SEC Staff Says Functional-Token Buybacks Do Not Promise Managerial Efforts
Updated FAQ guidance says buyback announcements generally do not satisfy the Howey test once a crypto system is functional, but conditions differ before launch.
The Securities and Exchange Commission’s corporate-finance staff said buyback announcements for tokens on functional crypto systems generally do not represent promises of essential managerial efforts, clarifying how the programs fit into the Howey analysis.
The updated FAQ says buybacks on functional networks generally do not constitute a promise of essential managerial efforts.
The guidance draws a different line for systems that have not yet become functional. In those cases, an issuer’s buyback announcement could represent a promise of essential managerial efforts if it presents the program as creating yield or returns for token holders.
The staff also said that maintaining, upgrading or expanding a functional crypto system, supporting its existing capabilities or making broad aspirational statements unrelated to profits generally would not satisfy the Howey test.
