SEC Clarifies Token Buyback Rules With 'No Central Party' Requirement

Updated Guidance on Buyback Mechanics

The SEC revised its token buyback FAQ to require that buyback programs operate without centralized control, according to The Defiant. The original September 25 answer focused on a system's functionality but did not explicitly address governance structure. The new wording makes the absence of centralized decision-making an affirmative condition for compliance.

What Changed

The shift reflects a move away from the prescriptive approach of the Gary Gensler era toward clearer rules for protocol operations. By explicitly requiring that no single party direct buyback execution, the SEC narrows the permissible design space for token programs. Protocols seeking to conduct buybacks must now demonstrate that the mechanism operates through decentralized consensus or algorithmic execution, not through orders issued by a foundation, development team, or other central entity.

Practical Implications for Protocols

Protocols operating buyback programs will need to audit their governance structures against the new standard. Those with buyback authority concentrated in a single entity or small committee may need to delegate that authority to token holders or an on-chain mechanism. The guidance does not ban buybacks outright but does establish a decentralization floor below which the SEC is likely to object.