Does Voting With Tokens Count as Collective Control? SEC Finally Makes It Clear

Written by Eric, Foresight News

The U.S. Securities and Exchange Commission (SEC) updated its frequently asked questions regarding the application of federal securities laws to "governance tokens" on November 2, 2026 (Beijing time), adding three new answers addressing governance participation, network control, and decentralization standards.

The update directly addresses a core question that has surrounded governance tokens for years: whether granting voting rights to a large number of holders would cause those holders to form a control group in the eyes of regulators, thereby affecting the judgment of whether a token is classified as a security or a digital commodity.

This clarification builds on the interpretive statement the SEC published on March 17, 2026. That statement sought to provide a framework for classifying crypto assets, distinguishing between centralized and decentralized systems, and introduced the concept of a "Central Party." A Central Party refers to individuals, entities, or groups that hold operational, economic, or voting control over a crypto system.

Being deemed "centralized" requires "unilateral" power

If a token is to avoid being placed in the "security" category, it must be shown that no so-called "Central Party" exists within the protocol ecosystem. For projects that use DAO governance, holders voting through tokens to decide protocol parameters, the use of funds, or upgrade proposals have long been viewed by regulators as potential evidence of collective control. If thousands of holders are treated as a single group acting in concert, the system would struggle to meet decentralization standards, and governance tokens would be more likely to fall within the scope of securities law.

The FAQ updated on November 2 draws a relatively clear distinction on this point. Staff noted that token holders who participate in governing a crypto ecosystem generally would not be deemed to constitute a "group" within the definition of a Central Party, provided there is no affiliation among them and no separate agreement, arrangement, or consensus (including through delegation) to act in concert. Even if, under certain factual circumstances, they were deemed a group, they would still need to actually possess operational, economic, or voting control to meet the Central Party standard.

The FAQ further explains that a Central Party means having the ability to unilaterally control access at the protocol layer, validator layer, or user layer — to change voting procedures, determine validators, modify code, reverse transactions, or restrict access. But those who wrote these explanations also made clear that they represent only staff views, not Commission rules or positions, carry no legal force, and create no new obligations.

Web3 projects need to "disperse their chips" as much as possible

Uniswap has become a typical case in the related discussion. UNI holders can vote on-chain on matters such as protocol fee parameters and treasury allocations. The SEC said that broad governance, even when run through a foundation or association, does not necessarily make participants a control group, which offers some interpretive room for projects that use similar legal wrappers.

However, the FAQ did not name any specific project, nor did it declare that UNI or any other token automatically constitutes a digital commodity. Projects still need to demonstrate that voting rights are widely distributed and that no small group can unilaterally change rules, restrict access, or overturn resolutions.

The update comes against the backdrop of a stalled legislative process: the CLARITY Act, intended to further clarify the division of regulatory responsibilities for crypto assets, regrettably fell short in the Senate by a vote of 49 to 50 in September 2026. In the weeks since, the SEC has continued to provide classification guidance through staff FAQs and other documents, and the next step in congressional legislation will depend on the composition of the new Congress after the midterm elections. Staff guidance fills part of the gap, but it has also prompted discussion about an executive agency actively shaping the boundaries of the rules while legislation stagnates.

For Web3 projects and DAOs, this clarification reduces one specific regulatory uncertainty facing governance tokens. For projects whose voting rights are genuinely dispersed and where no hidden coordination agreements exist, collective voting itself is less easily used directly as evidence against decentralization. Exchanges, market makers, and institutional investors evaluating such tokens may gain more framework for reference, thereby reducing conservative stances taken because of regulatory ambiguity.

When designing governance mechanisms, DAO projects may pay more attention to documenting the breadth of voting-right distribution, ensuring transparency in the proposal and execution process, and avoiding any single entity or affiliated group holding unilateral veto or amendment authority. Attempts to adopt legal structures such as DUNA may also gain clearer comparative language in subsequent compliance communications.

Some applaud, others call it "correct but empty words"

On the X platform, views on the matter are split. a16z's Miles Jennings described the update as a helpful clarification, noting that it further clarifies the token classification system and shows that a system can use legal entities such as DUNA while maintaining decentralized governance. Some users saw it as a positive signal for DeFi and DAOs, believing it responds to the uncertainty that projects such as Uniswap have long faced and may provide a more predictable regulatory reference for open governance.

Other voices emphasized its limitations, pointing out that this is only guidance issued by staff, carries no legal force, and has not made any classification decision on any specific token. Some commentators noted that with the CLARITY Act failing to pass, SEC staff continue to advance interpretation through FAQs, which both provides short-term clarity and highlights the administrative dominance under a legislative vacuum. Some discussions also mentioned that the guidance's judgments on "acting in concert" and "broad distribution" still depend on specific facts, which may leave considerable room for interpretation in practice.

To take the simplest example, delegating your tokens to your own staking operator is, at least under the current interpretation, a very complicated relationship, and there are still no clear cases or statutes to explain whether this is "decentralized" enough.

Overall, this FAQ update provides a more granular reference point for the classification analysis of governance tokens, especially in distinguishing independent voting from collective control. It helps reduce some regulatory concerns about DAO governance mechanisms and provides quotable language for project teams in structural design and communications. However, because of its non-binding nature and its requirement for case-by-case judgment, it does not eliminate all uncertainty. As Web3 projects advance decentralized governance, they still need to keep watching the actual distribution of voting rights, the possibility of unilateral exercise of control, and the further evolution of the legislative and enforcement environment.

Join the official Coincamps community:

X: https://x.com/coincamps

Telegram: https://t.me/coin_camps