The SEC's Division of Corporation Finance released updated guidance on cryptocurrency tokens Friday, addressing a question that has hung over the industry: when do token buybacks constitute a security under federal law?
In its updated FAQ, the SEC clarified that once a network is functional, announcing a token buyback does not constitute a promise of "essential managerial efforts" under the Howey test—the legal framework used to determine whether an asset qualifies as a security.
The guidance goes further. According to the SEC, maintaining, upgrading, or growing a functional network also does not satisfy the Howey criteria. Neither does promoting what a network currently does, or making vague aspirational statements that don't promise profit.
However, the SEC drew a clear line for pre-launch projects. If a network is not yet functional and an issuer markets a buyback as a source of yield or returns for holders, securities laws may still apply.
The practical effect is significant for established protocols. Dozens of networks currently operate buyback programs, including HYPE, PUMP, ENA, AAVE, SKY, LDO, PENDLE, AERO, RAY, JTO, NEAR, ETHFI, SYRUP, LIT, and others. All operate live products with revenue. Pump.fun has burned approximately $451 million in tokens, or about 16.6% of its total supply. Pons routes roughly 80% of V1 revenue to buybacks, while Ethena's token holders voted to direct 95% of net revenue to token repurchases.
The guidance effectively endorses a model that has emerged across the industry: treating tokens as claims on protocol cash flow rather than bets on future development. According to DefiLlama data, these programs operated in legal gray areas before the SEC's clarification.
Bitcoin ETFs recorded $2.39 billion in net inflows for the week, extending a seven-day rally. Ethereum ETFs saw $690 million in weekly inflows.
