SEC Clarifies Crypto Development Guidelines
The SEC's Division of Corporation Finance has released new FAQs that provide clearer guidance on when development activities in cryptocurrency projects constitute 'essential managerial efforts' under the Howey test.
The distinction is not between active developers and absent developers, but rather between developers maintaining a product that already works and purchasers funding promises about what that product will become.
Once a crypto system is functional, services that secure, maintain, improve or enhance it do not constitute essential managerial efforts under the interpretation referenced in the FAQ. Sponsoring and funding development projects can fall within this category as well.
The FAQs also clarify the treatment of token buybacks, staking receipt tokens, crypto marketing, and secondary-market platforms.