Tiger Research: Token Buyback, Coming Back Strong

The buybacks that stalled in 2022 due to pressure from the U.S. Securities and Exchange Commission have once again become a focal point. This report, authored by Tiger Research, analyzes how this mechanism, once deemed unfeasible, has re-entered the market.

Key Takeaways

• Hyperliquid's 99% buyback and Uniswap's renewed discussions on buybacks have brought the topic back into focus.

• Buybacks, once considered impractical, have become possible due to the SEC's "crypto projects" and the introduction of the Clarity Act.

• However, not all buyback structures are feasible, confirming that the core requirements of decentralization remain crucial.

1. Buybacks Make a Comeback After Three Years

Buybacks that disappeared from the crypto market after 2022 re-emerged in 2025.

In 2022, the SEC viewed buybacks as activities subject to securities regulation. When a protocol uses its revenue to buy back its own tokens, the SEC considers this as providing economic benefits to token holders, essentially equivalent to dividends. Since dividend distribution is a core feature of securities, any token engaging in buybacks could potentially be classified as a security.

As a result, major projects like Uniswap either postponed their buyback plans or completely halted discussions. There was no reason to take on direct regulatory risks.

However, by 2025, the situation changed.

Uniswap has reopened its discussions on buybacks, and several protocols, including Hyperliquid and Pump.fun, have executed buyback plans. What was once considered unfeasible has now become a trend. So, what has changed?

This report explores why buybacks were halted, how regulations and structural models have evolved, and how each protocol's approach to buybacks differs today.

2. Why Buybacks Disappeared: The SEC's Securities Interpretation

The disappearance of buybacks is directly related to the SEC's view on securities. From 2021 to 2024, regulatory uncertainty across the crypto space was exceptionally high.

The Howey Test is the framework the SEC uses to determine whether an activity constitutes a security. It includes four elements, and assets that meet all the elements qualify as investment contracts.

Based on this test, the SEC repeatedly claimed that many crypto assets fall under the category of investment contracts. Buybacks were interpreted under the same logic. As regulatory pressure increased across the market, most protocols had no choice but to abandon their buyback plans.

The SEC did not view buybacks as a simple token economic mechanism. In most models, protocols use their revenue to buy back tokens and then distribute value to token holders or ecosystem contributors. In the SEC's view, this is akin to dividends or shareholder distributions following a company buyback.

As the four elements of the Howey Test aligned with this structure, the interpretation of "buyback = investment contract" became increasingly entrenched. This pressure was most severe for large protocols in the U.S.

Uniswap and Compound, operated by U.S. teams, faced direct regulatory scrutiny. Therefore, they had to be extremely cautious when designing token economics and any form of revenue distribution. For instance, Uniswap's fee switch has remained inactive since 2021.

Due to regulatory risks, major protocols avoided any mechanisms that would directly distribute revenue to token holders or could materially impact token prices. Terms like "price appreciation" or "profit sharing" were also removed from public communications and marketing.

3. Shift in SEC's Perspective: Crypto Projects

Strictly speaking, the SEC did not "approve" buybacks in 2025. What changed was its interpretation of what constitutes a security.

• Gensler: Based on outcomes and behavior (How were tokens sold? Did the foundation directly distribute value?)

• Atkins: Based on structure and control (Is the system decentralized? Who actually controls it?)

Under Gensler's leadership in 2022, the SEC emphasized outcomes and behavior. If revenue is shared, the token tends to be viewed as a security. If the foundation intervenes in a way that affects prices, it is also considered a security.

By 2025, under Atkins' leadership, the framework shifted to structure and control. The focus moved to who governs the system and whether operations rely on human decision-making or automated code. In short, the SEC began to assess the actual level of decentralization.

Source: U.S. District Court for the Southern District of New York

The Ripple (XRP) lawsuit became a key precedent.

In 2023, the court ruled that XRP sold to institutional investors qualified as a security, while XRP traded by retail investors on exchanges did not fall under securities. The same token could belong to different classifications based on its method of sale. This reinforced an interpretation that a token's securities status does not depend on the token itself but rather on the method of sale and operational structure, directly affecting the assessment of buyback models.

These shifts were later integrated under an initiative called "crypto projects." After "crypto projects," the SEC's core questions changed:

Who actually controls the network? Are decisions made by the foundation or DAO governance? Is revenue distribution and token burning manually timed or executed automatically by code?

In other words, the SEC began to examine substantive decentralization rather than superficial structure. Two shifts in perspective became particularly critical.

1. Lifecycle

2. Functional Decentralization

3.1. Lifecycle

The first shift introduced the perspective of the token lifecycle.

The SEC no longer views tokens as permanent securities or permanent non-securities. Instead, it recognizes that the legal characteristics of tokens may change over time.

For example, in the early stages of a project, the team sells tokens to raise funds, and investors purchase tokens with the expectation that the team's strong execution will increase the token's value. At this point, the structure heavily relies on the team's efforts, making this sale functionally similar to a traditional investment contract.

As the network begins to see actual use, governance becomes more decentralized, and the protocol operates reliably without direct team intervention, the interpretation changes. Price formation and system operation no longer depend on the team's capabilities or ongoing work. A key element in the SEC's assessment—"reliance on the efforts of others"—is weakened. The SEC describes this period as a transitional phase.

Ultimately, when the network reaches maturity, the characteristics of the token are significantly different from its early stages. Demand is driven more by actual use rather than speculation, and the token functions more like a network commodity. At this point, applying traditional securities logic becomes difficult.

In short, the SEC's lifecycle perspective acknowledges that a token may resemble an investment contract in its early stages, but as the network becomes decentralized and self-sustaining, classifying it as a security becomes more challenging.

3.2. Functional Decentralization

The second shift is functional decentralization. This perspective focuses not on how many nodes exist but on who actually holds the control.

For example, a protocol may operate with ten thousand nodes globally, with its DAO tokens distributed among tens of thousands of holders. On the surface, it appears completely decentralized.

However, if the upgrade rights of the smart contract are held by a multisig wallet controlled by a three-person foundation, if the treasury is controlled by the foundation wallet, and if fee parameters can be directly changed by the foundation, then the SEC does not consider this decentralized. In reality, the foundation controls the entire system.

In contrast, even if a network operates with only one hundred nodes, if all significant decisions require DAO voting, if outcomes are executed automatically by code, and if the foundation cannot intervene at will, then the SEC may view it as more decentralized.

4. The Clarity Act

Another factor that allowed buyback discussions to re-emerge in 2025 was the Clarity Act, a legislative initiative proposed by the U.S. Congress. The act aims to redefine how tokens should be classified under the law.

While the SEC's "crypto projects" focused on determining which tokens qualify as securities, the Clarity Act raises a more fundamental question: What are tokens as legal assets?

The core principle is simple: a token does not permanently become a security merely because it was sold under an investment contract. This concept is similar to the SEC's lifecycle approach but is applied differently.

According to the SEC's previous interpretations, if a token was sold as part of an ICO investment contract, then that token itself could be indefinitely viewed as a security.

The Clarity Act separates these elements. If a token was sold under an investment contract at issuance, then at that moment it is considered an "investment contract asset." But once it enters the secondary market and is traded by retail users, it is reclassified as a "digital commodity."

In simple terms, a token may be a security at issuance, but once it is sufficiently distributed and actively traded, it becomes an ordinary digital asset.

This classification is important because it changes the regulatory bodies involved. Initial sales fall under the SEC's jurisdiction, while secondary market activities fall under the CFTC's jurisdiction. As regulatory oversight shifts, the constraints related to securities regulation that protocols face when designing their economic structures are reduced.

This shift directly impacts how buybacks are interpreted. If a token is classified as a digital commodity in the secondary market, then buybacks are no longer viewed as "dividends similar to securities." Instead, they can be interpreted as supply management, akin to monetary policy in a commodity-based system. It becomes a mechanism for operating the token economy rather than distributing profits to investors.

Ultimately, the Clarity Act formalizes the idea that the legal characteristics of tokens may change depending on the context, reducing the structural regulatory burdens associated with buyback design.

5. Shifting to Buybacks and Burns

In 2025, buybacks combined with automatic burn mechanisms reemerged. In this model, revenue is not directly distributed to token holders, the foundation has no control over price or supply, and the burn process is executed algorithmically. Thus, this structure moves further away from the elements previously flagged by regulators.

Uniswap's "Unification Proposal," announced in November 2025, clearly outlines this shift.

In this model, a portion of transaction fees is automatically allocated to the DAO treasury, but no revenue is directly distributed to UNI holders. Instead, a smart contract purchases UNI on the open market and burns it, thereby reducing supply and indirectly supporting value. All decisions managing this process are made through DAO voting, with no intervention from the Uniswap Foundation.

The key change lies in how this action is interpreted.

Early buybacks were seen as a form of "profit distribution" to investors. The 2025 model redefines this mechanism as supply adjustment, operating as part of network policy rather than intentionally influencing prices.

This structure does not conflict with the SEC's 2022 views and aligns with the "digital commodity" classification defined in the Clarity Act. Once a token is viewed as a commodity rather than a security, supply adjustments become akin to a monetary policy tool rather than a dividend-like payment.

The Uniswap Foundation stated in its proposal that "the environment has changed" and that "regulatory clarity in the U.S. is evolving." The key insight here is that regulators have not explicitly authorized buybacks. Instead, clearer regulatory boundaries have allowed protocols to design models that meet compliance expectations.

In the past, any form of buyback was viewed as a regulatory risk. By 2025, the question shifted from "Are buybacks allowed?" to "Can their design avoid triggering securities concerns?"

This shift opened up space for protocols to implement buybacks within a compliant framework.

6. Protocols Implementing Buybacks

A representative protocol executing buybacks and burn mechanisms in 2025 is Hyperliquid. Its structure illustrates several decisive features:

• Automated Mechanism: Buybacks and burns operate based on protocol rules rather than discretionary decisions by the foundation.

• Non-Foundation Revenue Streams: Revenue does not flow into wallets controlled by the foundation, or even if it does, the foundation cannot use it to influence prices.

• No Direct Revenue Sharing: Revenue is not paid to token holders. It is only used for supply adjustments or network operational costs.

The key point is that this model no longer promises direct economic benefits to token holders. It serves as the supply policy for the network. This mechanism has been redesigned to fit within the boundaries that regulators are willing to accept.

However, this does not mean that all buybacks are safe.

Although buybacks have regained momentum, not every implementation carries the same regulatory risks. The regulatory shift in 2025 opened the door for structurally compliant buybacks, rather than discretionary, one-off, or foundation-driven plans.

The SEC's logic remains consistent:

• If the foundation decides when to buy in the market, it reinforces the interpretation of "intentionally supporting prices."

• Even with DAO voting, if upgrade or execution rights ultimately rest with the foundation, it does not meet decentralization requirements.

• If value accumulates to specific holders rather than being burned, it resembles dividends.

• If revenue flows from the foundation to market purchases, leading to price appreciation, it reinforces investor expectations and aligns with the elements of the Howey Test.

In short, discretionary, incidental, or foundation-controlled buybacks still cannot escape securities scrutiny.

It is also important to note that buybacks do not guarantee price appreciation. Burning reduces supply, but it is merely a long-term token economic mechanism. Burning cannot strengthen weak projects; rather, strong projects can enhance their fundamentals through well-designed burn systems.