SEC Aligns with CFTC on Crypto Guidance, Issues Refreshed FAQs

The US Securities and Exchange Commission (SEC) has updated its guidance on how federal securities laws may apply to certain crypto assets and transactions, aligning with a similar move by the Commodity Futures Trading Commission (CFTC). The SEC's refreshed FAQs aim to clarify how the agency evaluates digital asset products, particularly in cases where the Howey test could be implicated.

The updated guidance reiterates that token buybacks may avoid being considered an investment contract if the system is functional and lacks a central party responsible for essential managerial efforts. This means that as long as there's no single entity controlling the network, token issuers can conduct customer buybacks without triggering a securities classification.

The SEC also addressed crypto networks, stating that activity improving or facilitating network functionality does not automatically satisfy the Howey test. Additionally, staking receipt tokens are not automatically classified as securities; their classification depends on how the arrangement is structured and presented.

The timing of this update coincides with congressional inaction on a proposed crypto market structure bill. SEC leadership is also undergoing changes, with Commissioner Hester Peirce announcing her resignation to join Regent University as an associate professor in November.