SEC staff revises token buyback guidance to require decentralized control

On September 28, 2026, the SEC's Division of Corporation Finance revised its crypto asset FAQ, clarifying that token buybacks on functional networks do not constitute promises of essential managerial efforts under the Howey test, provided there is no central party. While the guidance offers a regulatory green light for decentralized projects, critics like attorney Gabriel Shapiro warn it creates a loophole allowing issuers to prop up token prices without granting traditional shareholder rights.

SEC staff guidance on token buybacks

• ▪MetaLeX Labs corporate securities attorney Gabriel Shapiro characterized the SEC staff's September 28, 2026 buyback guidance as a loophole that allows crypto teams to prop up token prices without granting shareholder-style rights
• ▪SEC staff say buybacks on nonfunctional systems can promise essential managerial efforts if presented as yield or returns
• ▪SEC staff added a no-central-party condition to its token buyback FAQ on September 28, 2026
• ▪SEC staff say buyback announcements for non-security tokens on functional systems with no central party do not promise essential managerial efforts

Determining essential managerial efforts

• ▪Under the Supreme Court's Howey test, the SEC evaluates whether a crypto asset transaction constitutes an investment contract based on whether buyers have a reasonable expectation of profit from the essential managerial efforts of others.
• ▪The SEC staff stated that the definitions of functional and decentralized systems in its March 2026 interpretation do not alone determine if an issuer fulfilled its promises, as the assessment depends on represented thresholds.
• ▪The SEC staff stated that marketing statements describing a functional crypto system's existing utility or making vague aspirational statements generally do not constitute promises of essential managerial efforts unless they promote profit potential.
• ▪The SEC staff stated that efforts to secure, maintain, improve, or enhance a functional crypto system, including sponsoring development projects, generally do not constitute essential managerial efforts.

Legal status of the SEC staff FAQ

• ▪Gabriel Shapiro noted that because the SEC FAQ is staff guidance without legal force, a private plaintiff or a future SEC administration could reverse or challenge the FAQ's interpretation
• ▪SEC crypto asset FAQs are staff views with no legal force and no Commission approval or disapproval

Regulation Crypto Assets proposal

• ▪The SEC's August 2026 proposed Regulation Crypto Assets would allow cryptocurrency projects to sell tokens without undergoing full registration
• ▪The SEC staff's guidance on network maintenance in its September 28, 2026 FAQ update cited the agency's August 2026 Regulation Crypto Assets proposal, which includes a proposed conditional safe harbor for issuers completing or ceasing promised managerial efforts

Debatable claims

• ▪U.S. Securities and Exchange Commission staff statements on crypto do not carry the weight and greater permanence of full-fledged rules
• ▪The doctrine of 'sufficient decentralization' is a primary legal argument against classifying some cryptocurrencies as securities.
• ▪The SEC's token buyback guidance creates an unacceptable regulatory loophole
• ▪Token buybacks on functional networks inherently constitute essential managerial efforts