SEC staff says buybacks, upkeep of live networks fall outside Howey's management test
Regulation & Gov ·
New FAQs from the Division of Corporation Finance narrow when routine token activity counts as a securities offering.
The SEC's Division of Corporation Finance has released additional FAQs expanding on the agency's March 17 guidance for crypto assets, according to wublockchain.xyz. The staff commentary addresses a narrow but consequential question: at what point does a project's ordinary operational work amount to the kind of managerial effort that can turn a token into a security under the Howey test.
According to the guidance, once a crypto network is already up and running, activities like patching bugs, rolling out upgrades, building out the network further, and repurchasing non-security tokens generally do not count as the essential managerial efforts that Howey looks for. The distinction hinges on timing and framing rather than the activity itself — a buyback tied to a working system reads differently than one pitched, before the network is functional, as a way to deliver returns to holders. The FAQs specifically flag that buybacks marketed on that pre-launch, return-generating basis could still meet the managerial-effort standard.
The same update touches on Staking Receipt Tokens, which staff indicated could be treated as "digital tools" or "digital commodities" rather than securities, with the classification turning on how each token is structured. That framing lines up with related coverage describing the guidance as clarifying that liquid staking derivatives do not, on their own, convert an underlying commodity token into a security.
Four distinct sources have picked up the update, with framing that converges on the same throughline: live tokens, buybacks on functional protocols, and staking receipts can sit outside securities regulation depending on structure and how the activity is promoted. The FAQs are published directly on the sec.gov crypto-assets page maintained by the Division of Corporation Finance.
What remains unchanged is the legal weight of the document itself: staff FAQs reflect the views of SEC personnel and carry no binding legal force. That leaves open how courts, enforcement staff, or the commission itself might apply these distinctions in an actual dispute, and whether projects structuring buybacks or staking-receipt tokens around this guidance will find it holds up outside the FAQ format.