The US Securities and Exchange Commission (SEC) updated its policies regarding the application of securities laws to certain crypto assets and transactions. This Friday update to the agency’s frequently asked questions, originally issued in March, clarifies interpretations under the Howey test for investment contracts. The SEC stated that this guidance is non-binding, has no legal force or effect, does not alter applicable law, and creates no new obligations.
Under the new interpretation, token issuers may conduct customer buyback programs without necessarily triggering investment contract status, provided the crypto system is functional and lacks a central party responsible for essential managerial efforts. Similarly, networks that are functional or serve to secure, maintain, improve, or enhance such systems would not automatically satisfy the Howey test. Staking receipt tokens were also noted as not always classifying as securities. These updates follow similar guidance from the US Commodity Futures Trading Commission (CFTC), released days after the Senate failed to pass a crypto market structure bill. SEC Chair Paul Atkins and CFTC Chair Michael Selig signaled their agencies would address regulation absent congressional action. Concurrently, Commissioner Hester Peirce announced her resignation effective Oct. 2 to join Regent University, leaving the SEC with only two Republican commissioners and no announced replacements for Democratic seats.
The SEC’s issuance of non-binding staff guidance immediately following the CFTC’s parallel move suggests a coordinated effort by federal regulators to define jurisdictional boundaries in the absence of legislative clarity. By explicitly stating that these FAQs do not create new legal obligations, the agencies aim to provide operational certainty for token issuers and network operators while avoiding the political friction associated with formal rulemaking. This approach allows regulators to influence market behavior through interpretive soft power rather than statutory enforcement, potentially accelerating institutional adoption by reducing ambiguity around whether specific activities, such as buybacks or staking, constitute securities offerings.
However, the reliance on non-binding guidance introduces significant regulatory risk, as it offers limited protection against future enforcement actions should administrative priorities shift. The departure of Commissioner Hester Peirce, a prominent advocate for digital assets, further complicates the internal dynamics of the SEC, leaving the commission with a reduced quorum and unresolved vacancies. Market participants must now navigate a landscape where regulatory positions are fluid and dependent on the discretionary views of remaining commissioners, particularly given the stalled progress on comprehensive market structure legislation in Congress.
