SEC Says Liquid Staking, Token Buybacks Generally Aren’t Securities

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The U.S. Securities and Exchange Commission said major crypto activities, including liquid staking tokens, token buybacks and network maintenance, generally do not fall under securities laws.

According to interpretive guidance released on September 25 by the SEC’s Division of Corporation Finance, token buybacks on a functioning crypto network do not constitute an issuer’s essential managerial efforts under the Howey test, which is used to determine whether an asset is a security.

In other words, a buyback alone does not necessarily create an expectation that holders will profit from the issuer’s managerial efforts. By contrast, if the developers of an unfinished network conduct a buyback while promoting future price gains or investment returns, the token could be classified as an investment-contract security.