Token buybacks, network upgrades and routine marketing on a functioning crypto network generally do not, by themselves, make the token a security, staff at the US Securities and Exchange Commission said in updated guidance published Friday. The Division of Corporation Finance refreshed FAQ also said liquid staking tokens tied to commodity-like assets generally fall outside securities law.
The guidance addresses the third prong of the Howey test, which asks whether a buyer reasonably expects profits from the essential managerial efforts of others. Staff said maintaining, improving and developing an already functional network generally does not constitute those essential efforts, removing a gray area that had hung over mature projects.
On buybacks, the FAQ drew a line based on framing. A buyback announced for a functioning network does not by itself create an investment contract. But when an issuer presents a buyback as a way to generate yield or returns for holders, it becomes relevant to the securities analysis.
Staff added that vague, aspirational statements that do not promote profit expectations would likely not satisfy the test either. The division framed the document as a description of how existing law applies, not a new rule.
No legal force
The FAQs carry no legal force and a future commission could reverse them. Courts are not bound by staff positions, and private plaintiffs can argue the opposite reading. That caveat matters in a sector where enforcement priorities have swung with each administration.
Gabriel Shapiro, a securities attorney at MetaLeX Labs and former general counsel at Delphi Labs, called the buyback section a loophole and said it goes further than he expected.
“The securities laws are starting to look opt-in when the SEC applies them to crypto,” Shapiro wrote.
He warned that a private plaintiff or a future SEC could reach a different conclusion. In his reading, teams can now build networks and support token prices through buybacks without giving holders shareholder-style rights.
Uniswap founder Hayden Adams read the release more favorably. He said the clarification means buybacks will not cause commodity-type tokens to constitute securities, and that liquid staking tokens of commodity-type tokens are also outside the definition.
A regulator filling gaps
The FAQ landed two days after the Commodity Futures Trading Commission issued its own guidance letting registered firms keep records on blockchains and use tokenized assets, a move that came after Congress failed to advance the CLARITY Act.
The stalled bill would have drawn a clean line between the two agencies over spot crypto markets. With it delayed, both regulators are publishing interpretive guidance that carries less weight than statute but gives firms something to work with.
For token issuers, the practical effect is room for treasury operations. Projects holding large token treasuries have hesitated to run buybacks for fear of securities exposure. The FAQ signals that routine buybacks on live networks are lower risk, provided marketing does not promise returns.
For staking providers, the liquid staking language matters more. Services that issue receipt tokens against staked positions in commodity-like networks now have staff-level support for treating those receipts as non-securities, though the analysis still turns on how each network actually functions.
The Howey test dates to a 1946 Supreme Court case over citrus groves, and its application to code has been contested since the first token sales. Staff positions have moved before: the division published its first crypto FAQ in 2019 and revised it several times since.
Securities litigators noted the FAQ careful conditional language. Almost every sentence includes “generally” or “by itself,” leaving room to argue any specific case differently. That drafting style is deliberate, one former SEC attorney said, because staff cannot bind the commission or the courts.
Projects that pre-sold tokens before their networks functioned get no help from the release. The guidance applies to already functional systems, which leaves the largest open question in US crypto law, the status of early-stage token sales, exactly where it was.
The release does not resolve the underlying jurisdictional question of which agency oversees spot crypto trading, and litigation over individual tokens continues. Exchanges and issuers still navigate two regimes, and the FAQ only narrows one slice of that problem.
Market reaction was muted. UNI, the Uniswap governance token most directly affected by the buyback language, rose about 5 percent on the day of the release, though broader market moves make attribution difficult.
How the staff framed each activity
The FAQ separates three activities that had often been lumped together. Network maintenance and upgrades, things like bug fixes, consensus changes and performance work, are described as the ordinary work of keeping software running, not the managerial efforts that drive a profit expectation. Buybacks are treated as neutral unless marketed as a return-generating mechanism. Secondary-market liquidity programs get similar treatment when their purpose is orderly trading rather than price promotion.
Staff also addressed staking-as-a-service arrangements indirectly. The liquid staking discussion stops short of blessing every receipt token, and the analysis still depends on whether the underlying network is decentralized enough that no identifiable manager controls outcomes. For the largest proof-of-stake networks the staff language is helpful. For smaller chains with foundation-controlled upgrades, it changes little.
The release follows a pattern of administrative workarounds this month. The CFTC moved first with its recordkeeping guidance, and the SEC staff followed with the FAQ. Neither action required notice-and-comment rulemaking, and both can be withdrawn without a vote. Industry groups that spent two years lobbying for the CLARITY Act now find that the regulatory gap they wanted filled is being filled piecemeal, on terms each agency sets alone.
Securities lawyers are already drafting client memos with the same core advice: the FAQ is a data point, not a shield. Any project relying on it should document that its network is genuinely functional, that buyback communications avoid yield language, and that marketing review processes exist. In an enforcement action, those records would matter more than the FAQ itself.
One practical question the FAQ leaves open: how functional is functional. Staff did not define a threshold for when a network qualifies as already working. Projects that launched tokens before shipping working software, a common pattern in the 2017 era, remain in the highest-risk bucket, and the guidance gives them no path forward that was not already available.
Market structure effects may take longer to show. If buybacks become routine for mature projects, token treasuries start behaving more like corporate treasuries, with scheduled repurchase programs and disclosures. That could draw in traditional asset managers who have avoided tokens with active issuer involvement. It could also blur the line between a protocol and a company, which is the tension securities law has never comfortably resolved.
For now, the message from both regulators is the same: work within what exists. Congress did not pass a framework, so the agencies are writing guidance that fits inside current law. Firms get clarity on narrow questions, and the big structural questions wait for legislation that has already stalled once.
Additional context: Mitrade regulatory coverage; Hokanews summary of staff positions