Token holders can vote on a crypto network without actually controlling it. In an update to its crypto-assets FAQs published on November 2, the US Securities and Exchange Commission’s Division of Corporation Finance, which reviews registration statements, said voting by itself does not make individuals part of a controlling group, and that the decisive question is who truly controls the network.

A control test, not a token-distribution test

Question 1.4 of the November 2 update explains when governance voters could collectively qualify as a “central party.” Unaffiliated individuals who vote independently generally are not considered a “group of persons or entities” when determining whether a network has a central party. If they coordinate outside the governance process, however, the staff may treat them as a group — and even a coordinated group qualifies as a “central party” only if it has actual control over the network’s operations, economic decisions, or voting process.

The underlying principle comes from the SEC’s March 17 interpretive release, which states: “A functional crypto system does not have a central party that oversees participation or distributes rewards to users.”

Question 1.5 offers specific examples of such control, including unilateral power to limit access to the network, select validators, change voting rules, alter code, or cancel transactions. The examples show how the staff determines whether control exists; they do not create additional conditions or requirements under the relevant law. The FAQs present staff views only and do not constitute binding SEC rules.

Functionality and decentralization are measured separately

Question 1.6 addresses a related point: a crypto network’s functionality is not the same as its decentralization. A network may use its token exactly as intended and still be controlled by a person or a group, so operating as designed does not imply decentralization.

The FAQ also clarifies how the staff evaluates claims made to investors. Whether an issuer fulfilled promises of functionality or decentralization depends on how it described those milestones in its marketing, not on a general market standard.

Canton Coin gets a narrow no-action response

On November 3, the staff applied the framework to Canton Coin. In a no-action response, Deputy Chief Counsel Jonathan A. Ingram wrote: “the Division is of the view that Canton Coin is a ‘digital commodity’.” The characterization carries practical weight, since securities classification brings federal registration and disclosure obligations.

The staff relied on representations from Canton’s counsel, who said the coin’s value comes from how the network operates and from supply and demand, does not depend on managers generating profits for investors, and that no single person or group controls the network.

The relief was limited. The staff said it would not recommend an enforcement action regarding the creation of the particular Canton Coins without securities registration, and Ingram cautioned that different circumstances could lead to a different conclusion. No-action letters of this kind reflect the staff’s position and do not bind the Commission or the courts.

What governance data actually show

Identifying who controls a crypto network is harder than tracking its tokens. An ECB working paper found that the top 100 holders owned more than 80% of governance tokens across Aave, Ampleforth, MakerDAO, and Uniswap in a study covering 2022–2023. Its October 2022 figures put protocol- or exchange-linked holdings at roughly 64%, 19%, 35%, and 47%, respectively, and many leading voters could not be identified. Those figures underline why the staff frames the question as control rather than distribution: heavy voting or concentrated holdings alone do not settle who runs a network.

Concentrated ownership also has economic consequences. A 2026 study in Management Science linked it to slower platform growth, although other factors can soften the impact.

Governance disputes show how concentration plays out. Cryptopolitan reported that ENS founder Nick Johnson held about half of active delegated votes despite owning roughly 3% of the supply, prompting a proposal to delegate five million treasury tokens. Meanwhile, Compound holders are voting on tighter treasury delays and veto powers.

FATF is asking a different question

The SEC is not the only regulator examining who controls DeFi networks. FATF’s July 2026 report calls for a functional, risk-based assessment of control to address money-laundering risks.

The two frameworks serve different purposes: the SEC focuses on securities classification, while FATF addresses financial crime. Both, however, raise a practical question for institutions and DAOs — who actually has the power to make decisions?