SEC: Token Buybacks and Upgrades Do Not Make a Security
New SEC staff FAQs say buybacks and upgrades on a working blockchain do not, on their own, make a token a security. Here is what changed and why it matters.
Staff at the US Securities and Exchange Commission (SEC) have published new answers on when a crypto token counts as a security. The updated FAQs from the SEC's Division of Corporation Finance, released late on 25 September, say that token buybacks and network upgrades on a blockchain that already works do not, by themselves, turn a token into a security.
Key takeaways
- A buyback of tokens for a network that already works does not automatically make the token a security.
- Once a network works, efforts to maintain, secure or improve it are not the kind of "managerial effort" that creates a security.
- Describing what a network can do today is generally fine. Promoting future profits is not.
- The FAQs are staff guidance, not a new law, and they do not protect projects whose networks are not yet working.
What the SEC staff said
US law uses the Howey test to decide whether something is an "investment contract", and so a security. A key question is whether buyers expect profits from the efforts of others. Crypto teams have long worried that ordinary work, such as shipping upgrades or buying back tokens with protocol revenue, could look like those "efforts of others".
The new FAQs build on an interpretive release the SEC issued in March 2026 and draw three lines:
- Buybacks: announcing a buyback for a network that already works does not automatically create a security. Networks that are not yet working and that market buybacks as a source of profit get no such comfort.
- Upgrades: after a network is live and working, work to secure, maintain, improve or enhance it is not treated as the managerial effort Howey looks for.
- Marketing: promoting how a network is used today generally does not create an expectation of profit. Statements about planned features are acceptable if they do not promote profit potential.
On the same day, the Commodity Futures Trading Commission said regulated firms may keep required records on public blockchains, provided they can produce them reliably when asked.
Why it matters
Many large tokens, including exchange and DeFi tokens, run buyback or "burn" programmes funded by fees. Clearer staff guidance lowers the legal risk of these programmes in the US, which could encourage more of them and make US exchanges more willing to list such tokens. The guidance arrives as the SEC loses one of its most crypto-friendly voices: Commissioner Hester Peirce, who led its Crypto Task Force, leaves the agency on 2 October.
India angle
US rules do not apply in India, where crypto tokens are taxed as virtual digital assets and regulated mainly through anti-money-laundering rules rather than securities law. India still has no full crypto framework, and a parliamentary panel is waiting on the government's reply to its crypto study. Clearer US rules tend to shape how global exchanges list tokens, though, and many of those tokens trade on Indian platforms. For the Indian position, read is cryptocurrency legal in India.
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