SEC staff: Token buybacks on functional networks may fall outside securities rules under Howey

The SEC’s Division of Corporation Finance said a crypto project announcing a token buyback after its network is fully functional is not, by itself, a promise of "essential managerial efforts" and therefore does not meet that element of the Howey test, CoinDesk reported. The staff drew a sharper line for networks that are not yet operational. If an issuer markets a buyback as a way for holders to earn income or generate returns, the announcement could still implicate U.S. securities laws. MetaLeX Labs corporate securities counsel Gabriel Shapiro described the staff view as a "loophole", while emphasizing it is nonbinding guidance with no legal force and could be reversed by a future SEC. He also warned that private plaintiffs may take a different position. The guidance appeared in a new FAQ published Friday. It builds on the SEC’s March interpretive release and the agency’s proposed Regulation Crypto Assets framework, which would allow certain token offerings without full registration. The FAQ also follows the SEC’s recently introduced innovation exemption for tokenized stocks, rolled out after the Clarity Act failed to advance in the Senate. Shapiro said the buyback discussion "went further than I expected" and argued the broader industry trend is an effort to capture equity-like benefits without equity-like obligations. SEC Chairman Paul Atkins said in July that if legislation stalls, institutions may step in; the CFTC issued a similar warning in August.