SEC Urged to Exempt Most DAOs From Securities Rules

The organizations argue that sufficiently decentralized DAOs shouldn't be subject to the Howey test. This call was made amid a broader shift in the US government’s crypto stance under the Trump administration, which recently reversed Biden-era restrictions on including cryptocurrencies in retirement plans. Former CFTC Chair Rostin Behnam also weighed in, and believes that without expanded CFTC authority, the crypto market will remain largely unregulated and exposed to risk. Meanwhile, former SEC crypto lobbyist Paul Atkins, now agency head, signaled support for blockchain innovation and pledged a less aggressive enforcement posture. However, critics have raised concerns about the Trump administration’s deepening ties to crypto, including ventures led by Trump’s family. Despite this, digital assets are still gaining ground in traditional US financial structures.

SEC Urged to Rethink DAO Rules

The DeFi Education Fund and the Uniswap Foundation have jointly urged the US Securities and Exchange Commission (SEC) to adopt a hands-off approach when it comes to regulating decentralized autonomous organizations (DAOs). In a letter dated May 27 addressed to SEC Crypto Task Force lead Hester Peirce, the two crypto advocacy groups argued that DAOs, if “sufficiently decentralized,” should not be assessed under the Howey test. This is the legal framework that is traditionally used to determine what constitutes a security.

Part of the letter that was sent to the SEC 

Their argument centers on the belief that DAOs with a broad and active base of tokenholders operating in a decentralized governance model are fundamentally different from traditional organizations. As such, they should be treated as individuals or loosely associated groups rather than centralized entities. The letter pointed out that when a DAO exhibits decentralized control and enables community participation, its network token and related transactions should not be considered securities.

This correspondence was submitted in response to Commissioner Peirce’s Feb. 21 request for public input on how crypto should be regulated. The call for the SEC to take a step back when it comes to regulating DAO’s happened during a major shift in the SEC’s approach to crypto under the Trump administration. 

Statement from the SEC

Former crypto lobbyist Paul Atkins, now leading the agency, expressed his support for blockchain innovation. He recently criticized the Biden-era SEC for its aggressive enforcement tactics and signaled that the current leadership will avoid stifling technological progress. During a May 20 oversight hearing, Atkins confirmed that the SEC’s Crypto Task Force will release its first report in the coming months and is actively engaging the industry through a series of roundtables to better understand different perspectives.

Trump Admin Reverses Biden-Era Crypto Investment Limits

It is becoming more evident that crypto regulation is distancing itself from the Biden-era’s very aggressive enforcement. In fact, the US Department of Labor officially reversed a 2022 guidance that discouraged the inclusion of cryptocurrency in 401(k) retirement plans. 

The original guidance was issued during the Biden administration, and it urged plan fiduciaries to exercise “extreme caution” when considering digital assets for retirement accounts, due to concerns over volatility, valuation difficulties, and the speculative nature of cryptocurrencies.

Announcement from the Department of Labor

The rollback restores a more neutral stance on investment decisions involving crypto and retirement portfolios. US Secretary of Labor Lori Chavez-DeRemer framed the move as a rejection of what she called federal overreach, and stated that the department is “making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats.” By eliminating the prior advisory, the Labor Department is returning to what it describes as a “principled-based approach” that places decision-making back in the hands of retirement plan managers and fiduciaries.

The 2022 guidance attracted a lot of criticism from industry groups, including the American Banking Association, which faulted the department for bypassing a proper public comment period before issuing the advisory. Other critics argued that the policy unfairly restricted innovation and limited Americans’ access to emerging asset classes in their retirement portfolios.

This regulatory shift is also part of the broader changes occurring under President Trump’s administration, which took a far more supportive stance toward the cryptocurrency sector. Trump declared his intent to make the US “the world capital of crypto,” and his administration already scaled back enforcement actions by the SEC against well known Web3 firms like Uniswap, Coinbase, and Kraken. Officials have also initiated policy discussions surrounding real-world asset tokenization and the classification of digital tokens.

However, Trump’s embrace of crypto has not gone unchallenged. Some lawmakers continue to voice concern over his growing influence in the digital asset space, calling for heightened scrutiny of his administration’s ties to the industry. Despite this, the revocation of the Labor Department’s crypto guidance is a clear indication that digital assets are gaining firmer footing in traditional financial infrastructure under the current administration.

Crypto Needs CFTC to Be Regulated

Meanwhile, former CFTC Chair Rostin Behnam warned that the crypto market will remain largely unregulated unless the Commodity Futures Trading Commission is granted expanded authority. In a May 28 interview with Bloomberg TV, Behnam supported the view long held by many in the crypto industry that digital assets like Bitcoin and Ethereum are commodities, not securities, and thus fall outside the jurisdiction of the SEC. 

(Source: Bloomberg)

However, he also acknowledged that the CFTC, under current law, is limited to regulating derivatives markets and does not have the authority to oversee the broader cash markets for these non-security digital assets.

Behnam explained that neither agency can currently provide the regulatory clarity or protections needed without congressional action. “Until we do something, the market will remain unregulated,” he said, and warned that both retail and institutional investors will continue to be exposed to risks like fraud, manipulation, and conflicts of interest.

His comments were made as the Trump administration faces scrutiny over its involvement in the cryptocurrency space. In particular, members of the Trump family have launched a range of crypto ventures, including World Liberty Financial, various meme coins, and a stablecoin project. These moves raised some serious ethical and legal concerns, with some lawmakers questioning whether the presidency is being used to benefit personal investments.

American political strategist Sanders Townsend commented on the situation, and believes that Donald Trump is actively promoting his family’s crypto holdings and potentially leveraging his presidential powers in doing so. He warned that such activity may violate established rules governing elected officials and could present serious conflicts of interest.

Behnam also responded to Vice President JD Vance’s recent remarks at the Bitcoin 2025 conference, where Vance declared that “we reject regulators” and called crypto a White House priority. While acknowledging the importance of innovation, Behnam pushed back on the anti-regulation sentiment by stating that regulators are essential to the functioning and credibility of US financial markets.