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

What happened

The FAQs also said that after a network is functional, promises to maintain, upgrade or grow it wouldn't satisfy Howey. In brief The SEC's Division of Corporation Finance said buyback announcements on functional crypto networks don't count as promises of "essential managerial efforts" under the Howey test. The US Securities and Exchange Commission is a voluntary company founded in 1934.

Crypto projects looking to buy back their own tokens just got a green light from the SEC's staff, with one big condition. That's a key ingredient of the Howey test, the Supreme Court standard for deciding whether something is an investment contract, and therefore a security.

The picture changes for networks that aren't functional yet. Promoting a system's current uses, or making vague aspirational statements that don't tout profit, likely wouldn't either.

Gabriel Shapiro, a corporate securities attorney at MetaLeX Labs and former general counsel at Delphi Labs, said the guidance 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 .