Crypto Industry Pushes for Reduced DAO Regulation as SEC Shifts Direction
The DeFi Education Fund and Uniswap Foundation sent a letter to SEC Crypto Task Force leader Hester Peirce on May 27, requesting the Securities and Exchange Commission avoid regulating most decentralized autonomous organizations. According to Cointelegraph, the organizations argued that DAOs should not fall under the Howey test if they are "sufficiently decentralized." The letter stated these organizations are not identifiable coordinated groups and should be treated as individuals unless proven otherwise.
The timing aligns with broader regulatory changes under the Trump administration. SEC Chairman Paul Atkins, confirmed in April 2025, replaced Gary Gensler and has reversed multiple enforcement actions against crypto companies. Reuters reported that Atkins plans to establish guidelines for crypto token distributions and consider additional exemptions.
New SEC Leadership Changes Crypto Enforcement Strategy
Chairman Atkins addressed crypto innovation concerns during his first public appearance at an SEC roundtable in April. CNBC reported Atkins stating that innovation "has been stifled" due to regulatory uncertainty the SEC previously created. The agency under his leadership aims to develop rational frameworks through rulemaking rather than enforcement actions.
The SEC's Crypto Task Force, now led by Commissioner Hester Peirce, conducted multiple roundtables throughout 2025. Sidley Austin noted that President Trump's executive order in January established a Presidential Working Group on Digital Asset Markets. This Working Group must review existing regulations and identify those conflicting with the administration's pro-crypto direction.
Commissioner Peirce's leadership of the task force represents a shift from previous approaches. The SEC has withdrawn several prominent enforcement cases and rescinded problematic accounting guidance affecting crypto companies. These changes create a more favorable environment for DAO operations and governance token distributions.
Legal Challenges Persist for DAO Structure Recognition
Despite regulatory shifts, legal uncertainties remain around DAO liability and structure. Courts continue grappling with how to treat these organizations under existing law. Reuters highlighted challenges faced by American CryptoFed DAO, which attempted formal registration but encountered regulatory conflicts.
The Commodity Futures Trading Commission maintains its position that some DAOs can be sued as unincorporated associations. This creates complexity for DAO members who may face personal liability for organizational decisions. Legal experts suggest legislative solutions may be needed to clarify DAO status and member protections.
Current federal regulations struggle to accommodate decentralized governance structures. The letter from DeFi Education Fund and Uniswap Foundation specifically addresses this gap. They argue that truly decentralized DAOs with dispersed token holders and active governance participation should not be classified as securities offerings.
DeFi Market Growth Drives Regulatory Attention
The decentralized finance sector has experienced substantial growth, with market size reaching $20.48 billion in 2024. Grand View Research projects the market will grow at a 53.7% compound annual growth rate through 2030, reaching $231.19 billion. North America dominates this market with a 36.32% share, driven by major platforms including Compound and Uniswap.
DAO governance tokens play a central role in this expansion. Major protocols like MakerDAO, Aave, and Uniswap rely on token-based voting for protocol decisions. These tokens often trade on major exchanges and carry significant market value, creating questions about their regulatory classification.
The growth has attracted both institutional investment and regulatory scrutiny. PYMNTS reported that the new SEC approach prioritizes innovation while maintaining investor protection. This balance becomes crucial as DeFi protocols manage billions in total value locked.
Market participants anticipate continued regulatory evolution. The combination of industry advocacy, new SEC leadership, and congressional interest in comprehensive crypto legislation may reshape how DAOs operate within federal frameworks. However, the transition period creates ongoing uncertainty for projects seeking regulatory clarity.
Related Reading on DAO Times
For those interested in diving deeper into DAO infrastructure and tooling, DAO Times offers a comprehensive guide covering the latest tools available for creating and managing decentralized autonomous organizations in 2025. The article examines treasury management platforms, governance systems, cross-chain solutions, and emerging AI integrations that are shaping the DAO ecosystem. Readers will gain insights into practical tools for DAO creation, voting mechanisms, community management, and analytics platforms, along with understanding the risks and experimental nature of current DAO implementations.
