SEC Crypto FAQ Clarifies When Governance Participants Count as Central Party
The SEC's crypto FAQ clarifies when governance participants count as a "central party" under securities law. This advisory guidance narrows how regulators will treat control within crypto projects, but it does not resolve whether tokens are securities or commodities.
The U.S. Securities and Exchange Commission added three answers to its crypto FAQ on November 2, clarifying when governance participants count as a “central party.” The guidance rests on a March 17 interpretation that became effective March 23. It tells issuers that unrelated participants acting independently don’t automatically form a controlling group, but unilateral powers—granting or limiting access, changing voting rules, modifying code, or reversing transactions—signal central oversight. The update is advisory, not binding, but it narrows how regulators will likely treat control within crypto projects.
How the SEC Draws the Line
SEC staff framed the answers around a March 17–23 interpretation of federal securities law applied to crypto assets. Questions 1.4 through 1.6 cover shared governance, network access control, and decentralization. The guidance stresses that voting does not equal liability and that legal entities can participate without sacrificing decentralization. It also distinguishes functional systems that use native assets per programmed utility from systems that operate autonomously without centralized control.
Why It Matters for Projects
The FAQ follows a joint harmonization initiative in September that established a memorandum of understanding between the SEC and CFTC to align how securities and commodities laws apply to digital assets. That coordination effort is separate from the staff FAQ, but it sets the stage for consistent enforcement. Regulators are also navigating staffing gaps: only two commissioners are confirmed across both agencies (SEC Chairman Paul Atkins and Mark Uyeda), while CFTC Acting Chairman Michael Selig has been the sole confirmed commissioner since December 2025. A reduced quorum now lets a single commissioner act with two others, concentrating decision-making power.
What’s Next
A 2023 CFTC judgment against Ooki DAO imposed a $643,542 penalty, underscoring how quickly enforcement can move once a line is drawn. The FAQ doesn’t resolve whether a token is a security or a commodity, but it sharpens the focus on who controls what. The CLARITY Act, which could formalize some of these interpretations, isn’t expected to pass Congress until after the November 2026 midterms, with potential action in January 2027. Until legislation arrives, projects will need to scrutinize their governance structures and access controls to stay within the SEC’s emerging framework.
