On Friday the SEC’s Division of Corporation Finance said a token buyback would not amount to a promise of essential managerial efforts, provided the crypto system was functional.
By Monday it had added four words to that sentence: “and has no central party.”
The test is no longer about the buyback. It is about who controls the protocol.
What the Four Words Require
The original wording asked one question, whether the network worked. The revision asks a second, whether anyone is steering it.
Under the narrowed version no single entity, founding team or associated foundation included, can retain control capable of affecting the system’s success or failure. In practice that means governance running on-chain only, with no off-chain override and no admin keys sitting with a central actor.
This is an FAQ entry on the SEC’s website. It is staff guidance with no legal force, which cuts both ways: it binds nobody, and it also tells enforcement staff what they are looking at.
Ninety Percent of the Market Already Passes
Token buybacks reached $638 million through August, a record, against $545 million over the same months of 2025.
Two protocols account for almost all of it. Hyperliquid has bought back around $370 million this year and roughly $1.3 billion since launch. Pump.fun has bought around $200 million this year, $462.5 million cumulatively, destroying 167.7 billion tokens in the process.
Both are cited as protocols the guidance is comfortable with. So the narrowed test blesses close to 90% of the buyback market as it currently stands.
That is the part worth understanding. This is not a restriction on what exists. It is a condition on what comes next.
The Uncertain Case Is the Instructive One
Ethena is named as a protocol whose position requires a facts-and-circumstances analysis rather than a clean answer.
That is where most of the sector sits. A protocol with a foundation, an off-chain voting step before on-chain execution, or an emergency pause under identifiable control now has a question to answer that it did not have on Friday. The guidance also points back to earlier enforcement against DeFi Money Market and Mango DAO as the shape of the risk.
Miles Jennings, general counsel at a16z crypto, read the change as protective rather than restrictive. “The narrowing of Friday’s guidance will bolster its durability, while guarding against attempts to misconstrue it by those that wish to circumvent securities laws.”
What It Means for Anyone Holding
A buyback is one of the few mechanisms by which a token captures value from a protocol’s revenue, which is why the number has been climbing.
Nothing about that changes this week. What changed is that the legal comfort attached to a buyback now depends on governance architecture rather than on the buyback itself, and governance architecture is the harder thing to alter.
Protocols wanting that comfort have been given a specification. Whether they can meet it is a separate question from whether they want to.
