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Token buybacks on working crypto networks fall outside the Howey test, SEC staff say

SEC staff said on September 25 that token buybacks on functioning networks and staking receipts that only record ownership do not create investment contracts. Because they are staff views, live networks can plan repurchases around them while a future SEC or a private plaintiff could still contest them.

The Investor · Invest desk

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What happened

  • Staff said the answer changes on an unfinished network, where presenting a buyback as a source of yield or return can look like a promise that profits depend on the issuer's work.
  • Once a network is functional, work to secure, maintain, improve or expand it, including funding development, does not count as essential managerial effort, the FAQs said.
  • A receipt token from a protocol-based liquid staking provider may be treated as a digital commodity when its value tracks a working system and ordinary supply and demand.
  • The FAQs follow the failure of the Digital Asset Market CLARITY Act in a Senate procedural vote in mid-September 2026, and the bill is not moving for now.

Why it matters

  • Who has to decide decision Live-network treasuries can weigh repurchases against development budgets on price and supply grounds alone, because neither choice carries a securities-law penalty under the staff view.
  • What it limits constraint Teams selling tokens before launch have to keep buybacks out of any yield pitch or accept the Howey exposure the FAQs leave in place for them.
  • Who's exposed exposure An issuer that sizes a repurchase program on these answers is relying on staff views that a later Commission can withdraw and a private plaintiff can litigate.

The buyback answer lists the purposes it covers: treasury management, supply reduction, protocol burns and rebalancing, on a functional network whose token is not itself a security [2]. None of the four is described as a return to holders. Announcing a repurchase for those reasons is not a pledge of essential managerial effort, the Division of Corporation Finance said [2]. That pledge is a key ingredient of the Howey test, the Supreme Court standard for whether something is an investment contract [3].

Set beside the post-launch answer [5], the buyback answer puts a live network's repurchases and its development budget on the same side of the staff's line [17]. A token treasury choosing between the two now faces something close to a public company's choice between a buyback and capital spending. Gabriel Shapiro, a corporate securities attorney at MetaLeX Labs and former general counsel at Delphi Labs, pointed to where the comparison breaks. In his reading, teams can keep building and prop up prices with buybacks without giving holders shareholder-style rights [14].

The reports do not describe how staff decide when a network becomes functional. The case staff flag has two parts, an unfinished network and a buyback sold as a source of yield [4]. A live network that marketed its repurchases as yield would still be judged on how the project was marketed, who controls it and whether purchasers reasonably expect profit from others' efforts [7].

Staking receipts get a narrow version of the same test. A receipt that only evidences ownership of a digital commodity outside any investment contract records a deposit and does not create new financial rights, so staff treat it as a digital tool [15]. Crowdfund Insider's reading is that discretionary or yield-packaged staking products may not get commodity or tool treatment [18].

Shapiro read the buyback section as the broadest part. "The securities laws are starting to look opt-in now, at least as applied by the SEC to crypto," he wrote on X, adding that the buyback section "goes further than I expected" [10]. "They have opened a loophole in a regulatory regime whose whole point was supposed to be that you couldn't draft your way around economic reality," he wrote [11]. Crowdfund Insider called the practical message for issuers "narrower than a blanket green light" [8].

SEC Chair Paul Atkins signaled in July that the agency would step in if the market-structure bill faltered, and the CFTC issued a similar warning in August [13]. I think the result holds well enough for live networks to budget repurchases around it, and it leaves pre-launch token sales carrying the Howey risk they had before [4]. That view fails if the Commission or a court treats a live-network buyback as an investment contract. The FAQs build on a March interpretive release and the Regulation Crypto Assets proposal, a plan to let projects sell tokens without full registration [19]. A Commission rule along those lines is one way the buyback answer could become durable. The answers are staff views that do not change the statute [6], and Shapiro named the two ways they could be undone: "A private plaintiff or a future SEC could have other ideas," he wrote [12].

What to watch

  • Whether the Commission carries the buyback and staking answers into the Regulation Crypto Assets proposal, turning staff views into a rule that is harder to unwind.
  • Any private suit or enforcement action that treats a buyback on a live network as an investment contract.
  • A staff statement on when a network counts as functional, the condition both the buyback and post-launch answers depend on.

Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.

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Evidence68
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  1. [1]

    The SEC's Division of Corporation Finance released staff-level FAQs on September 25, 2026, saying that in defined circumstances token repurchase programs and liquid staking tokens do not themselves create an investment contract under the Howey analysis.

    Reported SupportedView cited source
  2. [2]

    When a crypto system is functional and the token is not itself a security, announcing a repurchase for treasury management, supply reduction, protocol burns, or rebalancing does not amount to a pledge of essential managerial effort.

    Reported SupportedView cited source
  3. [3]

    Essential managerial efforts are a key ingredient of the Howey test, the Supreme Court standard for deciding whether something is an investment contract and therefore a security.

    Reported SupportedView cited source
  4. [4]

    If the network is still unfinished, presenting a buyback as a source of yield or return for holders can look like a promise that profits will depend on the issuer's work.

    Reported SupportedView cited source
  5. [5]

    Once a system is functional, work to secure, maintain, improve, or expand it, including funding development, does not count as the essential managerial effort that keeps a token wrapped in an investment contract.

    Reported SupportedView cited source
  6. [6]

    The FAQ answers are staff views only; they are not Commission-approved rules and do not change the statute.

    Reported SupportedView cited source
  7. [7]

    Staff stress that outcomes still turn on facts: how a project was marketed, who controls it, and whether purchasers reasonably expect profit from others' efforts.

    Reported SupportedView cited source
  8. [8]

    Crowdfund Insider wrote that for issuers the practical message is "narrower than a blanket green light."

    Reported Supported Source: Crowdfund InsiderView cited source
  9. [9]

    The Digital Asset Market CLARITY Act, which would have drawn sharper lines between SEC and CFTC authority, failed a Senate procedural vote in mid-September 2026 and is not moving for now.

    Reported SupportedView cited source
  10. [10]

    "The securities laws are starting to look opt-in now, at least as applied by the SEC to crypto," Gabriel Shapiro wrote on X; he added that the buyback section "goes further than I expected."

    Reported Supported Source: Gabriel Shapiro, on X, as reported by DecryptView cited source
  11. [11]

    "They have opened a loophole in a regulatory regime whose whole point was supposed to be that you couldn't draft your way around economic reality," Shapiro wrote.

    Reported Supported Source: Gabriel Shapiro, as reported by DecryptView cited source
  12. [12]

    "A private plaintiff or a future SEC could have other ideas," Shapiro wrote.

    Reported Supported Source: Gabriel Shapiro, as reported by DecryptView cited source
  13. [13]

    SEC Chair Paul Atkins signaled in July that the agency would step in if the Clarity bill faltered, and the CFTC issued a similar warning in August.

    Reported SupportedView cited source
  14. [14]

    Gabriel Shapiro, a corporate securities attorney at MetaLeX Labs and former general counsel at Delphi Labs, reads the guidance as letting teams keep building, prop up prices with buybacks and enjoy many perks of a public investment without giving holders shareholder-style rights.

    Reported Supported Source: Gabriel Shapiro, as reported by DecryptView cited source
  15. [15]

    When a receipt simply evidences ownership of an underlying digital commodity that is not subject to an investment contract, the receipt can be treated as a digital tool; it records a deposit and does not create new financial rights.

    Reported SupportedView cited source
  16. [16]

    A receipt token issued by a protocol-based liquid staking provider may be viewed as a digital commodity when its value tracks the operation of a working system and ordinary supply and demand.

    Reported SupportedView cited source
  17. [17]

    Under the staff view, a functional network's token repurchases and its post-launch development funding both fall outside essential managerial effort.

    Derived Supported
  18. [18]

    According to Crowdfund Insider, liquid staking providers whose tokens are true receipts for non-security assets sit closer to commodity or tool treatment, while discretionary or yield-packaged products may not.

    Reported Supported Source: Crowdfund Insider analysisView cited source
  19. [19]

    The FAQs build on the SEC's March interpretive release and its Regulation Crypto Assets proposal, which would let projects sell tokens without full registration.

    Reported SupportedView cited source

Sources

2 independent publishers whose own reporting we read for this story.

  1. crowdfundinsider.com

    1 article · September 27, 2026

    SEC Officials State that Certain Crypto Buybacks and Staking Tokens Fall Outside Existing Securities Laws
  2. decrypt.co

    2 articles · September 28, 2026

    SEC Staff Says Token Buybacks Don't Make Crypto a Security—If the Network Works

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