SEC FAQ addresses crypto buybacks, network upgrades and profit claims

The SEC said token buybacks, network upgrades and marketing claims do not automatically make a crypto asset a security. The SEC's Division of Corporation Finance said Friday that announcing a buyback program for an already functioning crypto network would not by itself make its token subject to an investment contract. The exception may not apply to a nonfunctional network when issuers present the buyback as a source of returns for holders. The FAQ said services that secure, maintain, improve or enhance a functional crypto system would not count as managerial efforts under the Howey test. Marketing a network's existing uses generally would not create an expectation of profit. Statements about future features also would not create that expectation if they do not promote potential profits. The SEC said the outcome depends heavily on the facts of each case. The FAQ builds on the SEC's March Interpretive Release on securities laws and crypto assets. The CFTC updated its own crypto FAQ on Thursday. CFTC staff said futures firms and clearinghouses may invest customer funds in tokenized versions of previously permitted assets if they meet investment and custody requirements. CFTC staff also said regulated firms can use blockchains for recordkeeping if they can produce the records when the blockchain or its block explorer is not functioning.