SEC Chair Paul Atkins signaled Friday that the agency is considering formal rulemaking to clarify how existing securities regulations apply to onchain trading systems, blockchain settlement infrastructure, and AI-driven financial applications. Speaking at the AI+ Expo in Washington, Atkins outlined a regulatory approach designed to reduce legal uncertainty for hybrid traditional-decentralized market models that do not fit existing broker-dealer and exchange frameworks.
The Regulatory Gap in Blockchain Markets
Current securities rules were written for traditional intermediaries: brokers execute trades, exchanges match orders, clearinghouses settle transactions. Blockchain protocols collapse these functions into single software layers. As Atkins noted, “A single protocol can execute a trade, manage collateral, route liquidity, execute trading strategies through vault structures and settle the transaction.” This functional consolidation creates regulatory ambiguity. Existing statutes do not clearly map to decentralized settlement infrastructure or AI-driven execution engines embedded in smart contracts. The SEC under Gary Gensler pursued enforcement action against crypto platforms over this gap. Atkins’ remarks signal a shift toward prospective clarity rather than retroactive enforcement.
Formal Rulemaking and Exemptive Relief
Atkins indicated the SEC plans to use two tools: notice-and-comment rulemaking and exemptive authority. “We should clarify how the Commission views the spectrum of models that may implicate our statutes through notice and comment rulemaking, using our exemptive authorities where necessary and prudent,” he said. This approach echoes earlier Trump administration moves, including no-action letters and public guidance intended to reduce compliance uncertainty for crypto firms. The SEC has not announced a formal timeline or scope for the proposed rulemaking. Industry participants, including digital asset platforms like Kraken, have long requested regulatory clarity on which protocols trigger broker-dealer registration or exchange approval requirements.
Regulatory Philosophy Meets Market Reality
Atkins framed the SEC’s role differently than his predecessor. “Our job is to set the rules of play and referee the game, not to pick the winning team,” he said. This reflects a regulatory stance focused on rule clarity rather than technology selection. The CFTC has moved in parallel, issuing guidance on decentralized derivatives platforms. Together, these signals suggest the Trump administration views crypto infrastructure as requiring modernized regulatory frameworks, not prohibition. However, the practical scope remains undefined: which onchain models trigger securities rules, which qualify as exempt offerings, and how AI execution algorithms fit into best-execution standards remain open questions.
What Comes Next
Atkins’ remarks do not constitute formal notice of proposed rulemaking. No timeline, scope document, or draft language has been released. The SEC must still decide whether to proceed with formal rulemaking or rely on no-action relief and interpretive guidance. Industry stakeholders await clarity on which onchain models the agency views as securities exchanges versus utility protocols. Until formal rules or relief letters arrive, legal uncertainty will persist.
