WashingtonAtkins: SEC will regulate blockchain through rulemaking.
Existing law covers separate brokers, exchanges, and clearinghouses; the Securities and Exchange Commission chair said protocols merge all three.
The CLARITY Act in Congress would divide oversight between securities and commodities regulators.
Sources: CoinDesk
THE THREE-FUNCTION PROBLEM
US securities law was built around a separation of powers: brokers take orders, exchanges match them, clearinghouses settle them. Each function has different capital, custody, and conflict-of-interest rules. A blockchain protocol does all three in a single smart contract — there is no legal category for that.
RULEMAKING VS ENFORCEMENT
A regulator has two tools: write rules in advance (rulemaking) or sue firms after the fact and let courts define the law (enforcement). Gensler's SEC chose enforcement — dozens of cases against Coinbase, Binance, Ripple, Kraken — arguing existing law was clear. Atkins is pivoting to rulemaking, conceding that it wasn't.
THE HOWEY TEST
Whether a token is a security has turned on Howey v. SEC (1946) — an investment of money in a common enterprise with profits expected from others' efforts. The test was designed for orange grove leases in Florida. Applying its four prongs to a permissionless protocol with no central promoter is the legal contortion enforcement created.
THE CLARITY ACT
The pending bill divides jurisdiction by token type: the SEC keeps tokens that look like securities, the CFTC takes commodity-like tokens (including most of what trades on spot exchanges). The split matters because the CFTC has roughly a tenth of the SEC's budget and a far lighter regulatory touch.
WHY THIS PIVOT NOW
Atkins, confirmed in April 2025, was a Republican SEC commissioner from 2002–2008 known for opposing the agency's expansion of enforcement reach. His appointment under Trump signaled a deliberate reversal — not a refinement — of the prior chair's posture. The crypto industry spent over $130mn on the 2024 elections to make this happen.
THE PRECEDENT
The last time the SEC faced a technology that broke its categories was the rise of electronic communication networks in the 1990s. Reg ATS (1998) created a new lighter-touch category for venues that matched orders without becoming full exchanges. That same template — a tailored rule rather than forced fit — is what onchain rulemaking would replicate.