On November 2, 2026, SEC staff issued updated FAQ guidance clarifying that independent voters holding governance tokens like Uniswap (UNI) generally do not form a central controlling group if power is widely distributed. Central control may still apply if a small group holds unilateral power to alter network rules or override decisions. While reducing regulatory risk for DeFi projects using structures like Wyoming DUNAs, the guidance remains nonbinding and subject to potential legislative action following the failed CLARITY Act.
SEC staff guidance on decentralized governance
- ▪The SEC staff guidance issued on November 2, 2026, explained how governance cryptocurrencies align with the SEC's March 2026 cryptocurrency framework
- ▪SEC staff guidance indicates that a crypto project may maintain central control if a company or small group holds unilateral power to alter network rules, restrict access, or override decisions
- ▪SEC staff issued an updated FAQ on governance tokens establishing that projects must show widely distributed voting power among independent holders to avoid being designated as a controlling central party
FAQ guidance on specific governance structures
- ▪The SEC staff FAQ Q 1.4 establishes that crypto systems can maintain decentralized governance while utilizing legal entities like Wyoming Decentralized Unincorporated Nonprofit Associations (DUNAs)
- ▪Miles Jennings said SEC staff FAQ Q 1.5 distinguishes between permissioned and permissionless crypto systems
Impact and regulatory significance of nonbinding guidance
- ▪The November 2, 2026 SEC staff guidance on governance tokens reduces regulatory uncertainty for decentralized finance (DeFi) projects, potentially encouraging exchanges and institutional investors to engage with qualifying governance tokens
- ▪The November 2, 2026 SEC update on governance tokens represents nonbinding staff guidance rather than formal law or regulation, leaving open the possibility that future regulators interpret governance token control differently
- ▪Operating without central control can qualify a cryptocurrency as a digital commodity rather than a security, subjecting it to different regulatory requirements
Legislative efforts and upcoming midterm elections
- ▪The proposed CLARITY Act, which could provide statutory certainty for governance tokens beyond SEC staff guidance, failed to advance in Congress in September 2026
- ▪The U.S. midterm elections on November 3, 2026 will determine the composition of the next Congress responsible for potentially revisiting cryptocurrency legislation
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