SEC Staff: Token Buybacks Don't Trigger Security Status

Crypto projects have spent a record $638 million buying back their own tokens through late August 2026, and on September 25 the SEC's Division of Corporation Finance told those projects the practice is not, by itself, a securities-law trap. The staff said that on a blockchain network that is already up and running, announcing a token buyback does not amount to the kind of promise that turns a token into a security under the agency's Howey test analysis.

What the SEC staff actually said

The guidance arrived in a new batch of Frequently Asked Questions from the SEC's Division of Corporation Finance. The U.S. Securities and Exchange Commission said Friday that token buybacks, network upgrades and marketing claims don't automatically turn a crypto asset into a security. In the SEC's own words, published on its FAQ page, where a crypto system is functional, an issuer's announcement of a non-security crypto asset buyback program would not constitute a representation or promise to undertake essential managerial efforts.

The staff also addressed a related question about who has to keep building a network. Continuing to secure, maintain, improve, or enhance a functional blockchain network, including funding development or encouraging network effects, does not constitute the type of "essential managerial efforts" typically associated with an investment contract under Howey, and once a functional crypto system has no central controlling party, statements by an original issuer would generally be less likely to create a new investment contract around the native asset. Separately, the FAQs said certain staking receipt tokens, which users get for depositing assets with a liquid staking provider, are digital tools when they are receipts for a digital commodity that is not itself subject to an investment contract.

Why buybacks were a legal gray area

Under the Howey test, which U.S. courts use to decide whether an arrangement is an "investment contract" and therefore a security, one requirement is that profits come from the "essential managerial efforts" of a promoter or issuer. If a token issuer tells holders it will keep working to increase the token's value and buy tokens back with revenue, that can look like exactly this kind of promise. 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 — removing that particular argument for networks that are already live.

The FAQs are not a new rule. Attorney Gabriel Shapiro called the guidance a "loophole," but noted it's staff guidance without legal force that a future SEC could reverse. Shapiro, a corporate securities attorney, argued the shift was significant enough that "the securities laws are starting to look opt-in now, at least as applied by the SEC to crypto." In his reading, the FAQs let teams keep collecting the benefits of a public token program without the shareholder-style obligations that come with issuing actual equity, according to Decrypt.

The catch: it depends on whether the network is live

The guidance draws a hard line between finished and unfinished networks. Where a crypto system is not functional, an announcement of a buyback could constitute a promise of essential managerial efforts if the issuer presents the buyback as creating yield or return for token holders. In practice, that means a team pitching a buyback as "passive income" before its blockchain is operating faces a different — and riskier — legal analysis than a team that already has a working product and simply says it will repurchase tokens.

This clarification builds on earlier SEC positioning. The FAQs build on the interpretation the SEC issued on March 17, which the CFTC joined and which sorted crypto assets into categories including digital commodities and digital tools, and SEC Chair Paul Atkins said at the time that it acknowledged "most crypto assets are not themselves securities." The timing also follows a legislative setback for crypto-specific rules: the FAQ comes just weeks after the Clarity Act failed to advance in the Senate, leaving regulators to continue working under its existing laws. Separately, the CFTC updated its own crypto FAQ on Thursday, saying futures firms and clearinghouses are allowed to invest customer funds in tokenized versions of previously permitted assets, as long as they meet investment and custody requirements.

How much money is actually involved

More crypto projects are using revenue to buy back their own tokens, the way public companies repurchase stock, and the dollar figures have grown quickly. Crypto projects spent about $638 million on token buybacks through late August 2026, according to Allium Labs data — already a record, up from $545 million over the same stretch of 2025. Hyperliquid accounted for roughly $370 million and Pump.fun for about $200 million, together close to 90% of the total. For scale, crypto's total remains small next to Wall Street, where S&P 500 companies spent $1.02 trillion on repurchases in the 12 months through September 2025 — a different market, currency of comparison and time frame, but a useful reminder that token buybacks are still a fraction of listed-company activity.

Individual project histories show how volatile these programs can be. Aave's program shows how quickly treasury needs can override a buyback: it acquired more than 205,000 AAVE, about 1.28% of supply, for roughly $42 million in its first ten months. The DAO paused purchases on April 19, after the rsETH bridge incident, to preserve balance-sheet flexibility, and governance then debated cutting the annual budget from $50 million to $30 million as revenue softened. Separately, Ethena proposed a buyback program in late August, one of the arrangements the new FAQs were written to address.

What the guidance doesn't settle

The FAQs are staff-level views, not a Commission rule or a court ruling, so they carry no binding legal force and could be withdrawn or narrowed by a future SEC. They also don't say every buyback is automatically safe: an issuer that frames repurchases as a source of yield, or that runs the program before its network is functional, still risks the SEC arguing the token is a security. For readers holding tokens in projects that have announced or are considering buybacks, the practical takeaway is that the guidance reduces — but does not eliminate — the legal uncertainty that has surrounded these programs, and it applies specifically to the "essential managerial efforts" prong of the Howey test rather than to every possible securities-law question a token could raise.