SEC Staff Clarifies When Token Voting Signals Centralized Control

TL;DR SEC staff says broad token-holder voting generally does not create a controlling group when participants are unaffiliated and lack arrangements to coordinate outside governance. Unilateral authority over access, validator participation, upgrade voting, code changes or transaction reversals can indicate that a central party oversees participation in a crypto system. The November 2 FAQs also distinguish functionality from decentralization and remain nonbinding staff guidance with no legal force or new obligations. The SEC’s Division of Corporation Finance updated its crypto-asset FAQs on November 2, adding guidance on how governance participation, foundations and control should be assessed when classifying functional crypto systems. In the updated FAQs , staff said broad token-holder voting does not automatically create a controlling group.

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