SEC Staff Says Token Buybacks Don't Make Crypto a Security—If the Network Works

The SEC's Division of Corporation Finance published FAQs stating that announcing a token buyback program for a crypto network that is already functional does not, by itself, amount to a promise of "essential managerial efforts" under the Howey investment-contract test. That component of Howey is often used to determine whether a digital asset is a security; the staff's view reduces the likelihood that buyback announcements on operating networks will convert tokens into securities solely on that basis. The staff said the analysis differs for networks that are not yet functional. In those cases, a buyback announcement could be treated as a promise of returns if it is promoted as a source of yield or profits for token holders. The FAQs also indicated that after a network reaches functionality, promises to maintain, upgrade or grow the system would generally not satisfy the Howey managerial-efforts prong, and promotional statements focused on current uses or vague non-profit-oriented aspirations are unlikely to make a token a security. Attorney Gabriel Shapiro, formerly general counsel at Delphi Labs and now at MetaLeX Labs, praised the guidance as a substantial shift, saying on X that securities laws were starting to look "opt-in" in the SEC's application to crypto and that the buyback section exceeded his expectations. Shapiro also warned the FAQs create what he called a "loophole," noting that the guidance lacks legal force and could be overturned by a future SEC or challenged by private litigants. The FAQs build on the SEC's March interpretive release and its Regulation Crypto Assets proposal, which would offer a route for projects to sell tokens without full registration. The guidance follows the agency's recent innovation exemption for tokenized stocks, issued after the Clarity Act failed in the Senate; the release also comes amid prior signals from SEC Chair Paul Atkins about potential agency action and a similar warning from the CFTC in August. Because the FAQs are staff-level guidance rather than binding rulemaking, market participants and observers note the view narrows enforcement risk now but does not eliminate future legal uncertainty.