How SEC Innovation Exemptions Could Change Crypto Forever

At a recent event in Manhattan, SEC Chair Paul Atkins vowed to deliver innovation exemptions by the end of the year. This would give Web3 firms explicit permission to ignore certain regulations.

The Commission can’t make any progress on the effort right now, due to the government shutdown. It will need to carefully construct the exemptions’ language to retain crucial fiscal guardrails and prevent instability.

Innovation Exemptions Explained

Since Paul Atkins took over at the SEC in April, he’s been revolutionizing US crypto regulation in several key ways. Between his involvement in market structure legislation and moves to approve altcoin ETFs, he’s made a lot of progress, but there’s one immediate goal that remains out of reach.

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For over a month, Atkins has been describing an “innovation exemption” for crypto firms. The rules are a little unclear, but they would essentially allow Web3 businesses to ignore existing rules.

The CFTC already experimented with this, declaring that it will take no action against Polymarket for previous violations. This allowed the platform to return to the US.

Atkins has repeatedly commented on the innovation exemption, claiming that he hopes to bring it about soon. Today, he made a public appearance with CFTC Commissioner Caroline Pham, where he explicitly stated that this rule change should take effect before 2026:

“I have confidence [that the SEC] will be able to do it. [The exemption] is one of the top priorities…because I want to be welcoming to innovators and have them feel like they can do something here in the United States,” Atkins reportedly told the attendees.

Is This a Good Idea?

He also addressed a few other topics, mentioning that all official SEC business is frozen as long as the US federal government remains shut down. Although individual employees are free to publicly advocate for future rules changes, the Commission won’t be preparing these innovation exemptions for the foreseeable future.

Still, if Atkins can enact innovation exemptions for crypto, it would represent a huge change. The Trump administration has been pursuing a laissez-faire regulatory attitude with the industry, but this would revolutionize things.

However, the SEC will need to craft the language of these measures carefully. “Crime is legal now” is a damaging ethos to the crypto community, and Atkins is proposing explicit permission to break the rules.

Without crucial guardrails, these radical measures may further destabilize capital markets.