The SEC's Division of Corporation Finance issued updated crypto guidance on September 25, clarifying how staking receipt tokens, wrapped assets, buybacks, and functional networks may fall outside the definition of investment contracts under federal securities laws in certain cases.
Staking Tokens and Digital Commodities
According to the guidance, some staking receipt tokens may qualify as digital tools rather than securities. These tokens can function as receipts proving ownership of an underlying digital commodity. In some instances, a staking receipt token issued by a protocol-based liquid staking provider can also be treated as a digital commodity itself.
Functional Networks and Ongoing Maintenance
The SEC staff addressed when crypto projects may no longer involve an investment contract. The guidance emphasizes the continued importance of whether an issuer performs "essential managerial work" for buyers. Once a crypto system becomes functional, ongoing maintenance such as security work, software updates, and funding for development and network growth may not meet that standard.
The staff also indicated that statements concerning a functional decentralized network may not constitute a new investment contract when no central party controls the network's success or failure. Buyback activities in working networks would not necessarily demonstrate key managerial activities.
Buybacks and Pre-Functional Networks
Different treatment may apply to buybacks until a network becomes functional. According to the guidance, a buyback could be relevant when an issuer presents it as creating yield or returns.
Marketing and Promotion Standards
The SEC staff addressed marketing statements made by crypto issuers, noting that merely encouraging existing utility would not generally constitute a commitment to management. General statements about future features may also fall outside that standard. However, outcomes may differ when promotions directly link planned issuer activities to expected investor profits.
The guidance does not deem all trading platforms as necessarily crypto promoters. A platform must meet the existing Securities Act definition of "promoter" before that classification applies.
The SEC emphasized that this guidance does not impose fresh legal duties or establish new securities law obligations. The SEC itself has neither approved nor rejected the staff's FAQ answers.
