The U.S. Securities and Exchange Commission has updated its crypto guidance on token buybacks, clarifying that buybacks involving functional crypto systems without a central party generally do not constitute promises of managerial efforts or investment contracts. The change was reported by Eleanor Terrett and added to the SEC Division of Corporation Finance’s crypto FAQ on September 28.
The revised Question 2.5 now includes a no-central-party condition. Under the new interpretation, an issuer’s buyback announcement for a non-security crypto asset would not be treated as a promise of essential managerial efforts if the system is functional and lacks a central party. However, if a crypto system is not functional, announcing a buyback could create such a promise, especially if the issuer presents the program as generating yield or returns for token holders.
The revision followed concerns raised by Miles Jennings, general counsel and head of policy at a16z crypto. Jennings had warned that the previous wording could allow issuers to announce buybacks without creating an investment contract, prompting the SEC staff to refine the guidance.
The updated FAQ also addresses promotional statements, staking receipt tokens, and decentralized systems. Staff said promoting a system’s current utility or potential features generally would not constitute promises of managerial efforts without additional commitments. Once a system becomes functional, services involving maintenance, upgrades, security, and network growth generally would not meet the Howey test. However, transferring an issuer’s commitments to another party does not end an associated investment contract.
The SEC staff also explained that staking receipt tokens may qualify as digital tools or digital commodities depending on their structure. Receipts must evidence ownership without giving issuers control to lend, pledge, or otherwise use deposited assets.
The guidance remains a nonbinding staff interpretation. The FAQ states that its answers represent Corporation Finance staff views, not formal SEC rules or regulations. The Commission has neither approved nor disapproved the content, which carries no legal force and does not change existing law.
