SEC Staff Response Links Crypto Governance to Central-Party Test
Key Facts
Staff in the U.S. Securities and Exchange Commission’s Division of Corporation Finance added a response on how broad participation in governance bears on whether a crypto system has a “central party.” The response says whether participants constitute a “group of persons or entities” depends on the facts and circumstances, as part of the analysis of the term “digital commodities” in an earlier interpretive release. It therefore does not resolve whether governance tokens are securities or non-securities in general. Nor does it issue a decision specific to the Uniswap protocol, contrary to what the first draft suggested. The clarification focuses on coordination among participants and whether they have operational, economic or voting control over the system.
According to division staff, unrelated participants generally are not a group merely because they take part in broad governance, if they have no agreement, arrangement or understanding, formal or informal, to act together. But the absence of coordination alone does not end the rest of the test; even if participants are deemed a group, they must have operational, economic or voting control over the system for the central-party definition to apply. The response describes broad-based governance as a transparent, rules-based system that allows a broad and diverse group of stakeholders to contribute independently and reach consensus or a binding agreement. The transparency condition includes public documentation of proposals, deliberations, voting mechanisms, results and implementation. Procedures should also be based on objective rules set in advance that no individual party or coordinated group can change on its own.
The response defines participation oversight as having authority to control access to the system at any level, whether at the protocol, validator or user level. Examples of unilateral authority that could indicate such oversight include granting or restricting access, setting voting mechanisms and controlling who participates in validation. Other examples include modifying code, reversing transactions and revoking access. By contrast, a central party generally does not oversee participation when the material aspects of operating the system are carried out automatically under rules-based code. The same applies when discretion is exercised solely through a broad-based governance system that is not a central party.
The response distinguishes “functionality” from “decentralization” as concepts addressing different aspects of a system’s design and operation. Functionality concerns use of the native token according to the system’s programmed utility, while decentralization relates to the system operating without a person, entity or group holding operational, economic or voting control. Division staff say the degree of decentralization may vary with the facts and circumstances even in a functional system that uses a native token. The group test also is not limited to a standalone governance system; the response says the same result applies if governance is part of an organization, association or institution and participation is based on holding the native token. These conditions keep the analysis tied to each system’s structure and decision-making process.
Uniswap’s documentation offers an example of governance powers that could enter this discussion, without making the response a judgment on the protocol. According to the developer documentation, UNI holders can participate as delegates and activate voting rights by delegating the voting power associated with their tokens to an address. Governance powers include managing treasury funds and setting and activating protocol fees. The documentation also says governance can issue additional UNI tokens up to 2% of the total circulating supply annually. In a comment letter to the SEC, Uniswap Labs said governance votes on specific, limited fee parameters, protocol deployments and treasury allocations. The company added that it cannot stop the protocol, change the swap process or access users’ assets.
The response has stated limits: it represents the views of Division of Corporation Finance staff, not a rule, regulation or statement issued by the SEC; it has no legal force and creates no new obligations. Staff also limited their view to the description of digital commodities in Section Three of the interpretive release and said it does not apply to other definitions or provisions of the Securities Act or the Securities Exchange Act, including the definition of an exchange. The FAQ section refers to the interpretive release issued on March 17, 2026, without setting a date for issuing or revising these responses. The clarification comes amid the SEC’s “crypto asset regulation” proposal, issued on August 18, 2026, with the comment period ending on October 20, 2026, as it remains within the proposed rulemaking process. In its comment on the proposal, Uniswap Labs asked to allow trading of crypto assets that are not securities in secondary markets while disclosure obligations remain with the issuer, or to provide alternative exemptions for platforms and intermediaries. The company said the proposal does not address trading in assets on the secondary market after launch, and that treating an asset as a securities transaction may continue until it is separated from the issuer’s promises.