SEC Tightens Token Buyback Guidance, Adds No-Central-Party Test

On Sept. 25, U.S. Securities and Exchange Commission staff said a token issuer could announce a buyback without that announcement being treated as a promise to support a token’s value if the crypto system was already functional. On Sept. 28, staff added a second condition: the system must also have no central party. The updated FAQ says a buyback announcement for a non-security crypto asset would not by itself amount to a promise of essential managerial efforts when both conditions are met.

The guidance reflects the views of SEC staff and is not legally binding. The staff also warned that if a system is not yet functional, a buyback announcement could be treated as a promise if the issuer frames purchases as a way to generate yield or returns for holders.

Crypto projects spent $638 million on token buybacks through late August. The dollar totals do not indicate who controls future purchases or program decisions.

The SEC’s March crypto-asset interpretation defines a central party as a person, company, or group that has operational, economic, or voting control over a crypto system. The staff said that definition applies to the crypto system as a whole. Control over a treasury or a buyback program alone does not automatically mean the entire system is centralized, but such control can be evidence of economic influence.

The guidance focuses attention on who can start, stop, or change buyback activity and what other powers those actors hold. Many projects combine automated, on-chain buybacks with discretionary decisions by people, committees, or companies. Whether discretionary actors amount to a central party depends on their role across the broader protocol, not just on buyback code.

Pump.fun’s April 28 disclosure described PUMP purchases and a buyback program as plans or smart-contract functions rather than firm promises, except for purchases that were already programmed to occur through on-chain code deployed before April 28. The project’s token page states about 50 percent of defined platform revenue was programmatically locked and allocated to be burned for one year beginning April 28. The project said future purchases can generally be started, stopped, or changed unless they were already programmed to happen automatically. The disclosures use slightly different late-April dates for which purchases are automatic.

Funding updates for Aave show how human discretion has affected buybacks. A DAO service provider reported that the Aave Finance Committee could adjust weekly AAVE buyback volumes within a 75 percent range and that the DAO had allocated $42 million to buy more than 205,000 AAVE during the program’s first ten months. An April governance notice said AAVE buybacks were paused from April 19 after an rsETH bridge incident. The service provider said the pause gave the treasury more flexibility while consequences were assessed and that any restart would be announced through a funding update. A later update included AAVE among assets that could be purchased but did not document resumed purchases after the pause.

Under the staff framework, automated buys that are part of already deployed smart-contract code are less likely to be viewed as promises of ongoing managerial effort. The staff said discretionary programs controlled by identifiable parties may raise questions about centralization and about whether an asset is a security.

The updated FAQ narrows the circumstances under which a buyback announcement is treated as a promise and directs attention to governance and control mechanisms. The staff pointed to whether a system is operational and who holds meaningful operational, economic, or voting control over the protocol as relevant factors for assessing buyback announcements.