SEC Clears Token Buybacks in Functional Networks with Caveats
The Securities and Exchange Commission (SEC) has clarified its stance on token buybacks in functional networks, providing much-needed guidance for crypto projects.
In a recent FAQ document, SEC staff stated that an issuer's announcement of a non-security crypto asset buyback program would not constitute a representation or promise to undertake essential managerial efforts, which can turn a token sale into an investment contract under the Howey test.
The answer has a caveat: if the network is not yet functional and the issuer presents the buyback as creating yield or return for token holders, it could cross the line and be considered a security.
The SEC's Division of Corporation Finance also clarified that staking tokens, which users receive for depositing assets with a liquid staking provider, can count as digital commodities if they come from a protocol-based liquid staking provider. Additionally, funding upgrades to a working network is not the kind of managerial effort that makes a token a security.