On September 17, the SEC issued its “Innovation Exemption,” granting temporary, conditional relief from the definitions of “exchange” and, for certain liquidity providers, “dealer” under the Securities Exchange Act of 1934 to facilitate the on-chain trading of tokenized National Market System stocks. The exemption permits qualifying Tokenized Securities Venues (“TSVs”) to offer permissioned trading through automated market makers and liquidity pools, subject to conditions including trading and volume limits, public transaction data, issuer objection rights, technology safeguards, and requirements that tokenized shares provide the same rights and privileges as the corresponding traditional securities. The order represents a significant step in the SEC’s efforts to accommodate tokenized securities within the federal securities laws, while allowing the Commission to observe how on-chain trading operates in practice and use that experience to inform potential longer-term rulemaking.
On September 17, the CFTC’s Market Participants Division issued Staff Letter No. 26-25, broadening the passive-software no-action relief previously granted to Phantom and making it generally available to qualifying software providers. Under specified conditions, staff will not recommend enforcement for failure to register as an introducing broker (“IB”) or associated person where a provider offers software that enables users to trade CFTC-regulated derivatives through registered FCMs, IBs, or DCMs, but does not hold customer assets, generate trading signals, or exercise discretion over order routing or execution. The relief is notable for wallets, trading interfaces, and other market-access technology because it provides a broader framework for distinguishing passive technology providers from regulated intermediaries, including in circumstances where providers market particular products or registrants and receive transaction-based compensation.
On September 14, SEC Chairman Paul Atkins gave remarks at the Solana Policy Institute Summit reaffirming his commitment to making the United States an innovation capital through Project Crypto. While he urged Congress to advance the CLARITY Act, he also stated that the SEC will work on a crypto framework regardless of CLARITY passage. He went on to discuss the SEC’s recent work on Regulation Crypto Assets, modernization of transfer agents, and the creation of a crypto custody framework for advisers and funds. Atkins has asked SEC staff to develop a proposal outlining rules for crypto ownership or custody by a regulated fund or an investment adviser.
On September 15, the CLARITY Act fell short of passage when a Senate procedural vote failed to meet the required 60-vote threshold, with the final tally at 49–50. The bill had already passed the House 294–134 in July 2025 and recently went through substantial changes to secure passage before the midterms. Despite a final substitute incorporating over 120 amendments on ethics, stablecoin-yield safeguards, and state attorney general enforcement, key stakeholders and Senators cited insufficient changes to the bill. The bill remains on the Senate calendar, but with midterm elections approaching and lead sponsor Senator Lummis declaring the effort “over,” prospects for comprehensive crypto legislation in 2026 remain uncertain.
On September 15, Texas state senators held a hearing to examine whether prediction markets constitute illegal sports gambling or a legitimate financial product in the state. With prominent prediction market representatives, gambling trade associations, and activists in attendance, the hearing included arguments from all sides. The Texas Constitution prohibits most gambling, so members of the gambling industry and consumer activists argued that prediction markets cannot legally operate in Texas. Prediction market representatives argued that these platforms act as CFTC-regulated financial products immune to state jurisdiction.