Four words on the buyback

The Securities and Exchange Commission's Division of Corporation Finance published a set of frequently asked questions on crypto assets on Thursday 25 September. On Sunday it changed one of the answers. The page now reads "Updated: Sept. 28, 2026", and beneath Question 2.5 a note records exactly what changed: the answer was "Updated Sept. 28, 2026, to add 'and has no central party.'"

Question 2.5 is about token buybacks, the programmes through which a project uses treasury funds or protocol revenue to buy its own token back and hold it or burn it. The staff list the usual reasons: "treasury management, supply reduction, protocol-funded burns, and rebalancing". The question is whether announcing one amounts to "a representation or promise to undertake essential managerial efforts", which is the part of the Howey test that turns a token sale into an investment contract.

On Thursday the answer began: where a crypto system is functional, an issuer's buyback announcement would not constitute such a promise. Since Sunday it begins: "Where a crypto system is functional and has no central party, an issuer's announcement of a non-security crypto asset buyback program would not constitute a representation or promise to undertake essential managerial efforts." The second half is unchanged. Where a system is not functional, a buyback "could" amount to such a promise "if the issuer presents the buyback as creating yield or return for token holders."

Four words is a small edit. Read against the Commission's own definitions, it is not a small change.

The FAQs rest on the interpretive release the Commission adopted on 17 March, Release No. 33-11412. Its definition of "functional", in footnote 49, is modest: a system is functional "if the system's native crypto asset can be used on the system in accordance with the programmatic utility of the system". A token that does what its code says qualifies. Its definition of "central party", in footnote 54, is anything but modest: "a person, entity, or group of persons or entities having operational, economic, or voting control of a crypto system."

Set that beside the release's definition of "decentralized", in footnote 50: a system that "functions and operates autonomously with no person, entity, or group of persons or entities having operational, economic, or voting control". The words are nearly the same. On Thursday a buyback was safe ground for any system that worked. Since Sunday it is safe ground for a system that works and that nobody controls, which is, in substance, the Commission's test for decentralization.

That is a much smaller set of projects, and the reason is in the definition itself. "Economic control" is a broad phrase to put next to a buyback, because a buyback is an economic decision made by someone. A foundation that decides when to buy, how much and with which funds is exercising exactly the kind of control the footnote describes. The edit does not say such a programme is an investment contract. It says the staff's comfort no longer reaches it automatically, and that the question falls back to the facts.

The neighbouring answers point the same way. Question 2.4 already tied the durability of a token's status to the absence of a central party, saying that once "a functional crypto system has no central party", an issuer's statements likely would not create a new investment contract. Question 2.5 now uses the same condition. Congress drew the line in the CLARITY Act around control too. On the vocabulary, the agency and the bill are converging on the same word.

Two cautions on how much weight any of this bears. The FAQ page says in terms that the answers "represent the views of the staff" and "are not a rule, regulation or statement of the Securities and Exchange Commission", that the Commission "has neither approved nor disapproved their content", and that "like all staff guidance, these FAQs have no legal force or effect". And the staff have not said why they made the edit, whether in response to a question, a comment or second thoughts. The page links a comparison with the prior version and nothing more.

For a project running a buyback today, the practical reading is plain. Before Sunday the argument ran: our network works, so our buyback is not a promise. After Sunday it has to run: our network works, and no person or group has operational, economic or voting control of it. The second sentence is harder to write, and harder still for the entity that is doing the buying.