SEC Staff: Crypto Buybacks Are OK—If the Network Actually Works

SEC staff say crypto token buybacks don't make a coin a 'security'—but only if the network is already functional. Critics call it a loophole.

The U.S. SEC (Securities and Exchange Commission — the government agency that regulates investments) just gave crypto projects some good news, with one important catch.

A part of the SEC called the Division of Corporation Finance published new guidance saying that if a crypto network is already working and functional, a project can announce a token buyback (buying back its own coins from the market, often to support the price) without that automatically turning the token into a security (a regulated investment product, like a stock, that comes with strict legal rules).

Why does this matter? Whether a token counts as a "security" depends on the Howey test — a long-standing legal rule from the Supreme Court. One key part of that test asks whether investors are relying on a company's "essential managerial efforts" to make money. The SEC staff now say that buybacks on a working network don't count as such a promise.

Here are the key points:

Functional networks: Announcing buybacks is fine — it does NOT make the token a security.
Not-yet-working networks: Pitching buybacks as a way to earn yield or returns (profits for holders) could still break securities laws.
Also allowed: Promising to maintain, upgrade, or grow a working network, and promoting its current uses.

But there's a big caveat. This is only staff guidance — it does not have the full force of law. A future SEC leadership could reverse it, and private lawsuits are still possible.

Attorney Gabriel Shapiro called the move a "loophole," warning that crypto teams can now boost their token prices with buybacks and enjoy many benefits of public investing — without giving holders the rights that stock owners normally get.

Bottom line: The SEC is making it easier for crypto projects to operate, but the rules are softer and easier to undo than actual laws passed by Congress. For beginners, the takeaway is simple: buybacks on established crypto networks now face less regulatory risk — for now.

This is an AI-generated summary. Read the original article at: https://decrypt.co/379398/sec-staff-token-buybacks-dont-make-crypto-security