At a glance

  • The SEC’s Division of Corporation Finance added three questions to its crypto FAQs on 2 Nov, saying token holders who vote independently in a broad-based governance system generally are not a “group” that forms a central party.
  • The answers are staff views. The page says they are “not a rule, regulation or statement” of the Commission and have no legal force.

The new entries, numbered 1.4 to 1.6, sit under the part of the FAQs that deals with how the SEC classifies crypto assets. They build on the Interpretive Release the Commission issued on 17 Mar 2026, which says a digital commodity is not itself a security.

That release ties the label to a “central party”: a person, entity or group with operational, economic or voting control of a crypto system. A functional system with a digital commodity, it says, does not have one overseeing participation or handing out rewards.

What the FAQ says

The question staff took on is whether the people voting in a network’s governance could together count as that “group”. Their answer is that it depends on the facts, but generally no, if the voters are not affiliated and have no agreement, arrangement or understanding, formal or informal, to act in concert outside the governance system itself.

The FAQ says delegation can count as acting in concert. It also says the answer is the same where governance runs through a foundation or association and voting rights come from holding the network’s native token. Even a group, staff add, would still need operational, economic or voting control to meet the definition.

A “broad-based governance system” is defined in a footnote as transparent, rules-based and “wide and diverse”, meaning decision-making power is not concentrated, directly or through delegation, in one stakeholder or a coordinated group.

Overseeing participation

The second new answer explains what it means for a central party to oversee participation. Staff say it means having the authority to control access to a crypto system at the protocol, validator or user level.

The examples given are unilateral powers to grant or limit access, change voting processes for upgrades, control who joins consensus, or modify the code, reverse transactions or revoke access. By contrast, there is generally no oversight where the system runs on rules-based code without discretion, or where any discretion is exercised only through broad-based governance.

The third answer separates “functional” from “decentralized”. Staff say they are distinct concepts, and that a functional system with a native digital commodity has characteristics of decentralization, to a degree that varies with the facts.

What it does not do

A footnote limits the governance answer to the classification section of the Interpretive Release. It has no bearing on other definitions under the Securities Act or the Exchange Act that refer to a group of persons, including the definition of “exchange”.

Another footnote warns that a foundation could itself be a central party where it controls another crypto system, for example by setting the operating parameters of applications built on the network. The FAQs were first published on 25 Sep.

What happens next

Staff can keep adding to the FAQs; the page has been updated twice since launch, on 28 Sep and 2 Nov. The larger procedural step remains the Commission’s action on the SEC’s proposed $75 million crypto exemption, Regulation Crypto Assets, whose comment period closed on 20 Oct. In Congress, the push for exchange rules continues separately; see how the Binance hack became Washington’s argument for US exchange rules.

This article is for information only and is not investment advice.