches repurchases as a return for holders before the network works is taking the risk the staff flagged.
This is a live question, not a hypothetical one. More crypto projects are using revenue to repurchase their own tokens, the same way public companies buy back stock. Ethena proposed a buyback program in late August. What teams like that didn’t have was a clear answer on whether announcing one could make their token look like a security.
Liquid staking tokens get sorted, too
The FAQs also address staking receipt tokens, the ones users get when they deposit assets with a liquid staking provider.
The staff said those tokens are digital tools when they’re receipts for a digital commodity that isn’t itself subject to an investment contract. They may count as digital commodities themselves if the token comes from a protocol-based liquid staking provider.
That’s a narrower answer than a blanket pass. The classification depends on what’s underneath the receipt and who issued it.
Paying for upgrades doesn’t make a token a security
Another answer could matter more over the long run. Once a network is functional, work to secure, maintain or improve it, including funding development projects, isn’t the managerial effort that makes a token a security, the staff said.
That isn’t a new idea from the agency. The SEC floated the same view in its proposed Regulation Crypto Assets in August. The FAQs now put the staff’s name behind it.
Not every answer is a loosening
Some of the guidance cuts the other way. If another party takes over an issuer’s promises, the token stays subject to the original investment contract. Handing obligations to a new entity won’t wipe the slate clean.
Exchanges got a clearer answer as well. A trading platform that lists a token counts as its promoter only if it fits Rule 405’s definition of a promoter under the Securities Act.
Where this fits
The FAQs build on the interpretation the SEC issued on March 17, which the CFTC joined. That document sorted crypto assets into categories including digital commodities and digital tools. SEC Chair Paul Atkins said at the time that it acknowledged “most crypto assets are not themselves securities.”
Before any team rewrites its token plans around this, one detail from the document itself deserves attention. These are staff views, not a Commission rule, and they “have no legal force or effect,” the division said. If you’re planning a buyback, treat the FAQs as a read on how the staff thinks, not as legal cover. And if your network isn’t functional yet, don’t market the buyback as yield.
