Article by Eric, Foresight News
On November 2, 2026, Beijing Time, the U.S. Securities and Exchange Commission (SEC) updated its frequently asked questions regarding the application of federal securities laws to "governance tokens," adding three new responses addressing governance participation, network control, and decentralization standards.
This update directly addresses long-standing questions surrounding governance tokens: whether granting voting rights to a large number of holders could cause them to be viewed by regulators as a controlling group, thereby affecting whether the token is classified as a security or a digital commodity.
This clarification is based on the interpretive statement issued by the SEC on March 17, 2026. The statement seeks to provide a framework for classifying crypto assets, distinguishing between centralized and decentralized systems, and introducing the concept of an “affiliated party”—an individual, entity, or group that holds operational, economic, or voting control over a crypto system.
To be classified as "centralized," there must be a "unilateral" power.
To avoid having a token classified as a security, it is necessary to demonstrate that there is no central party within the protocol ecosystem. For projects utilizing DAO governance, the act of holders voting on protocol parameters, fund allocation, or upgrade proposals has long been viewed by regulators as potential evidence of collective control. If thousands of holders are collectively regarded as a coordinated group, the system struggles to meet decentralization standards, making the governance token more likely to fall under securities regulation.
The FAQ updated on November 2 provides a relatively clear distinction. Staff noted that token holders participating in cryptocurrency ecosystem governance are generally not considered to constitute a “group” under the definition of a central party, provided they have no affiliation with one another and no separate agreements, arrangements, or consensus—whether through delegation or otherwise—to act in concert. Even if, under certain factual circumstances, they are deemed a group, they must still possess actual operational, economic, or voting control to meet the central party standard.
The FAQ further explains that a central party means having unilateral control over access at the protocol level, validator level, or user level—the ability to alter voting procedures, determine validators, modify code, reverse transactions, or restrict access. However, those who wrote these explanations explicitly stated that they represent only the staff’s views, not the committee’s rules or position, and carry no legal effect or create any new obligations.
Web3 projects need to distribute tokens as widely as possible.
Uniswap has become a representative case in related discussions. UNI holders can vote on protocol fee parameters, treasury allocations, and other matters through on-chain governance. The SEC has stated that broad governance, even when operated through a foundation or association, does not necessarily make participants a control group, providing some interpretive flexibility for projects adopting similar legal structures.
However, the FAQ does not name any specific projects, nor does it state that UNI or any other token automatically constitutes a digital commodity. Project teams must still demonstrate that voting rights are widely distributed and that no small group can unilaterally modify rules, restrict access, or overturn decisions.
This update occurs against the backdrop of legislative gridlock, as the CLARITY Act, aimed at further clarifying the regulatory division of responsibilities for crypto assets, narrowly failed in the Senate in September 2026 by a vote of 49 to 50. In the weeks that followed, the SEC continued to provide classification guidance through staff FAQs and other documents, while the next steps in congressional legislation will depend on the composition of the new Congress following the midterm elections. The staff guidance has filled some gaps but has also sparked debate over whether administrative agencies are overstepping to define regulatory boundaries in the absence of legislative action.
For Web3 and DAO organizations, this clarification reduces a specific regulatory uncertainty facing governance tokens. For projects with genuinely dispersed voting rights and no implicit collusive agreements, collective voting itself is less likely to be directly used as evidence against decentralization. Exchanges, market makers, and institutional investors may gain a more actionable framework when evaluating related tokens, thereby reducing conservative positions driven by regulatory ambiguity.
When designing governance mechanisms, DAO projects may place greater emphasis on documenting the broad distribution of voting rights, ensuring transparency in proposal and execution processes, and preventing any single entity or affiliated group from holding unilateral veto or amendment powers. Efforts to adopt legal structures such as DUNA may also provide clearer reference language for subsequent compliance communications.
Some people applauded, while others called it "obvious statements."
On the X platform, opinions on this matter are divided. Miles Jennings of a16z described the update as a helpful clarification, noting that it further defines the token classification framework and demonstrates that the system can utilize legal entities like DUNA while maintaining decentralized governance. Some users view this as a positive signal for DeFi and DAOs, seeing it as a response to the long-standing uncertainty faced by projects like Uniswap and potentially offering a more predictable regulatory framework for open governance.
Other voices have emphasized its limitations, noting that this is merely guidance issued by SEC staff and lacks legal enforceability, without making any specific classification decisions regarding tokens. Some commentators observed that, in the absence of the CLARITY Act’s passage, SEC staff have continued to advance interpretations through FAQs, providing short-term clarity while highlighting the administrative dominance in the absence of legislative action. Some discussions also noted that the guidance’s assessments of “concerted action” and “widespread distribution” still depend on specific facts, leaving considerable interpretive room in practice.
A simple example is delegating tokens to one’s own staking operator, which, under current interpretations, represents a highly complex relationship with no clear case law or regulations to determine whether this is sufficiently “decentralized.”
Overall, this FAQ update provides a more nuanced reference point for categorizing governance tokens, particularly in distinguishing between independent voting and collective control. It helps alleviate some regulatory concerns regarding DAO governance mechanisms and offers project teams actionable language for structural design and communication. However, due to its non-binding nature and the requirement for case-by-case judgment, it does not eliminate all uncertainty. Web3 projects advancing decentralized governance must continue to closely monitor the actual distribution of voting rights, the potential for unilateral exercise of control, and the evolving legislative and enforcement landscape.