Urgent: Crypto Lobby Urges SEC Hands-Off Approach on DAO Regulation
A significant move is underway concerning the future of decentralized governance. Prominent groups within the **crypto lobby** are pushing back against potential regulatory oversight from the Securities and Exchange Commission (SEC) regarding decentralized autonomous organizations (DAOs).
Why the **DeFi Education Fund** and Uniswap Are Speaking Out
The DeFi Education Fund and the Uniswap Foundation have formally requested that the SEC refrain from regulating most DAOs. In a letter sent to SEC Crypto Task Force lead Hester Peirce on May 27, the groups argued that DAOs should not fall under the SEC’s securities-defining Howey test if they are considered “sufficiently decentralized.” Their core argument is that decentralized DAOs lack the identifiable structure and coordinated group necessary to be treated as companies.
Treating DAOs as Individuals, Not Under **SEC Crypto** Rules
Instead of treating DAOs as corporate entities, the letter proposes they should be viewed as individuals or a collection of persons, unless there is clear evidence to the contrary. The key phrase is “sufficiently decentralized.” According to the letter:
“If a DAO has a dispersed collection of tokenholders who have the opportunity to actively participate in and govern the DAO and the network, it is sufficiently decentralized such that neither the network token for that DAO, nor transactions in which that network token are the object, should be considered a security.”
This argument directly addresses the structure of many decentralized projects, including those associated with the **Uniswap Foundation**, where governance is distributed among numerous token holders.
Context: SEC’s Stance and the **Crypto Lobby**’s Efforts
This letter was submitted in response to a previous statement by SEC Commissioner Hester Peirce on February 21, which invited public comment on crypto-related matters. The regulatory environment has seen shifts, with figures like former crypto lobbyist Paul Atkins leading the SEC Crypto Task Force under the current administration. Atkins has expressed views that blockchain technology could foster new market activities and has cautioned against stifling innovation, a sentiment echoed by the **crypto lobby**.
During a May 20 SEC oversight hearing, Atkins confirmed that the Crypto Task Force’s initial report is expected within months and that the group is holding discussions with industry participants. This backdrop highlights the ongoing dialogue and differing perspectives between regulators and the crypto sector regarding the appropriate level and nature of oversight, particularly concerning decentralized structures like DAOs.
The Push for Clearer **DAO Regulation**
The letter from the DeFi Education Fund and the **Uniswap Foundation** represents a significant effort by the industry to shape the conversation around **DAO regulation**. They aim to prevent a broad application of existing securities laws to decentralized entities, arguing that such an approach would be inappropriate and potentially harmful to innovation in the decentralized finance (DeFi) space.
This pushback underscores the industry’s desire for regulatory clarity and a tailored approach that recognizes the unique characteristics of decentralized autonomous organizations. The outcome of this dialogue could significantly impact how DAOs operate and interact within the broader financial ecosystem.
Summary
In summary, leading crypto groups are actively advocating for a hands-off approach from the SEC on regulating most DAOs. Their argument centers on the decentralized nature of these organizations, asserting they should be treated as individuals rather than companies under securities law. This effort is part of a broader industry push to influence the evolving regulatory landscape for decentralized technologies.
