ScopeLift CEO Says Regulatory Concerns Are Losing Force for Token Buybacks

ScopeLift CEO Ben DiFrancesco said securities-law concerns are losing force as a justification for governance tokens that return no value to holders, increasing pressure on fee-generating protocols to explain their token economics.

Protocols that generate or could generate fees and have issued or plan to issue a token should have a credible plan for directing value to it, DiFrancesco said in remarks recorded Oct. 7. Possible mechanisms include distributing protocol fees or using them for programmatic token buybacks.

“Now, the good news I think is that that’s changing, right?” DiFrancesco said, describing how regulatory concerns had discouraged projects from offering dividends or buybacks.

He linked token value to a protocol’s economic security, saying its value should remain above the level at which the assets it protects would be worth stealing.

“I don’t buy that excuse anymore, right? The regulatory excuse is going away,” DiFrancesco said of projects that argue their tokens do not need to return value.

Securities and Exchange Commission staff guidance issued Sept. 25 said a buyback announcement, by itself, would not constitute a promise of essential managerial efforts when a crypto system is functional. A Sept. 28 revision added that the system must also lack a central party.

DiFrancesco said the shift could increase scrutiny of teams that can return value to their tokens but choose not to. ScopeLift assumed control of Tally’s governance platform in March, which was renamed Cactus two months later.

The discussion also addressed Safe, a multisig wallet project. Greenfield Capital said in an Oct. 4 open letter that it had asked Switzerland’s Federal Supervisor of Foundations to examine the governance of the Safe Ecosystem Foundation. The investor called for independent board members and a board-led strategy review.

Greenfield counted about $30 billion in Safe accounts in August, down from $66 billion in January 2024.

DiFrancesco said requiring token projects to explain how they return value represents “a maturation of the ecosystem.”