SEC: Token Buybacks and Network Upgrades Don't Automatically Turn Crypto Assets Into Securities

The U.S. Securities and Exchange Commission has updated its guidance to stress that token buybacks, network upgrades and related marketing claims do not, by themselves, make a crypto asset a security. The agency said routine activity on a functioning network is generally distinct from conduct or statements that lead purchasers to reasonably expect profits driven by a development team's efforts. In a new FAQ from the SEC's Division of Corporation Finance, the agency said that announcing a token buyback on an operating network does not alone create an "investment contract." The analysis can shift when a network is still incomplete and promoters frame buybacks as a potential source of returns. In that context, the purpose of the buyback and the surrounding claims carry more weight than the mere fact of repurchases. The guidance also covers ongoing development after launch. The SEC indicated that developers can secure systems, maintain services and improve functionality without automatically creating the kind of managerial reliance considered under the Howey test. Efforts to encourage usage of an operating network similarly do not necessarily amount to the type of reliance that would point toward securities treatment. The agency drew a line between describing how a network is used today and promoting token profit potential. Marketing existing network functionality typically does not cause buyers to expect profits from a project team's managerial work. Projects may discuss planned features as well, as long as those statements are not pitched as investment opportunities. Even so, the SEC emphasized that there is no one-size-fits-all outcome. Its assessment depends on the network's condition, what the project says, and what purchasers reasonably expect. Labeling activity as an "upgrade" or calling purchases a "buyback" does not settle a token's legal status; the SEC said it will evaluate the surrounding facts under existing securities law. The FAQ builds on the SEC's March interpretation on how federal securities laws apply to certain crypto assets and transactions, which provides the broader framework for the division's answers on buybacks, ongoing development and promotional statements. The update comes after the Clarity Act failed to advance in the Senate, leaving regulators to address industry questions through guidance under current authority. Separately, staff at the Commodity Futures Trading Commission updated guidance for regulated firms that handle customer funds and maintain records. The CFTC addressed investments in tokenized versions of permitted assets and the use of blockchains for recordkeeping. Firms must still meet applicable investment and custody requirements when using tokenized assets. Firms that keep records on blockchains must also be able to produce those records even if a network or block explorer stops working. Overall, the SEC said the key question remains tied to each project's conduct and claims. Buybacks and network upgrades alone do not determine whether purchasers are led to expect profits from a team's efforts.