Will Token Buybacks Be Considered Securities? What to Make of the SEC's New Guidance

Market Trends

01 October 2026

Here is the bottom line: In an FAQ published on September 25, 2026, the SEC's Division of Corporation Finance made clear that announcing a token buyback plan on an already functional crypto network does not, by itself, turn the token into an investment contract. But this conclusion comes with three hard conditions: the network must already be "functional," the token itself must not be a security, and the buyback must not be promoted as a source of returns for holders.

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A "Clarification" That Is Easy to Misread

Many Chinese-language reports read this FAQ as "the SEC has approved token buybacks." The reality is much narrower.

This FAQ is a supplementary answer from staff at the SEC's Division of Corporation Finance to the March 2026 interpretive release. The page itself states that it is not an SEC rule, regulation, or Commission statement, and it has no independent legal force. It answers an analytical question in a specific situation. It is not a blanket pass for project teams.

A more accurate way to put it is this: the word "buyback" is no longer automatically a trigger for securities classification. If an already operating network announces a buyback, the token does not become an investment contract simply because the word "buyback" is used. But if other facts that already make something a security exist—for example, if the issuer keeps promising to use operating income to buy back tokens and distribute gains to holders—this FAQ does not automatically erase those problems.

The Core Question: Is the Buyback Tied to "Managerial Efforts"

One key element of the Howey test is whether purchasers reasonably expect to earn profits "from the managerial efforts of others." The SEC's FAQ cuts straight to this point.

The staff's logic is this: once a crypto network is already functional, services that maintain, improve, or enhance the network no longer count as "essential managerial efforts" under the Howey test. Therefore, an issuer announcing a buyback—whether for treasury management, reducing supply, or protocol-funded burning—does not by itself amount to a promise of managerial efforts.

In other words, the SEC no longer treats the mere fact that "the project team is still doing things" as evidence of control. The premise is that the network is actually up and running, and no longer in the stage of "promising to build something in the future."

But the analysis is different for a network that is not yet functional. If the issuer promotes the buyback as "a source of income or returns for holders," that announcement may cross the line.

Where the Line Falls Between Functional and Non-Functional Networks

This is the most important distinction in the entire FAQ, and also the part readers most easily gloss over.

Functional networks: A buyback announcement does not automatically trigger securities laws. Network upgrades, maintenance, and improvements also do not count as managerial efforts. Promoting the network's existing uses, or making vague vision statements that do not involve profit, generally will not create an expectation of profit.

Networks that are not yet functional: If the issuer describes the buyback as something that "allows holders to earn income or returns," that promotion may amount to a promise of managerial efforts, satisfying one element of the Howey test.

Here is a point you need to check for yourself: "functional" is not a black-and-white label. In the March interpretive release, the SEC explained that whether functionality or decentralization promises have been fulfilled should be judged by how the issuer originally defined or described those goals when marketing the investment contract—not by industry-wide standards formed after the fact. If the project originally promised "a permissionless lending network," then whether core permissions are still controlled by a single company may be relevant. If the promise was only "blocks can be produced normally," the standard is different.

What If the Project Team Is Still Promoting "Buyback as a Price Floor"

The FAQ gives a very narrow safe zone, but project teams can shut it themselves.

The staff made clear that if a buyback is promoted as a source of income or returns for holders, it may amount to a promise of managerial efforts even on a non-functional network. This means that a project team saying "we will buy back" and saying "we will buy back, so you holders can profit" are two different things in regulatory analysis.

Promoting the network's existing uses generally will not create an expectation of profit. Talking about future features is also fine, as long as potential profit is not promoted. Vague vision statements and roadmap discussions that do not promise profit are generally not prohibited.

But once "the team keeps working" is directly linked to "purchasers' profits," you are back in the core zone of Howey analysis.

What This Guidance Does Not Solve

Several boundaries need to be made clear.

It does not change the judgment of whether the token itself is a security. The premise of the FAQ is whether a "non-security crypto asset" becomes an investment contract in a specific arrangement. If the token itself has already been deemed a security, this FAQ does not apply.

It does not stop private litigation. One corporate securities lawyer commenting on the guidance pointed out that it essentially opens a door: project teams can keep building, use buybacks to support prices, and enjoy the benefits of public investment, while not having to give holders shareholder-like rights. But "private plaintiffs or a future SEC may see things differently." Staff guidance is not binding on courts.

It is not legislation. After the Clarity Act failed to advance in the Senate, the SEC and CFTC have had to rely on piecemeal guidance to fill the regulatory gap. Guidance is easier for the next administration to overturn than legislation.

How to Use This Guidance in Practice

If you are evaluating a specific project, do not just look at whether it issued a "buyback announcement." Follow this order:

First, is the network already operational? "Mainnet is live" does not automatically count. Compare the project's originally promised functional goals in fundraising materials, whitepapers, and marketing, and see whether those goals have been achieved. If core functions still depend on a single team's ongoing development and operation, the functionality judgment is questionable.

Second, what does the buyback announcement actually say? If the announcement only says "we plan to buy back for treasury management or reducing supply," the risk is lower. If the announcement says "we are buying back so holders can earn returns," or promotes the buyback together with "the team's continued value creation," it enters a gray area.

Third, does the token itself have any history or risk of being deemed a security? The premise of this FAQ is "non-security crypto assets." If the token was already deemed an investment contract at the issuance stage, a buyback announcement will not automatically change that classification.

Fourth, pay attention to timing. This FAQ is staff guidance, not a permanent rule. After Hester Peirce leaves the SEC, how long this relatively lenient approach lasts depends on future personnel and enforcement priorities.

A token buyback will not automatically be deemed a security—but this conclusion is only valid when three conditions are met at the same time: the network is already functional, the token itself is not a security, and the buyback is not promoted as a promise of returns. If any one of them is missing, the analysis has to be redone.

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