The U.S. Securities and Exchange Commission’s Division of Corporation Finance has updated its guidance on crypto assets to draw a sharper line between automatic token buybacks and programs directed by a foundation, core team, or other central group.
The Sept. 28 FAQ update indicates that buybacks are less likely to be viewed as part of an “investment contract” when they operate within an already functional crypto system and do not depend on a central party to determine whether, when, or how they occur. That framing places new weight on the design of token-repurchase programs that have become common among revenue-generating DeFi protocols.
A project whose smart contracts automatically use defined revenue streams to acquire tokens may be better positioned under the staff’s framework than one where a team announces repurchases, selects their size and timing, and links those decisions to efforts to support token value. The distinction could influence how U.S.-facing protocols structure treasury policies and communicate with token holders.
Automation versus managerial discretion
The SEC’s revised wording focuses on whether token holders are relying on ongoing managerial efforts by others. In the buyback context, that analysis turns on two practical questions: whether the system is functional when the plan is promoted, and whether the repurchase mechanism can run without a coordinating group making material decisions.
An automatic mechanism might direct a predetermined share of protocol fees to a smart contract that purchases or removes tokens from circulation under rules embedded in code. Such a system leaves less room for a foundation or team to adjust the program in response to market conditions, token performance, or strategic priorities.
Discretionary programs look different. A treasury committee that decides whether to spend revenue on buybacks, token grants, liquidity, development, or other purposes retains control over a major economic decision. Governance votes can distribute that authority across token holders, but they may also show that buybacks remain dependent on human decisions rather than fixed protocol rules.
The FAQ does not create a categorical safe harbor for automated buybacks, nor does it state that any governance-based system necessarily involves a security. It instead gives projects a more specific framework for assessing how the design and promotion of a buyback program could factor into an investment-contract analysis.
Functional networks receive greater attention
The updated guidance also addresses projects that market buybacks before their systems are usable. Promises made in a presale, testnet phase, or immediately after launch may carry greater legal sensitivity if buyers are being asked to rely on a team’s future work to build the network and direct revenue toward token purchases.
In that setting, a commitment to use future proceeds for buybacks can resemble a “key managerial undertaking,” according to the FAQ’s framing. The message to buyers matters as much as the technical mechanism: public statements that present a team as actively working to increase token value could strengthen the appearance that purchasers are relying on that team’s efforts.
That places pressure on projects to separate operational descriptions from price-oriented marketing. A protocol can explain how fees move through its contracts, but language suggesting that a buyback will create gains for token holders may create a more difficult securities analysis, especially where the program remains under the sponsor’s control.
Protocol designs face different levels of exposure
Hyperliquid offers an example of a structure closer to the automated end of the spectrum described in the SEC’s FAQ. Its Assistance Fund receives roughly 99% of trading fees and converts those funds into HYPE through execution at the network’s layer-1 level, according to the protocol’s publicly described design.
The relevant address has been presented as a system address without a private key, meaning an operator cannot simply withdraw or redirect the funds. If the mechanism works as described, it reduces the role of a team in setting repurchase schedules or changing the destination of revenue after fees enter the system.
Uniswap’s proposed and developing fee-related framework illustrates a more layered model. Under the described TokenJar structure, protocol fees could be accessed by third parties only through burning UNI after governance enables a fee switch. Uniswap has also said UNI holders do not have a direct claim on protocol revenue.
That distinction may reduce the resemblance to a conventional revenue distribution, though governance remains central to activating and potentially modifying the system. The SEC’s language suggests that the extent of that discretion, rather than the use of a DAO label alone, will be relevant.
Foundation-led models face closer scrutiny
Programs associated with pump.fun and Ethena show why operational control has become a central issue. pump.fun has carried out token buybacks and burns funded by platform activity, but its model has been described as allowing an operator to alter parameters including the allocation, timing, and whether acquired tokens are held or burned.
Ethena’s referenced proposal would direct 95% of net revenue toward ENA buybacks after USDe reaches a specified supply threshold. The process described involves a foundation proposal and governance parameters rather than an entirely self-executing flow of funds.
Neither structure automatically determines a securities outcome. Their reliance on changeable rules and identifiable decision-makers, though, gives the SEC’s updated FAQ more direct relevance. A foundation’s ability to adjust the program or present it as an effort to support token value could become part of the factual record in any regulatory review.
A design issue with market-access consequences
A token treated as a security in the United States can encounter restricted distribution options and reduced access to trading venues serving U.S. customers. That prospect gives protocol treasuries a reason to review not only their buyback code but also their governance processes, public communications, and the timing of any announced policy.
The new FAQ shifts attention away from the simple question of whether a protocol buys its own token. It instead asks whether the buyback is an embedded feature of a functioning network or a continuing capital-allocation decision made by people whose efforts token holders may be relying on.
For DeFi projects that use revenue to support token economics, that difference will increasingly sit at the center of how buyback programs are built and described.
For deeper context on shifting U.S. crypto rules and enforcement, explore the possible future of crypto regulation in the US today.
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