SEC Sets Regulatory Framework for AI and Onchain Markets

SEC Chair Paul Atkins warned that the agency will hold firms accountable for the outcomes of the AI tools they deploy and for disclosing to investors how those tools are used — a principles-based posture modeled on the Commission's handling of electronic trading in the late 1990s.

In an address at the Special Competitive Studies Project Expo on AI, Mr. Atkins pushed back on the idea that AI demands an entirely new regulatory regime, framing it as the latest in a long line of capability-expanding technologies. What is genuinely new, he argued, is scale — the speed at which AI-driven errors or bad actors could propagate through the financial system. He said that the SEC will not dictate which AI models firms must use or cement today's technology as tomorrow's standard. He said that firms should expect SEC scrutiny to focus on model governance, transparency, and explainability rather than on specific technology choices.

Mr. Atkins outlined four areas for potential rulemaking: (i) how the "exchange" definition applies to onchain trading systems; (ii) how broker-dealer definitions apply to software-based trading interfaces; (iii) how clearing agency definitions apply when settlement is near-instantaneous; and (iv) how Securities Act and Advisers Act requirements apply to "crypto vaults" — onchain applications that generate yield for users. He also warned that suppressing innovative technology doesn't eliminate demand for it, citing FTX as evidence that regulatory avoidance simply pushes risk offshore. Notice-and-comment rulemaking is expected across all four areas, giving industry participants meaningful opportunities to engage.

Mr. Atkins also renewed his call for Congress to pass the CLARITY Act, arguing that statutory language is the most durable form of regulatory certainty. He said firms should use the time before those processes conclude to review their AI governance documentation, map onchain activities against existing regulatory categories, and watch for a near-term limited innovation pathway for onchain trading systems.