SEC Division of Corporation Finance no-action letter: Canton Coin

October 30, 2026
VIA ELECTRONIC SUBMISSION
Securities Act of 1933 Sections 2(a)(1) and 5
Securities Exchange Act of 1934 Sections 3(a)(10) and 12(g) Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, N.E., Washington, DC 20549-0213 Attn: Ted Yu, Chief Counsel Jonathan Ingram, Deputy Chief Counsel Andrew Schoeffler, Senior Special Counsel Mark Vilardo, Special Counsel Re: Canton Coin Dear Messrs. Yu, Ingram, Schoeffler and Vilardo:
I write on behalf of Digital Asset Holdings, LLC (together with its affiliates, “DA”), a Delaware limited liability company. DA is the creator of the Canton blockchain protocol and the developer of the technology for Canton Coin, a digital asset native to the Canton Network, the blockchain network utilizing the Canton blockchain protocol. On behalf of DA, I am writing to respectfully request that the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) provide confirmation concerning two points: First, that in the Staff’s view, Canton Coin is a “digital commodity” as described in the Commission’s March 2026 Crypto Assets Interpretation,1 and therefore is not itself a “security” within the meaning of either Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act; and Second, that the Staff will not recommend enforcement action to the Commission when Canton Coin is minted programmatically by Super Validators, Validators and application providers, in the manner and under the circumstances described below, without registration under Section 5 of the Securities Act or Section 12(g) of the Exchange Act. 1 SEC, Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Release Nos. 33–11412 & 34–105020, 91 Fed. Reg. 13714 (Mar. 23, 2026) (the “Interpretation”).

I. Background
A. Key Context: Challenges and Opportunities for Global Financial Infrastructure The dominant paradigm today in blockchain architecture is for the entire ledger to be replicated across all users. As a result, all participants in a blockchain network expose their data to each other participant; there is no built-in privacy. This is the case with both legacy public blockchain networks as well as private blockchain networks. In legacy public blockchain networks, privacy is achieved by adding on capabilities that can result in a loss of connectivity and that can introduce vulnerabilities. In private blockchain networks, privacy is achieved by limiting participation in the network (though there is typically still no privacy among those who participate), but this also limits connectivity. DA was founded in 2014 with the belief that for blockchain to serve as the backbone of global financial infrastructure—for both traditional finance (“TradFi”) and decentralized finance (“DeFi”)—both privacy and connectivity must be built into the protocol. B. The Canton Blockchain Protocol To that end, DA designed the Canton blockchain protocol (“Canton”), which natively provides both privacy and connectivity. Taking its name from Switzerland’s cantonal system and drawing inspiration from the architecture of the internet, Canton gives each user full control over with whom they share data but also enables each user to connect to any other user, so long as they choose to do so. Canton achieves its unique combination of privacy and connectivity by taking a fundamentally different architectural approach than other blockchains. Rather than replicating the entire ledger across all users, Canton is designed to ensure that each user is only in possession of, and only able to see, the data it is allowed to see based on privacy rules set by each user. In Canton, data is shared only on a need-to-know basis, and the ledger of all data is segmented across users. As a result, transaction validation is only between parties to a transaction. There is no need to rely on third parties to validate a transaction. All privacy parameters in Canton (e.g., permissioning who can connect to an application and who can see data) are determined at the application layer via smart contracts rather than hard-coded at the ledger level, and can be customized based on a participant’s requirements (up to and including enabling complete transparency of data and participation to anyone if needed). Canton’s core codebase is open source. Any two or more parties can use this codebase to deploy applications and infrastructure to transfer value using Canton as the underlying blockchain ledger without requiring the permission or approval of any third party and can configure their application(s) in any manner that suits them, including configuring an application to allow for all data to be publicly visible and to allow any party to connect to it. Accordingly, the Canton blockchain is public and permissionless;
anyone can build and deploy applications and infrastructure on Canton without requiring the permission of a third party. As noted above, permissioning is achieved at the application layer rather than the ledger layer.2 2 As discussed below, the Global Synchronizer serves as public infrastructure for Canton participants and is operated in a decentralized manner by entities known as Super Validators. To become a Super Validator requires the approval of at least two-thirds of the existing Super Validators. This does not alter the public, permissionless nature of Canton; any party can freely connect to the Global Synchronizer. Moreover, the Global Synchronizer is only one instance of Canton synchronizer infrastructure; anyone can deploy their own synchronizer (in either a centralized or decentralized configuration) without needing to obtain the permission of any third party. At the same time, each party using Canton always retains full control over which other parties they choose to connect to as well as which

To ensure that each user’s segmented ledger is current, despite no user possessing the entire ledger, Canton uses what are called “synchronizers.” To enable connectivity in this segmented-ledger architecture, each user can connect to multiple synchronization layers. Synchronization layers can be operated by a single party or operated in a decentralized manner by multiple parties acting independently to ensure resiliency and neutrality. Parties operating a synchronization layer are blind to the details of the transactions they synchronize, preserving the privacy of the transacting parties. This architecture enables horizontal scalability and avoids the throughput limitations present in many other public blockchains. For example, a party may connect to an application operating on one synchronizer and transact with a party operating an application on a second, separate synchronizer.
C. The Global Synchronizer and the Canton Network
The first and currently only decentrally operated global domain synchronizer on the Canton Network is called the “Global Synchronizer.” Parties known as “Super Validators” participate in the operation of the Global Synchronizer. A Super Validator may operate its own node (as a “Super Validator Node Operator”) or participate by having its Super Validator instance hosted by a Super Validator Node Operator. The actual output of the Global Synchronizer is determined by a Byzantine-fault-tolerant consensus algorithm where consensus is achieved if at least two-thirds of the Super Validator Node Operators agree on the ordering and validity of the synchronized transactions. At launch, there were 13 Super Validators. As of September 30, 2026, there were approximately 60 Super Validators. Any changes to the Global Synchronizer protocol—including the addition of new Super Validators—require the approval of at least two-thirds of the Super Validator Node Operators. As of September 30, 2026, there were 13 Super Validator Node Operators. Under the current governance framework, only Super Validator Node Operators vote on governance matters. Each Super Validator Node Operator has one vote, regardless of the number of Super Validators it hosts or the amount of Canton Coin it holds or has earned. DA is a Super Validator and operates two Super Validator Nodes, and thus participates in protocol governance. However, DA does not currently have any ability to unilaterally dictate consensus outcomes, nor will DA seek to have any ability to unilaterally dictate consensus outcomes in the future. Parties known as “Validators” are Canton’s participant nodes. Validators participate in consensus by processing and validating the transactions to which they are a party. Users connect to a synchronizer through a Validator node, which houses the data each user is permissioned to see. Because a Validator’s access to ledger data is segmented, validated transactions must be routed to a synchronization domain for sequencing and confirmation. The Canton Network comprises the applications connected to the Global Synchronizer and applications connected to all other synchronizers on the Canton Network. D. The Canton Network’s Native Token: Canton Coin Canton Coin is the native crypto asset, or token, of the Canton Network and is used to pay network fees for using the Global Synchronizer (i.e., “gas” fees). To incentivize network growth, Canton Network participants can mint Canton Coin by operating infrastructure or applications that connect to the Global other parties are able to connect to them. As noted above, Canton draws inspiration from the architecture of the internet, giving each user full control over with whom they share data while also enabling each user to connect to any other user, so long as they choose to do so.

Synchronizer pursuant to protocol-level rules approved by the Super Validator Node Operators. Canton Coin is fungible and freely transferable. The economics of Canton Coin are distinct among blockchain networks. Most other blockchains allow only infrastructure providers, such as miners and validators, to mint the network’s native crypto asset. But for Canton Coin, the Global Synchronizer was designed to allow those that build and operate applications to mint the most Canton Coin (after initially favoring infrastructure providers to bootstrap growth):

Super Validators can mint Canton Coin by operating and participating in the Global
Synchronizer, including transaction sequencing, validation (only for Canton Coin transactions) and network governance activities;
Validators can mint Canton Coin by providing validation and other supporting infrastructure
services for Canton Network participants; and
Application providers can mint Canton Coin by building and operating applications connected to
the Global Synchronizer.
Canton Coin minting occurs through discrete protocol-defined minting cycles, or rounds, with allocations programmatically determined based on the Canton Coin minting curve and related protocol parameters. As discussed in Section I.F. below, a non-profit entity, the Canton Foundation, facilitates governance, including by hosting committees of network participants related to various aspects of network operations, including the economic parameters for Canton Coin (via a tokenomics committee). Participation in these committees is open to all foundation members, and foundation membership is open to all network participants. Importantly, the committees, including the tokenomics committee, do not have the ability to dictate changes to the protocol. Rather, the output of the committees helps inform the Super Validators as to relevant considerations when deliberating protocol changes. That said, all protocol changes are only effectuated upon the approval of at least two-thirds of the Super Validator Node Operators. The Canton Foundation’s committees, including the tokenomics committee, provide venues for discussion, but do not have the power to make protocol changes. During each round, qualifying activity creates activity records, which are summarized by the protocol and assigned minting weights. Participants may then mint the portion of Canton Coin corresponding to their activity. Within each participant category, Canton Coin rewards are not distributed equally among all participants. Rather, rewards are generally determined based on activity levels, participation metrics, activity record weights and other protocol-defined weighting mechanisms applicable to the relevant participant category. As a result, participants that contribute greater activity, infrastructure services or application usage generally receive a greater share of the Canton Coin allocated to that participant category. The following chart provided by DA sets forth the Canton Coin allocations that can be minted by participants on the Canton Network over time, pursuant to the Canton Coin minting protocol.

The increasing proportion of Canton Coin available for minting by application providers vis-à-vis Super Validators and Validators incentivizes parties to build applications and bring assets onto the Canton Network by connecting to the Global Synchronizer. Further, featured applications, which are applications formally recognized for delivering real utility to users and meaningful activity on the Canton Network, are eligible to programmatically mint higher amounts of Canton Coin relative to non-featured applications based on the activity generated through such applications, which further incentivizes application providers to continue developing, operating and supporting applications that drive sustained activity and adoption on the Canton Network. Applications seeking to maintain featured application status and remain eligible for enhanced rewards must satisfy specified lock-up requirements and other eligibility criteria, which are intended to align incentives among application providers, support long-term participation in the Canton Network and discourage short-term extraction of rewards without corresponding ecosystem contribution. In addition, beginning in February 2026, five percent of the Canton Coin available for minting was allocated to parties that support protocol development and other ecosystem public goods (such minting allocation, the “Development Fund”), with allocation being sourced pro rata from each of the Super Validator, Validator and application provider allocations. The Development Fund is intended to support the continued growth, adoption and long-term resilience of the Canton Network ecosystem by helping ensure that protocol development, infrastructure and ecosystem support initiatives can scale alongside increasing network activity and usage with community participation. Development Fund grants are administered pursuant to governance frameworks approved by the Super Validator Node Operators, and, although DA may participate in the applicable governance processes through its role operating two of the 13 Super Validator Nodes, DA does not have the ability to unilaterally determine how Development Fund grants are made. In addition to favoring application providers over infrastructure providers, the Canton Network’s economic protocol is designed to encourage actual use of the token rather than speculative activity. It does so by adopting a burn-mint tokenomics model. Under this model, over the long run, the price of Canton Coin is expected to align with the utility of the network because, absent useful activity on the network, the total supply of Canton Coin will continue to increase such that downward pressure would be expected on the price of the coin. On the other hand, when there is useful activity on the network, the model specifies that coins used to pay fees related to this activity are “burned” (i.e., removed from circulation), which would be expected to put upward pressure on the price of the coin.

Specifically, the Canton Coin minting protocol allows a predetermined amount of Canton Coin to be minted over time. The cumulative number of Canton Coin that can be minted by Canton Network participants increases over time (while the incremental number of new Canton Coin that can be minted decreases over time until reaching a steady state after ten years), creating inflationary pressure on the coin. At the same time, all Canton Coin used to pay fees are “burned” or removed from circulation. Thus, as fees are paid, the total supply of Canton Coin is reduced. Network fees are protocol-level fees determined pursuant to the Global Synchronizer’s protocol rules and governance-approved parameters, rather than fees independently imposed by individual network participants. The primary network fees are traffic fees, which are assessed when transactions are submitted to the Global Synchronizer. Traffic fees are generally assessed based on the amount of Global Synchronizer traffic consumed by transactions submitted to the Global Synchronizer, including bandwidth, storage and related resource usage. Such fees are calculated programmatically pursuant to protocol-level formulas and parameters and are not negotiated between participants. Applications may determine how protocol-level fees are allocated among their users (e.g., an application provider may require its users to cover the protocol-level fees incurred when users transfer assets using the application), but individual participants do not have unilateral authority to modify the protocollevel fee formulas or parameters, which remain subject to the applicable Canton Network governance process. The fees are denominated in U.S. dollars, so the quantity of Canton Coin required to pay the necessary fees will change as the price of Canton Coin fluctuates over time. If there is high activity on the Global Synchronizer, then more Canton Coin will be burned, reducing the total supply, which can be expected to put upward pressure on the price of Canton Coin. The opposite will happen with lower Global Synchronizer activity. Accordingly, under this model, over the long run, the price of Canton Coin is expected to align with the utility of the network. No portion of the Canton Coin used to pay network fees is received by DA, the Canton Foundation or any other person; such Canton Coin is destroyed by the protocol. E. Canton Coin Launched After the Canton Network was Functional Unlike some other tokens that were launched before the underlying network was functional and had demonstrated utility, Canton Coin was launched after the technology was mature and had proven its ability to support regulatory-grade use cases. Specifically, DA has worked on developing the underlying technology since its founding in 2014 (with the Canton protocol whitepaper published in 2020), and the Global Synchronizer and Canton Network were not launched until DA was confident in Canton’s functionality. Moreover, there was no “initial coin
offering,” pre-mine or any other pre-launch sale or allocation of the token. From the launch of the network in June 2024, Canton Coin has been minted programmatically over time pursuant to the minting protocol by participants operating on the Canton Network, including Super Validators, Validators and application providers (including featured application providers), based on network activity, and has been used to pay Global Synchronizer transaction fees. The first tokens were minted over time by all Global Synchronizer participants (not just DA) using substantially the same protocol-level minting mechanics that continue to govern Canton Coin emissions today. F. Governance The Canton Network was designed to be independently governed and serve as neutral infrastructure. No one party controls it, and there is no single point of failure. As noted, as of September 30, 2026, the Global Synchronizer is anchored by approximately 60 Super Validators and 13 Super Validator Node Operators. Governance of the Global Synchronizer is by the Super Validators, with decisions requiring the approval of at least two-thirds of the Super Validator Node Operators, including with regard to the Global Synchronizer’s rules, upgrades, fees, minting parameters (including adjustments to minting formulas, allocation percentages or other economic variables relating to the minting, burning, distribution

or use of Canton Coin), participation requirements or technical standards. No person possesses unilateral control over the outcome of these decisions. There are no capital, holdings or other economic minimum requirements to become a Super Validator. New Super Validators are generally admitted through the Canton Improvement Proposal (“CIP”) process, pursuant to which an existing Super Validator may nominate a prospective Super Validator articulating the benefits that such new entity would bring to the Canton Network and, following public review and discussion, such nomination must be approved by at least two-thirds of the Super Validator Node Operators. There is no minimum or cap to the number of Super Validators that can exist on the Canton Network, and there are no terms of service or agreements between or among the Super Validators. A Super Validator may operate its own node or participate through a Super Validator Node Operator that hosts one or more Super Validators. In either case, Canton Coin rewards attributable to such Super Validator are earned by, and distributed directly to, the Super Validator. Under the current governance framework, only Super Validator Node Operators vote on governance matters. Each Super Validator Node Operator has one vote, regardless of the number of Super Validators it hosts or the amount of Canton Coin it holds or has earned. Accordingly, voting power is allocated on an equal per-node basis, meaning one vote per Super Validator Node Operator, rather than based on differing economic stakes, validator tiers or the number of Super Validators represented by a particular Super Validator Node Operator. Proposed network changes, upgrades and other governance modifications are developed and discussed through the CIP process before being submitted to the Super Validators for approval and deployment. Under the CIP process, proposed changes are documented in a written proposal that describes the contemplated modification, rationale and implementation considerations and are generally made publicly available for review and discussion among Super Validators and other ecosystem participants through Canton Foundation forums, repositories and other governance channels. Following review and any revisions, proposals are submitted to the Super Validator Node Operators for a vote and require approval by at least two-thirds of the Super Validator Node Operators. If approved, the applicable changes are implemented and deployed by participants operating the Global Synchronizer in accordance with the approved proposal. To support the Super Validators’ governance and operation of the Global Synchronizer, an independent non-profit entity called the Canton Foundation provides a forum for governance discussions and operational and administrative support in connection with implementing decisions approved by the Super Validators. The Canton Foundation is funded through membership fees and Canton Coin minted through its participation in the
Global Synchronizer as a Super Validator Node Operator. The Canton Foundation also maintains committees and working groups comprised of participating Super Validators and other ecosystem participants that voluntarily elect to participate. These committees and working groups generally provide domain expertise and facilitate operational, administrative and ecosystem coordination functions pursuant to governance frameworks approved by the Super Validators from time to time. In certain cases, such committees may administer or implement operational initiatives or ecosystem programs approved by the Super Validators, subject to the applicable governance frameworks and oversight processes established by the Super Validators. Neither the Canton Foundation nor its committees and working groups possess independent authority to modify protocol-level governance, minting or other Global Synchronizer rules, which remain subject to the applicable approval requirements of the Super Validators. Accordingly, while the Canton Foundation plays an important role in facilitating governance discussions and administering operational initiatives, governance authority over the Canton Network remains with the Super Validators. Because the Canton Foundation is only one of the over 60 Super Validators and only one of the 13 Super Validator Node

Operators (in each case as of September 30, 2026), it lacks the ability to control or direct the governance of the Canton Network. As of September 30, 2026, the Canton Foundation is co-chaired by DTCC and Euroclear and governed by a board of 22 directors, of which DA holds only one seat. As of September 30, 2026, the board members included representatives from 5North, 7RIDGE, Broadridge, BNY, Bitwave, CNTN, DA, Cumberland, DTCC, Euroclear, Fairmint, HSBC, IntellectEU, Liberty City Ventures, Obsidian Systems, LTP, MPCH, T-RIZE and Tradeweb. G. Canton Network Activity The Canton Network is utilized by a broad spectrum of TradFi and DeFi market participants. As of September 30, 2026, the Canton Network had approximately 60 Super Validators, over 700 Validators and over 120 applications (including more than 90 featured applications), processed a monthly average of over $7.1 trillion in U.S. Treasury repo trades that were settled atomically. H. Secondary Markets Canton Coin trades on third-party trading platforms that are not operated, controlled or sponsored by DA. The natural sellers of Canton Coin in the secondary market are Super Validators, Validators and application providers monetizing Canton Coin minted for the services they provide. The natural buyers of Canton Coin in the secondary market are Validators, application providers and application users that require Canton Coin to pay Global Synchronizer transaction fees. As the creator of the Canton protocol and a founding participant in the Canton Network, DA has earned Canton Coin through the minting protocol since launch in the same manner as other participants. DA has also, from time to time since launch, purchased and sold Canton Coin on the secondary market for ordinary operational and treasury purposes—including converting Canton Coin it earns into fiat currency, obtaining Canton Coin needed to pay network fees and managing its working capital—on the same terms available to any other market participant. DA has not undertaken, and does not undertake, to support, stabilize or otherwise influence the price of Canton Coin, and it makes no representation or promise to any person that it will do so. Neither DA nor any affiliate has marketed, or will market, Canton Coin as an investment or as a means of earning a return based on the efforts of DA or others. DA’s communications regarding Canton Coin describe its use on the Canton Network.
II. Requests and Analysis
For the reasons set forth below, we are of the opinion that (1) Canton Coin is a “digital commodity,” as described in the Interpretation, and therefore is not itself a “security” within the meaning of either Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act; and (2) the programmatic minting of Canton Coin by Super Validators, Validators and application providers, in the manner and under the circumstances described in this letter, does not involve the offer, sale or trading of a “security” within the meaning of either Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act. A. Canton Coin is a “Digital Commodity” In the Interpretation, the Commission classified crypto assets into five categories based on their characteristics, uses and functions: digital commodities, digital collectibles, digital tools, stablecoins and

digital securities.3
The Commission explained that digital commodities, digital collectibles and digital tools “are not themselves securities,” although a crypto asset that is not itself a security may nevertheless become subject to the federal securities laws if offered and sold as part of an “investment contract.”4

In describing the “digital commodity” category, the Commission explained that:
A digital commodity is a crypto asset that is intrinsically linked to and derives its value from the programmatic operation of a crypto system that is functional, as well as supply and demand dynamics, rather than from the expectation of profits from the essential managerial efforts of others. A digital commodity does not have intrinsic economic properties or rights, such as generating a passive yield or conveying rights to future income, profits, or assets of a business enterprise or other entity, promisor, or obligor, but may have certain other rights[.]5 The Interpretation also stated that in this context, the Commission uses the term “commodity” in “an economic and commercial sense (i.e., assets that are fungible, have utility and whose value is determined by supply and demand).”6 The Interpretation further explained that a crypto system is “functional” for purposes of the “digital commodity” definition “if the system’s native crypto asset can be used on the system in accordance with the programmatic utility of the system,” and that “native” in this context refers to “a crypto asset generated for use on a particular crypto system.”7

Canton Coin satisfies this standard and should be classified as a “digital commodity.” Canton Coin is intrinsically linked to and derives its value from the programmatic operation of a crypto system, the Canton Network, which is functional and was functional upon launch. Additionally, Canton Coin derives its value from supply and demand dynamics, not from the expectation of profits from the essential managerial efforts of others.
i. The Canton Network has been functional since launch.
As discussed in Section I.E. above, Canton Coin was launched after the underlying Canton blockchain technology was mature and had proven its ability to support regulatory-grade use cases. Specifically, DA has worked on developing the underlying technology since its founding in 2014 (with the Canton protocol whitepaper published in 2020), and the Global Synchronizer and Canton Network were not launched until DA was confident in Canton’s functionality. Moreover, there was no “initial coin offering,” pre-mine or any other pre-launch sale or allocation of Canton Coin. From the launch of the network in June 2024, Canton Coin has been minted programmatically over time pursuant to the minting protocol by participants operating on the Canton Network, including Super Validators, Validators and application providers (including featured application providers), based on network activity, and has been used to pay Global Synchronizer transaction fees. The first tokens were minted over time by all Global Synchronizer participants (not just DA) using substantially the same protocol-level minting mechanics that continue to govern Canton Coin emissions today.
ii. Canton Coin is intrinsically linked to the programmatic operation of the Canton
Network.
3 Interpretation at 13717.
4 Id. 5 Id. at 13718. 6 Id. at 13718, n.48. 7 Id. at 13718, n.49.

The Interpretation explains that a digital commodity “is necessary to participate in or use certain aspects of an associated functional crypto system,” and that the programmed purpose of a digital commodity is to “facilitate and incentivize the validation, ordering, and confirmation of transactions on the associated functional crypto system, serve as a mechanism to maintain the functioning and/or security of the associated functional crypto system, and foster network effects.”8 The Commission further stated that “a digital commodity is integral to the operation of the associated functional crypto system” and that a functional crypto system “may require users to pay transaction (or ‘gas’) fees in the system’s native digital commodity.” 9 The Commission stated that such fees, together with newly generated protocol units, “typically are used as an incentive mechanism to reward participation in and use of the associated functional crypto system.”10 Canton Coin performs precisely these programmed functions. It is intrinsically linked to the programmatic operation of the Canton Network. Canton Coin is the medium through which users pay Global Synchronizer fees, which is the mechanism by which transactions are sequenced and confirmed across the Canton Network. Canton Coin is also the mechanism by which Super Validators, Validators and application providers are incentivized to supply, respectively, synchronization infrastructure, participant-node infrastructure and application activity. Canton Coin also fosters “network effects,”11 as the Canton Network’s reward structure is designed to shift rewards toward the participants that deliver the most utility to the Canton Network. Rewards are earned based on contribution, while burning reduces circulating supply as usage increases.
iii. Canton Coin’s value derives from the programmatic operation of the Canton
Network and from supply and demand dynamics.
The Interpretation explains that “[l]ike commodities generally, a digital commodity has intrinsic value derived from the value of the goods and services that may be produced or accessed using that commodity, as well as from supply and demand dynamics,” with the result that “the value of a digital commodity is intrinsically linked to the programmatic functioning of the associated functional crypto system.”12 On the Canton Network, this linkage exists through the burn-mint model. Global Synchronizer fees are denominated in U.S. dollars but are paid by burning Canton Coin. Consequently, the quantity of Canton Coin required to pay the necessary fees will change as the price of Canton Coin fluctuates over time. On the mint side, new Canton Coin enters circulation only through discrete, protocol-defined minting rounds and only as rewards for measurable activity by Super Validators, Validators and application providers. When usage is high, more coins are burned, which tends to increase the token’s price in U.S. dollars. Conversely, when usage is low, fewer coins are burned, which tends to decrease the token’s price in U.S. dollars. Thus, the price of Canton Coin is designed to reflect usage of the Canton Network, and over the long run keep the price of Canton Coin aligned with the utility of the Canton Network.
iv. No central party oversees participation or distributes rewards.
The Interpretation’s reasoning as to why a digital commodity is not a security turns in significant part on the absence of a central party. The Interpretation observes that a “functional crypto system does not have 8 Id. at 13718. 9 Id. 10 Id. 11 Id. at 13718, n.52 (The Interpretation defines “network effects” as “the phenomenon where the value, use, and security of a crypto system increase as more users participate and interact with the crypto system.”). 12 Id. at 13718.

a central party that oversees participation or distributes rewards to users,” and therefore “a purchaser would not reasonably expect to profit based on the essential managerial efforts of others.”13 The Interpretation defines a “central party” in this context as “a person, entity, or group of persons or entities having operational, economic, or voting control of a crypto system.”14 No such “central party” exists with respect to the Canton Network because no person, including the Canton Foundation and DA, has operational, economic or voting control of the Canton Network. Rewards are not distributed by anyone. They are minted by participants themselves against protocolgenerated activity records. The Canton Foundation facilitates governance, administration and ecosystem coordination, including through recommending to Super Validators proposed changes to the protocol parameters (including economic parameters) based on discussions in foundation-hosted committees such as the tokenomics committee. That said, neither DA nor the Canton Foundation can independently control protocol-level rules. Additionally, neither DA nor the Canton Foundation can unilaterally change protocol parameters (including economic parameters). Changes to protocol parameters (including economic parameters) require the approval of at least two-thirds of the Super Validator Node Operators.
v. Canton Coin does not have intrinsic economic characteristics of a “security.”
The “digital commodity” definition excludes crypto assets with “intrinsic economic properties or rights, such as generating a passive yield or conveying rights to future income, profits, or assets of a business enterprise or other entity, promisor, or obligor.”15 Canton Coin lacks such characteristics. It does not generate a passive yield. New Canton Coin is minted only against measured activity records created by a participant’s own validation, sequencing, transfer or application activity. Canton Coin conveys no right to future income, profits or assets of DA, the Canton Foundation, any Super Validator, any application provider or any other enterprise, promisor or obligor, nor does holding Canton Coin passively accrue yield. Additionally, Canton Coin was not offered or distributed in connection with any capital-raising event. There was no initial coin offering, no pre-mine and no other pre-launch sale or allocation; all Canton Coin in circulation have been programmatically minted upon, and following, the launch of the Canton Network. B. Programmatic Minting of Canton Coin by Super Validators, Validators and Application Providers Are Not Transactions Involving “Investment Contracts” Under Howey
Section 2(a)(1) of the Securities Act 1933 and Section 3(a)(10) of the Securities Exchange Act of 1934
define the term “security” broadly to include a number of specifically enumerated financial instruments, such as notes, stocks and bonds. Where an instrument does not fall within any of the specifically enumerated items in Section 2(a)(1) and Section 3(a)(10), the Commission analyzes transactions involving such arrangements under the “investment contract” test set forth in SEC v. W.J. Howey Co.16 Under Howey, to determine whether an investment contract exists the Commission and courts look to whether there is (i) an investment of money (ii) in a common enterprise (iii) with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.17 In performing this analysis, the Commission and courts look to the “economic realities” of the transaction, rather than the 13 Id. 14 Id. at 13718, n.54. 15 Id. at 13718. 16 SEC v. W.J. Howey Co., 328 U.S. 293 (1946). 17 Id. at 301.

labels attached to it.18 The failure of any one element defeats the existence of an investment contract. In this case, the programmatic minting of Canton Coin by Super Validators, Validators and application providers does not involve or implicate a “reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.”19 In the Interpretation, the Commission explained that “whether it would be reasonable for a purchaser to expect profits based on representations or promises to engage in essential managerial efforts depends on the specific facts and circumstances, taken as a whole, under which those representations and promises are made.”20 The Commission also stated that certain representations or promises by an issuer conveyed to purchasers to develop and achieve functionality for a non-security crypto asset and/or develop an associated crypto network or associated crypto application, together with a business plan containing certain information, likely would create a reasonable expectation of profits because they speak directly to those essential managerial efforts that affect the failure or success of the project.21 In published responses to “frequently asked questions” (the “FAQs”), the Staff stated that:
The Commission has recently expressed the view that, once a crypto system is functional, services to secure, maintain, improve, or enhance such a system or its functionality, or to facilitate network effects, whether through sponsoring or funding development projects or other similar activities, would not involve essential managerial efforts. As a result, any representations or promises by the issuer to provide or continue to provide (or arrange for the provision of) such services after the crypto system is functional would not satisfy the Howey test.22 As discussed above, the Canton Network was functional upon launch. The programmatic minting of Canton Coin did not begin until launch and there was no initial coin offering, pre-mine, pre-launch sale or allocation. As a result, there was no pre-functional period in which DA or any other person raised money against a development roadmap, and no period in which purchasers could have reasonably formed profit expectations tied to promised essential managerial efforts. DA, the Canton Foundation and other ecosystem participants such as Validators, Super Validators and application providers continue to support the Canton Network through software development, documentation, standards work, ecosystem coordination, education and institutional engagement. Consistent with the Staff’s statement in the FAQs (copied above), because Canton Network was functional upon launch, none of these efforts would constitute “essential managerial efforts.” Super Validators, Validators and application providers expect compensation for the infrastructure and services that they provide, measured by protocol-defined activity records. However, any profit expectations here are based on that entity’s own efforts:
18 See Landreth Timber Co. v. Landreth, 471 U.S. 681, 689 (1985); Tcherepnin v. Knight, 389 U.S. 332, 336 (1967) (“form should be disregarded for substance and the emphasis should be on economic reality”); United Hous. Found., Inc. v. Forman, 421 U.S. 837, 849 (1975). 19 While we believe that Howey’s other elements arguably are not met, the failure of the third element is sufficient for purposes of our analysis in this letter. For that reason, in this letter we are not addressing the other elements. 20 Interpretation at 13721. 21 See id. at 13721-22. 22 SEC, Division of Corporation Finance, Frequently Asked Questions on the Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, at Question 2.3 (originally issued Sept. 25, 2026; updated Sept. 28, 2026).

Super Validators: Super Validators run synchronization nodes forming the Global Synchronizer
and validate Canton Coin transactions. Operating this infrastructure requires sustained commitments of hardware, personnel, uptime and operational discipline and rewards are earned in proportion to the operator’s own measured contribution, rather than allocated pro rata from a pool.
Validators: Validators process and validate the transactions to which they are parties and route
them for sequencing and confirmation. A Validator’s minting rights are proportional to the fees it burns, which the protocol treats as a proxy for the activity generated by that node. The Validator must therefore use the Canton Network to earn rewards.
Application providers: Application providers earn rewards when they facilitate transactions
through their applications, with reward eligibility keyed to activity markers created by the provider’s own contract code and to the fees burned through its application. If one application generates a given share of Canton Network’s fees in a round, it may mint a corresponding share of the application reward allocation in the next round, whereas an application that drives no activity earns nothing. Building, operating, securing and maintaining an institutional-grade application demonstrates significant efforts.23 Moreover, the activities undertaken by Super Validators and Validators are services to the Canton Network. They are administrative or ministerial in nature—not essential managerial efforts. This characterization is consistent with the Interpretation, where the Commission stated that a miner who contributes computational resources to secure a network and validate transactions “merely is engaging in an administrative or ministerial activity” and any “expectation to receive rewards is not derived from any third party’s essential managerial efforts,” but instead “is derived from the administrative or ministerial act of Protocol Mining performed by the miner” such that the “rewards are payments to the miner in exchange for services it provides to the PoW Network rather than profits derived from the essential managerial efforts of others.”24 Here, by engaging in activities that enable the operation of the Canton Network, the Super Validators and Validators are engaging in activities to receive Canton Coins as a result of their own efforts, with no expectations derived from any third party’s essential managerial efforts upon which the Canton Network’s success depends. Likewise, any efforts of DA or the Canton Foundation do not rise to the level of essential entrepreneurial or managerial efforts under Howey. The Canton Foundation facilitates governance, administration and ecosystem coordination—including through recommending to Super Validators proposed changes to the protocol parameters (including economic parameters) based on discussions in foundation-hosted committees such as the tokenomics committee—but does not independently control protocol-level rules. Neither DA nor the Canton Foundation can unilaterally change protocol parameters, including economic parameters. Changes to protocol parameters, including economic parameters, require the approval of at least two-thirds of the Super Validator Node Operators. Canton Coin minting is determined programmatically. No sponsor or promoter calculates the rewards, pays the rewards or plays a necessary role in their disbursement.25 23 See Securities Act Release No. 5211 (Nov. 30, 1971); see also Steinhardt Grp. Inc. v. Citicorp, 126 F.3d 144, 155 (3d Cir. 1997) (finding no investment contract where a participant’s powers were not nominal but significant and directly affecting its profits). 24 Interpretation at 13725. See also Donovan v. GMO–Z.com Tr. Co., Inc., 779 F. Supp. 3d 372, 388 (S.D.N.Y.

(‘‘Ministerial, technical, and clerical tasks often are ‘necessary’ for an investment scheme to operate and thereby generate a profit, but courts have long found such efforts to be insufficient under Howey’s third prong.’’). 25 Neither DA nor any affiliate has marketed, or will market, Canton Coin as an investment or as a means of earning a return based on the efforts of DA or others. Instead, DA’s communications describe Canton Coin’s utility in

III. Conclusion
For the reasons discussed above, I respectfully request that the Staff provide confirmation concerning two points: (1) that in the Staff’s view, Canton Coin is a “digital commodity” as described in the Interpretation,26 and therefore is not itself a “security” within the meaning of either Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act; and (2) that the Staff will not recommend enforcement action to the Commission when Canton Coin is minted programmatically by Super Validators, Validators and application providers, in the manner and under the circumstances described above, without registration under Section 5 of the Securities Act or Section 12(g) of the Exchange Act. I appreciate your consideration of this request. Should you require additional information or wish to discuss this request further, I am available at your convenience. Respectfully, Jeffrey T. Dinwoodie Cc: Manoj Ramia – General Counsel, Digital Asset connection with the Canton Network. The Canton Network’s design reinforces the point, as it lacks passive valueaccrual mechanisms, such as dividends, interest or programmatic buybacks. 26 Interpretation at 13718.

Resources

Incoming Letter