SEC closes crypto consultation with two out of five commissioners

Two out of five seats occupied. The SEC closes the comment period on Regulation Crypto Assets this Tuesday, October 20. This 146-page text must explain how a token is legally sold in the United States. In total, the SEC received some 140 letters. They range from the support of Hyperliquid to the request of five former senior officials to start again. However, Paul Atkins and Mark Uyeda will read them alone. Indeed, Hester Peirce left the Commission on October 2. Since then, no name has come to the Senate to replace her. As for the CLARITY Act, the Senate buried it on September 15.

Regulation Crypto Assets: what the SEC offers to token issuers

The SEC proposed the text on August 18, then published it in the Federal Register on the 21st. Paul Atkins then saw in it “clear paths to raise capital under the federal securities laws”. First, a “Startup” exemption allows you to raise up to $5 million over four years. No registration or financial statements, but only once. Then, a “Fundraising” exemption rises to 75 million per year. Beyond 20 million, the issuer must provide audited accounts. Finally, rule 400 adds an exit airlock. A token ceases to be an investment contract when its issuer has accomplished the “essential managerial efforts” promised. The same goes if he has definitively abandoned them. The issuer must then file a transition form. Additionally, state laws no longer apply as long as the issuer publishes its reports.

This airlock concentrates the shots. Davis Polk, however, supports the architecture of the text. But the cabinet wrote on October 15 that this notion “is not a standard”. In other words, it does not explain “to a developer what he can and cannot do”. Jake Chervinsky, on the contrary, calls for rapid adoption for the Hyperliquid Policy Center. He warns, however, that requiring a tacit admission in the transition form would be problematic. This would likely make “the safe harbor unusable in practice for most existing transmitters.” Bitwise, for its part, recalls that it has “never been an issuer of crypto-assets”. The manager therefore calls for a test based on observable public facts. Result: three letters favorable to the Crypto Assets Regulation, and three requests for rewriting of the same article.

“Deeply flawed”: SEC veterans want to start all over again

The heaviest letter bears five signatures known to Washington. John Coates, John Coffee, James Cox, Merritt Fox and Joel Seligman sign under the “Shadow SEC” label. Their verdict: a “deeply flawed” proposal. They then ask the substantive question in one line. “Do we need a new Crypto Regulation? » They are asking for at least a new proposal. John Reed Stark, former SEC cyber enforcement chief, goes further. With Lee Reiners (Duke), he demanded pure and simple withdrawal on October 16. According to them, the transition form would be “an exit visa from Commission supervision”. A visa “stamped by the traveler himself”.

Who will decide? Two Republican commissioners. Indeed, the other three seats are empty. Jaime Lizárraga left the Commission in January 2025, Caroline Crenshaw in January 2026 and Hester Peirce this month. Then the Commission changed the rules. On September 30, two days before Peirce left office, she changed her quorum rule without public consultation. From now on, only one commissioner is enough on a file if the other recuses himself. The SEC sees it as a way to “promote the flexibility and finality” of its decisions. John Jenkins, of TheCorporateCounsel.net, sees it more as "a way of not running a railway company." In English, “no way to run a railroad”. As a reminder, the 1995 rule set the SEC quorum at three commissioners.

Without the CLARITY Act, the SEC and CFTC are moving forward separately

Congress had to address the issue. But the motion to open debate on the CLARITY Act failed by a vote of 49 to 50 on September 15. Far from the 60 required. Cynthia Lummis summed up the evening with “it’s over”. Since then, each agency has charted its own course. The CFTC, too, now has only one commissioner with Michael Selig. However, on October 5, it published a preliminary regulatory notice on crypto-asset markets. Comments remain open until mid-December. The Treasury, for its part, closed its consultation on October 19 on the application of the GENIUS Act to stablecoins. More than 105 contributions. The Senate does not sit until November 9. And the White House still doesn't have a candidate for Peirce's seat. However, in July Politico cited the name of former SEC officer Steven Levine for the position.