SEC Clarifies Token Buyback Rules as Volume Hits $638M

SEC Offers Guidance on Crypto Buybacks

Token buybacks across the crypto sector have reached a new high of approximately $638 million through late August, according to data from Allium Labs. This figure surpasses the $545 million recorded during the same period in 2025. A significant portion of this activity is concentrated within two projects: Hyperliquid, accounting for roughly $370 million, and Pump.fun, with around $200 million – together representing nearly 90% of the total.

Regulatory Clarity Emerges

On September 25, the Securities and Exchange Commission (SEC) staff addressed legal uncertainties surrounding these buyback programs. The guidance hinges on the relationship between a project’s token and its business performance. The SEC staff indicated that a clearer link between a token and business returns strengthens the argument that token holders are investing in a security.

Howey Test and Functional Networks

The SEC’s Division of Corporation Finance clarified that buyback announcements for tokens already deemed non-securities on functional networks do not fall under the “essential managerial efforts” component of the Howey test. However, for newer projects on networks still under development, promoting buybacks as a source of yield could be interpreted as an investment contract. This distinction relies on the network being functional – defined as the native token being usable according to its programmed utility – and the token already being outside the scope of securities law.

Future Regulation and Form TR

The SEC’s proposed Regulation Crypto Assets outlines exemptions for fundraising, allowing projects to raise up to $5 million over four years or $75 million annually with increased disclosure requirements. A key component is Form TR, a filing that requires issuers to certify the completion or permanent cessation of promised managerial efforts. The SEC estimates around 475 issuers could utilize this safe harbor annually. Comments on the proposal are open until October 20. This framework aims to establish a lifecycle from securities-regulated fundraising to mature networks capable of self-funding token buybacks.

Buyback Activity: Pump.fun and Hyperliquid

Pump.fun allocates 50% of its revenue to token buybacks and burns, having cumulatively purchased $462.5 million worth of PUMP, representing 16.8% of the original supply. Hyperliquid has burned approximately $1.3 billion of HYPE since launch, with over $1 billion in annualized fees now directed towards programmatic purchases. However, the SEC notes that buybacks must be considered alongside token issuance; a high buyback volume doesn't necessarily translate to positive impact if offset by significant new emissions.

Source: CryptoSlate