SEC FAQ Explanation: Token voting is not equal to manager status

According to Woofun AI, the SEC Corporate Finance Bureau updated the virtual currency classification FAQ on November 2, adding 3 new questions and answers (numbers 1.4 to 1.6). The core is to clarify whether token holders' participation in governance is equivalent to being the actual manager of the network.

This update complements an explanatory document issued by the SEC in March 2026 to clarify the prerequisites for digital goods not securities: there must be no central entity with operational, economic, or decision-making control in the network. According to data compiled by Woofun AI, question 1.4 indicates that if participants are unrelated and do not reach a collaborative agreement outside of governance, even if voting rules are set through the foundation, in principle, they do not constitute a central entity; however, if an organization can control another network, it may be regarded as a central entity. Question 1.5 further defines that only when a single entity has the power to grant access, modify software updates, decide on token allocation voting procedures, manage participants in consensus mechanisms, or cancel transactions; this is not the case if the operation is automatically executed by code or made through a governance mechanism of a non-central entity.

Furthermore, question 1.6 distinguishes between “functionality” and “decentralization”. The former indicates that tokens are used normally for the intended purpose, while the latter indicates that no single entity controls the operation of the network. Although functional digital goods networks have decentralized characteristics, the extent varies from network to network.

Notably, this FAQ only represents the views of staff, is not legally binding, and “broad governance” must meet the three requirements of transparent processes, rules-based operation, and diverse distribution of powers.

This clarification indicates that the regulatory level's perception of the decentralized governance structure is becoming more refined, moving from simple identification to a substantive review of actual control. This is another critical step taken by the SEC on the virtual currency classification issue following the March 2026 explanatory document, providing a more specific caliber reference for industry compliance.