The U.S. Securities and Exchange Commission's Division of Corporation Finance issued updated crypto-asset FAQs on November 2, 2026, adding three key clarifications on how decentralized governance, foundations, and token voting are assessed when classifying functional crypto systems.
The guidance establishes that broad token-holder voting generally does not create a controlling group when participants are unaffiliated and lack arrangements to coordinate outside governance. Staff clarified that the same principle applies when governance operates through an organization, association, or foundation where participation depends on holding the network's native token.
However, the analysis changes significantly when a person, entity, or coordinated group holds control over meaningful network functions. The SEC identified unilateral authority to grant or restrict access, alter upgrade voting procedures, determine validator participation, modify rules-based code, reverse transactions, or revoke access as examples of overseeing participation in a crypto system.
Staff also defined broad-based governance as transparent, rules-based, and open to a wide and diverse set of stakeholders, including developers, node operators, validators, miners, and native-token holders. Decision-making authority cannot be concentrated in one stakeholder or affiliated group. A foundation may still qualify as a central party if it holds operational, economic, or voting control, underscoring concerns surrounding token-based governance models in DeFi.
The FAQs separately clarified that functionality and decentralization are distinct concepts—a network is functional when its native asset can be used for its programmed utility, while decentralization concerns whether it operates autonomously without a controlling person, entity, or group. Importantly, the Division stated the FAQs reflect staff views, carry no legal force, and create no new obligations for developers, foundations, and holders.
The guidance does not classify any specific blockchain under these criteria, providing an interpretive framework rather than a binding new rule as the SEC continues evolving its crypto rule framework.
