That was fast. Yesterday, in response to the Working Group recommendations from mid-week, SEC Chair Paul Atkins unveiled the launch of the Commission’s “Project Crypto” during a speech to the “America First Policy Institute.” The initiative directs the SEC’s policy divisions to work with the existing Crypto Task Force led by Commissioner Hester Peirce, to “swiftly” develop proposals to implement the Working Group recommendations. But it sounds like those in the crypto ecosphere will be able to break through previous roadblocks even before final rules are on the books:
In accord with the PWG Report’s recommendations, I have directed the Commission staff to draft clear and simple rules of the road for crypto asset distributions, custody, and trading for public notice and comment. While the Commission staff works to finalize these regulations, the Commission and its staff will in the coming months consider using interpretative, exemptive, and other authorities to make sure that archaic rules and regulations do not smother innovation and entrepreneurship in America.
Here’s more detail on what Chair Atkins is thinking for some aspects of the new regulatory framework:
I have directed the Commission staff to work to develop clear guidelines that market participants can use to determine whether a crypto asset is a security or subject to an investment contract. Our goal is to help market participants to slot crypto assets into categories, such as digital collectibles, digital commodities, or stablecoins, and assess the economic realities of a transaction. This approach can allow market participants to determine, based upon clear guidelines, whether any outstanding promises or commitments of the issuer cause the crypto asset to be subject to an investment contract.
In addition, it should not be a scarlet letter to be deemed a security. We need a regulatory framework for crypto asset securities that allows these products to flourish within American markets. Many issuers will prefer the flexibility in product design that the securities laws afford, and investors will benefit from the opportunity to earn distributions, voting rights, and other features typical of securities. Projects should not be forced to establish decentralized autonomous organizations and offshore foundations or decentralize too early if this is not their desired plan of action. I am excited to see new use cases for crypto asset securities in commerce, such as the ability to participate in blockchain network consensus with tokenized equities.
Thus, for those crypto asset transactions that are subject to the securities laws, I have asked staff to propose purpose-fit disclosures, exemptions, and safe harbors, including for so-called “initial coin offerings,” “airdrops,” and network rewards. Regarding these sorts of transactions, our goal should be that issuers no longer exclude Americans from their distributions to avoid legal complexity and lawsuits,[14] but instead choose to include Americans to enjoy legal certainty and an accommodating regulatory environment. It is my view that a Cambrian explosion in innovation could occur if we stay true to this course.
The speech also indicates that the Commission is open to working with companies that want to “tokenize” securities – and engage in other yet-to-be-known types of innovation:
While the Commission is actively considering industry requests that could jumpstart innovative activity, we are also contemplating an innovation exemption that would allow registrants and non-registrants to quickly go to market with new business models and services that do not neatly fit within our existing rules and regulations. The Commission will continue to ensure that market participants adhere to certain conditions and requirements designed to achieve the policy aims of the federal securities laws.
Under my vision for an innovation exemption, innovators and visionaries will be able to immediately enter the market with new technologies and business models but will not be required to comply with incompatible or burdensome prescriptive regulatory requirements that hinder productive economic activity. Instead, they will be able to comply with certain principles-based conditions designed to achieve the core policy aims of the federal securities laws. These conditions may include, for example, a commitment to make periodic reports to the Commission, incorporate whitelisting or “verified pool” functionality, and restrict tokenized securities that do not adhere to a token standard that incorporates compliance features, such as ERC3643.[22] I encourage market participants and SEC staff alike to have an eye towards commercial viability when contemplating what various models could look like.
In his speech, Chair Atkins analogized the current need for innovation to the one facing the SEC in the 1960s, when the market transitioned from paper stock certificates to electronic DTC entries. I do wonder whether that was as polarizing at the time as crypto is now. My guess is, probably! Whatever your views on the merits of crypto becoming mainstream, you can’t argue with the fact that the market appears to be poised for some big changes right now.
– Liz Dunshee
The question of what Congress will fund next year is still a very open one, since our lawmakers sprinted out of Washington before making much progress on the appropriations bills. Just the same, some of the early activity can give us a sense of what type of budget the SEC will be working with, and which enforcement and rulemaking priorities will get those precious dollars.
As Meredith blogged in June, the SEC had requested that its funding level not change from last year. It’s not too surprising to see that the current subcommittee version of the House appropriations bill would actually reduce the Commission’s funding by about 7% compared to last year. What may be more interesting is the laundry list of items that the bill would “defund” (i.e., the SEC wouldn’t be able to use the appropriated funds for these items):
– SEC. 527. None of the funds made available by this Act may be used to compel a private company to make a public offering under the Securities Act of 1933 by amending the ‘‘held of record’’ definition under section 12(g)(1) of the Securities Exchange Act of 1934.
– SEC. 528. None of the funds made available by this Act may be used to implement any program that requires a national securities exchange, a national securities association, or a member of such an exchange or association to collect and provide personally identifiable information with respect to a retail market participant to meet the requirements relating to an order or a reportable event under section 242.613(c)(7) of title 17, Code of Federal Regulations, or any successor regulations thereof.
– SEC. 529. None of the funds made available by this Act may be used to review or approve the budget for the Financial Accounting Standards Board (FASB) as described in 15 U.S.C. 7219, until the FASB withdraws the Accounting Standards Update on Income Tax Disclosures issued in December 2023 (No. 2023-09).
– SEC. 530. None of the funds made available by this Act may be used to develop, promulgate, finalize, implement, or enforce rulemaking that would, directly or indirectly, create new disclosure requirements under Regulation D or lower the amount of money an issuer can raise through Regulation D.
– SEC. 531. None of the funds made available by this Act may be used to implement or enforce the final rule entitled ‘‘Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure’’ (88 Fed. Reg. 51896 (August 4, 2023)).
The tax and cybersecurity disclosure restrictions are interesting, since some companies have been wondering whether they need to worry about these rules anymore under the current regime. For cyber, it’s worth remembering that even though Commissioners Peirce and Uyeda objected to the cybersecurity disclosure rules when they were adopted, it was in part because they believed the preexisting rules and guidance already required disclosure of material cybersecurity risks and incidents. That suggests we will still need to keep principles-based disclosures in mind for these issues. Plus, the laws are still on the books (for now) and enforcement could resume after a regime change. All that said, it does seem that when it comes to obsessing over the finest, most technical disclosure points, we may get a little breathing room for the time being – especially if the spending prohibition makes it into the final appropriations bill.
– Liz Dunshee
A new report from Cornerstone Research shows that securities class action filing activity has held steady for the first half of this year – but the dollar values are higher and “AI washing” is showing up in more claims. Here are a few other takeaways:
– 12 cases filed in the first half of 2025 related to artificial intelligence disclosures, putting this category on track to surpass the 2024 yearly total of 15.
– Cryptocurrency-related filings are poised to increase, while COVID-19-related filings are on pace to decline sharply.
– The annualized number of SPAC-related filings is on pace to nearly match that of 2024.
– The number of filings in the Consumer Non-Cyclical sector increased by 31% in 2025 H1 relative to 2024 H2, largely driven by a surge in Biotechnology and Pharmaceutical filings.
– Mega filings accounted for the vast majority of total MDL and total DDL (91% and 83%, respectively), significantly above the 1997–2024 semiannual averages.
– The count of mega DDL filings (15) in 2025 H1 was three times the 1997–2024 semiannual average (five) and between the number of mega DDL filings in 2024 H2 (17) and 2024 H1 (10).
A report from NERA Economic Consulting reached similar conclusions, while also showing that plaintiffs remain interested in “bread & butter” claims. Here’s more detail on that one:
– A total of 108 new federal securities class action suits were filed in the first half of 2025. The bulk of these (99 cases) were standard cases containing alleged violations of Rule 10b-5, Section 11, and/or Section 12. If this pace continues, 2025 will see approximately 216 cases, a slight decline from 2024 levels.
– The electronic technology and technology services and the health technology and services sectors together accounted for 59% of filings. However, suits in the finance sector declined to 7%.
– A significant number of standard case filings included allegations related to missed earnings guidance (44%) and allegations related to misled future performance (33%).
Check out more trends in our “Securities Litigation” Practice Area.
– Liz Dunshee
