With Legislation Stalled, the Regulators Start Writing the Rules Themselves
The SEC is preparing an exemption for certain token offerings and both agencies are moving on market structure through rulemaking, a route that is faster than Congress and considerably less permanent.
The Securities and Exchange Commission and the Commodity Futures Trading Commission are moving to establish through rulemaking much of what the stalled market structure bill would have established through statute.
The most immediate step is an SEC rule expected in coming weeks that would exempt certain token offerings from securities registration requirements — a targeted fix for the problem that has defined the industry's relationship with the agency since 2017.
What an exemption would do
Under current law, an offering of an investment contract must be registered or fall within an exemption. The registration process was designed for companies issuing stock, and it fits a token distribution badly: there is often no issuer in the conventional sense, no financial statements to audit, and no ongoing reporting obligation that maps to how the asset works.
A tailored exemption would specify conditions — disclosure, distribution limits, restrictions on insider sales — under which a token can be distributed without full registration.
The advantages of rulemaking
It is faster. An agency can propose, take comment and finalize a rule in a year, while a bill requires floor time in two chambers and a signature.
It is also more technically precise, because the drafting is done by staff who work on these questions daily rather than by legislative offices balancing dozens of unrelated priorities.
The disadvantage
A rule can be undone by the next administration through the same process that created it, and it can be challenged in court by anyone with standing. Recent years have not been kind to agency actions that push at the boundaries of statutory authority.
That is the fundamental weakness of the regulatory route: the industry's stated goal has been durable certainty, and a rule is the least durable form of law available.
What the CFTC is doing
The commodity regulator has moved in parallel on the trading side, addressing how digital commodity intermediaries register and operate. Its authority over spot markets is limited in ways the pending legislation would have fixed, which leaves gaps that rulemaking alone cannot close.
Those gaps — particularly around spot market surveillance and custody — are the strongest remaining argument for passing a statute rather than settling for rules.
