The SEC Division of Corporation Finance released new FAQs clarifying when token buybacks might classify a crypto asset as a security. According to the guidance, buyback programs for functional networks do not necessarily constitute the essential managerial efforts required by the Howey test.
For networks that are not yet functional, the SEC staff warned that buyback announcements could be viewed as securities offerings if issuers market them as a way to generate yield or returns for token holders. Promises to maintain or upgrade a functional network are also unlikely to meet the Howey test criteria.
Legal experts, including Gabriel Shapiro of MetaLeX Labs, noted that this guidance suggests a shift toward an opt-in approach for securities laws in the crypto sector. However, the FAQs do not carry formal legal force and could be challenged by future regulatory actions or private litigation.
These FAQs build upon previous initiatives, such as the March interpretive release and the Regulation Crypto Assets proposal, which aims to allow token sales without full registration. The agency also recently introduced an innovation exemption for tokenized stocks following legislative developments.
