In a May 8 speech, SEC Chairman Paul Atkins said the agency could consider a limited “innovation path” for on-chain trading systems in the near future.
In the meantime, the agency will reserve formal notice and comment rules to determine how crypto platforms fit within the exchange definition. Atkins tied that idea directly to the SEC’s handling of electronic trading in the 1990s.
The SEC issued ad hoc no-action letters for years as electronic trading challenged the exchange framework, then instituted Regulation ATS in 1998. The rule was a middle ground that allowed alternative trading systems to operate as broker-dealers under specific circumstances as the market matured.
In the original approval release, the framework was described as intended to “encourage market innovation” while maintaining investor protections. Atkins points first to that set of targeted guidance, and then to a purpose-aligned architecture, as a template for on-chain financing.
The two-step reading makes the speech different from the generic rhetoric about crypto policy.
Atkins seems to be preparing the SEC allows certain on-chain trading systems to operate within the regulatory perimeter under certain conditions, while a longer regulatory process determines how definitions of exchange, broker-dealer, clearing, and transfer agent apply to software-based markets.
For crypto companies that have faced years of enforcement before regulations were in place, this series would mark a real departure from the agency’s recent stance.
Why on-chain markets force a new architecture
Traditional SEC rules were built around separate actors that performed separate regulated functions, such as matching orders on the exchanges, routing and executing broker-dealers, clearing houses that settle them, and transfer agents that record ownership.
A single on-chain protocol can perform all these functions automatically, often in seconds, without separate intermediaries at every step.
Applying a rulebook designed for this separation to software that collapses creates legal uncertainty that both companies and regulators try to escape, and Atkins immediately acknowledged that friction.
Clean compliance requires the SEC to do more than simply declare existing rules applicable. Some functions that resemble on-chain exchange activity also resemble broker-dealer or clearing activity, or both at the same time.
A limited path is intended to address this problem by giving companies a route to operate within the perimeter before the more difficult definition rewrites are completed.
| Traditional SEC category | Traditional function | What an on-chain protocol can do |
|---|---|---|
| Stock exchange | Matches buy and sell orders | Automatically executes transactions within the protocol |
| Broker-dealer | Routes and fulfills customer orders | Routes liquidity and executes trades via software |
| Clearing agency | Settles and arranges transactions between parties | Settles transactions on-chain, often within seconds |
| Transfer agent | Maintains ownership records | Updates ownership records directly on-chain |
This process could take the form of a waiver, conditional no-action letters, a pilot program, a customized registration framework, or a registration-lite model for certain locations in the chain.
The sequence is short-term conditional access, followed by formal regulations to future-proof the framework.
The SEC has already worked with temporary instruments in this area. On April 13, the Department of Commerce and Markets issued a staff statement providing conditional relief for certain self-protecting crypto interfaces, calling it an “interim step” while broader regulatory issues are considered.
Between March 17 and May 4, the SEC’s Crypto@SEC page recorded five market structure or tokenization moves, and Atkins’ speech serves as the policy framework that ties these operational moves into a coherent series.
Commissioner Hester Peirce pointed out specific draft levers in December 2025, asking whether the SEC should tailor the Form ATS to cryptocurrency alternative trading systems, revise public versus non-public disclosure requirements, and reconsider ATS reporting in light of public blockchains.
The February FAQ clarified that pairs trading in securities and non-security crypto assets is permitted, confirmed that current ATS forms allow for crypto disclosures, and noted that broker-dealer ATS operators may perform certain clearing and settlement functions under applicable law.
The trajectory Atkins refers to appears to build on these components.
Bridge or funnel
The optimistic reading is that the SEC is preparing a true Reg ATS-style bridge, with formal conditional pathways for on-chain locations, purpose-built disclosure frameworks, and explicit recognition that some on-chain clearing and settlement may fall within the scope of broker-dealer activity.
In that version, companies that have operated offshore or in legal limbo would have a practical route to register, disclose and operate domestically.
The approval of Nasdaq tokenized securities, the NYSE tokenized securities filing, and the HQLAx no-action relief are all operational evidence that the SEC can structure conditional adjustments without waiting for Congress.
Conditional accommodation and deregulation are different outcomes. The original ATS regulation brought new trading platforms within the SEC’s perimeter and imposed conditions on their operation.
A crypto equivalent would have requirements for disclosure, archiving, retention standards, routing transparency and conflict of interest controls, with a framework built around the way on-chain protocols actually function.
The practical benefit for the industry would be a compliance route based on an on-chain architecture.
The pessimistic reading is that the trajectory manifests itself primarily for intermediate or hybrid actors, leaving autonomous protocols and decentralized systems in the same legal uncertainty they face today.
The conditional exemption it provides only applies to providers that do not hold customer assets, do not take orders, do not route transactions, do not execute transactions, and do not request specific user activity. That exclusion list covers most of what makes an automated market maker or lending protocol work.
A path designed around these parameters would help companies closest to the traditional broker-dealer model, while doing little for parts of supply chain finance that don’t have a clear broker-dealer analog.
| Optimistic reading | Pessimistic reading |
|---|---|
| Creates a workable compliance route for locations in the chain | Mainly helps hybrid or mediated actors |
| Uses tailored disclosure and reporting requirements | Leave autonomous protocols in legal no man’s land |
| Brings activity onshore rather than pushing it abroad | Becomes a funnel to stricter SEC scrutiny |
| Gives the SEC visibility without relying on enforcement first | The relief is too limited to change much in practice |
| Recognizes that software-based markets do not neatly align with existing exchange rules | This mainly benefits companies closest to the broker-dealer model |
Atkins also used the speech to urge Congress to send the CLARITY Act to President Donald Trump’s desk, and the legislative backdrop helps explain why SEC action has independent weight.
The CLARITY Act faced an impasse in February over stablecoin rewards provisions, an April push from Treasury Secretary Scott Bessent and a May 1 deal on a key provision that could restore Senate momentum.
That stop-start path means the SEC must act with its own tools while Congress negotiates, and Atkins said in January that the statute alone leaves operational questions up to the organization.
His FTX reference shut down the political argument, noting that regulatory gaps are pushing risk offshore, leaving U.S. investors exposed.
FTX operated outside the US, but US customers still lost money. A domestic trajectory brings activity into the system before the next structural failure makes the holes unmistakable.
The speech is best taken as a sign that the SEC appears to be moving from a classification argument about crypto fitting the old rulebook to a design exercise about what conditions a bridge for on-chain locations would actually require.