SEC limits crypto buyback relief to networks with no central party

The US Securities and Exchange Commission narrowed its new crypto buyback guidance on September 28, saying the relief shields a token buyback from securities law only when the network is functional and has no central party. Most large programs may not qualify.

Staff in the SEC's Division of Corporation Finance run the crypto-asset FAQ, first posted on September 25. They revised it the following Monday. The document carries no legal force. It sets out how the division reads existing law, not a Commission rule or a court ruling.

What the SEC changed

The updated FAQ answers one question. When an issuer announces a buyback of its own token, does that promise the ongoing work that would turn the token into a security under the 1946 Howey test? Staff say no. Two conditions apply.

"Where a crypto system is functional and has no central party, an issuer's announcement of a non-security crypto asset buyback program would not constitute a representation or promise to undertake essential managerial efforts," the FAQ reads. The first version, posted September 25, stopped at the word "functional." The phrase "and has no central party" was added three days later.

A central party is not left vague. The SEC's March 2026 interpretation defines it as any person, entity, or group with "operational, economic, or voting control of a crypto system." A foundation that directs buybacks counts. So does a company. So does a committee of token holders that sets the pace.

One more limit sits underneath. If a network is not yet functional and the issuer sells the buyback as a source of yield or returns, staff say that can still read as a securities promise. The relief covers working networks, not pre-launch pitches.

Essential managerial efforts is the part of the Howey test that asks whether buyers are counting on a central team to make the asset pay off. When the answer is yes, the asset tends to look like a security. Staff had already said routine work to keep a live network running, such as security patches or upgrades, does not count once the system works. The buyback question was the piece still open.

Why lawyers called the first draft a loophole

Crypto lawyers reacted fast. The original wording, several warned, would let a centralized company sell a token and support its price through buybacks while denying the token was a security. Miles Jennings, general counsel at Andreessen Horowitz's crypto unit, praised the revision as "great work by the SEC." Gabriel Shapiro, a securities lawyer at MetaLeX Labs, wrote that "it seems there is a decentralization premise here after all."

SEC Commissioner Hester Peirce made the limit explicit. "If you have a central party, you can't rely on this FAQ," she said. Peirce, one of the agency's most crypto-friendly members, is due to step down in October.

Which buyback programs are affected

Token buybacks have become a common way for projects to hand revenue back to holders. A token buyback works a bit like a company repurchasing its own shares. It uses income to buy the asset on the open market, which can support the price. Spending on crypto buybacks reached about $638 million this year through late August, according to CryptoSlate. Pump.fun disclosed on April 28 that it would route half its platform revenue into token purchases for a year.

Analysts at Unchained ran the largest programs through the new test. Pump.fun (PUMP) sends that revenue into purchases, but a company operates the platform. Aave (AAVE) uses a finance committee that can dial weekly volumes up or down. Uniswap (UNI) and Sky (SKY) run on token-holder votes. Hyperliquid (HYPE) comes closest, because its buybacks fire automatically, yet a foundation controls nearly half the network's validator votes. None of them clearly passes, the analysts found.

What this means in practice is unsettled. The FAQ names no project. It does not say any existing buyback breaks the law, and regulators have tied no enforcement case to one. Neither the SEC nor the named projects have said whether any program will change.

What to watch

Staff guidance can move again, as the past week showed. A new FAQ, a Commission rule, or a court ruling could each redraw the line. Some projects may restructure buybacks to remove any controlling party. Others may pause them, as Aave did on April 19. Some may simply wait.

Easier registration questions do not mean a quiet regulator. In the same week, the SEC filed two civil complaints seeking to recover about $15.3 million from operators of fake AI trading schemes run through WhatsApp groups, according to CoinGeek. The message from staff is a split one. Clearer lines for functional networks, and steady pressure on fraud.

A bigger question hangs over all of it. How durable is the SEC's crypto opening? The division has used this same FAQ format before, including when it said staff do not view ether staking as a securities transaction. Congress is still weighing market-structure legislation that would fix in law what these FAQs only sketch. For now, the rulebook on token buybacks is a staff document that changed twice in one week.