U.S. SEC and CFTC release update to their joint cryptocurrency FAQs: Token repurchases and network upgrades do not automatically qualify as securities, while the CFTC permits on-chain record-keeping.

The U.S. Securities and Exchange Commission (SEC) Division of Corporation Finance released an updated Frequently Asked Questions (FAQ) on September 25, clarifying that token repurchases, network upgrades, and marketing statements do not automatically render crypto assets securities. SEC staff noted that announcing a repurchase plan for an already operational crypto network does not in itself make the associated tokens an investment contract; however, if the network is not yet live and the issuer promotes repurchases as a source of returns for holders, that could be a different matter. The FAQ also clarifies that once a crypto system is operational, services provided to safeguard, maintain, improve, or enhance the system or its functions, or to promote network effects, do not constitute managerial efforts under the Howey Test. Marketing a network’s existing uses generally does not create an expectation of profit, nor do statements about future functions—provided such statements do not highlight profit potential. The update reaffirms that conclusions will remain highly case-specific, building on the SEC’s March interpretive release on the application of securities laws to crypto assets. On the same day, the Commodity Futures Trading Commission (CFTC) updated its crypto FAQ, allowing futures firms and clearinghouses to invest customer funds in tokenized versions of previously permitted assets, provided they meet investment and custody requirements. CFTC staff also stated that regulated entities may use blockchain for record-keeping, but must still be able to produce records if the blockchain or its block explorer is unavailable. The two updates come as the CLARITY Act failed to advance in the Senate, with regulators continuing to advance a crypto regulatory framework under existing laws.