SEC staff expanded its crypto asset FAQ on November 2, 2026, with three answers on governance and network control. The guidance clarifies who qualifies as a central party. It also distinguishes a functional network from a decentralized system.
The Division of Corporation Finance added questions 1.4 through 1.6 to explain the SEC’s March 17 interpretation. The answers carry no legal force and create no new obligations. Question 1.4 applies only to digital-commodity classification.
Journalist Eleanor Terrett said the update appeared aimed at clarifying decentralization questions the CLARITY Act would address in law.
How SEC Staff Assess Control in Crypto Governance
Unaffiliated participants generally fall outside the group definition if they lack separate agreements to coordinate beyond broad-based governance. The assessment covers informal understandings and delegation.
SEC staff said groups need operational, economic, or voting control to qualify as central parties. The FAQ defines broad-based governance as transparent, rules-based, and free of concentrated decision-making.
What Network Oversight and Functionality Mean
Unilateral authority to restrict access, choose validators, change code, or reverse transactions indicates oversight. That authority can exist at protocol, validator, or user levels.
SEC staff said central oversight generally is absent when all material operations run automatically without discretion. The same applies if material discretion is exercised solely through broad-based governance. Its participants also need to fall outside the central-party definition.
A functional system lets its native token serve its programmed purpose. Decentralization requires autonomous operation without operational, economic, or voting control by a person, entity, or coordinated group.
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