SEC Staff FAQ Clarifies Token Buybacks and Liquid Staking Rules

The U.S. Securities and Exchange Commission released a new set of frequently‑asked‑questions that address two hot topics in the crypto space: token buybacks and liquid staking. The guidance provides clearer boundaries for projects seeking to use token mechanisms for funding and for users participating in staking services.

Staking receipts classified as non‑securities

According to the FAQs, staking receipts that meet certain criteria are considered “qualifying staking receipts” and fall outside the definition of a security. This classification applies when the receipt represents a right to a portion of staking rewards without conferring ownership or control over the underlying protocol.

Token buybacks for maintenance and development

The SEC reaffirmed its earlier position that token buybacks may be used to fund ongoing maintenance and development of a project, provided the buyback does not constitute a distribution of securities. The agency emphasizes that projects must ensure the buyback mechanism does not create an expectation of profit derived from the efforts of others.

Implications for crypto projects

• Projects offering liquid staking can structure receipts to meet the non‑security criteria outlined in the FAQs.
• Token buyback programs must be carefully designed to avoid violating securities laws.
• The clarification may reduce regulatory uncertainty for DeFi protocols that rely on staking and token economics.