The U.S. Securities and Exchange Commission has revised its crypto guidance to clarify when token buyback announcements may fall outside investment contract rules. Updated September 28, the staff FAQ states that buybacks involving functional crypto systems without a central party generally do not constitute promises of managerial efforts. The change follows concerns raised by a16z crypto General Counsel Miles Jennings. That matters because an announcement creating such a promise can bring a token transaction within the definition of an investment contract, a form of security under federal law.

SEC Adds Central Party Condition to Buyback Guidance

The SEC's Division of Corporation Finance, the staff unit that reviews public company disclosure filings, updated Question 2.5 in its crypto FAQ () to include the condition that a functional system have no central party. Under this guidance, an issuer's buyback announcement for a non-security crypto asset would not constitute a promise of essential managerial efforts.

If a crypto system is not functional, however, announcing a buyback could create such a promise. That applies when the issuer presents the program as generating yield or returns for token holders.

The revision followed comments from Miles Jennings, a16z crypto's general counsel and head of policy. Jennings had previously warned that the earlier wording could allow issuers to announce buybacks without creating an investment contract.

FAQ Explains Other Crypto Classification Conditions

The updated FAQ also addresses promotional statements, staking receipt tokens, and decentralized systems. According to the staff, promoting a system's current utility or potential features generally would not constitute promises of managerial efforts absent additional commitments.

Once a system becomes functional, services involving maintenance, upgrades, security, and network growth generally would not meet the Howey test, the Supreme Court framework from SEC v. W. J. Howey Co. that treats a transaction as an investment contract when money is invested in a common enterprise with a reasonable expectation of profits derived from the efforts of others. However, transferring an issuer's commitments to another party does not end an associated investment contract.

The SEC staff further explained that staking receipt tokens — instruments representing assets deposited in staking arrangements — may qualify as digital tools or digital commodities, depending on their structure. Receipts must evidence ownership without giving issuers control to lend, pledge, or otherwise use the deposited assets.

Guidance Remains Nonbinding Staff Interpretation

The FAQ states that its answers represent the views of the Division of Corporation Finance staff, not formal SEC rules or regulations. The Commission has neither approved nor disapproved the content, which carries no legal force and does not change existing law. For issuers weighing buyback programs, the document places the emphasis on system functionality, the presence of any central party, and whether announcements promise yield or returns — the same factors the staff uses to assess whether a promise of managerial efforts exists.

The document also notes that a trading platform is considered a promoter only if it meets the definition under Securities Act Rule 405.