HOUSE FINANCIAL SERVICES COMMITTEE
Hearing on Oversight of the SEC
For questions on the note below, please contact the Delta Strategy Group team.
On February 11, the House Financial Services Committee held a hearing entitled “Oversight of the Securities and Exchange Commission.” The witness in the hearing was Securities and Exchange Commission (SEC) Chairman Paul Atkins, with his testimony here.
Below is a summary of the hearing prepared by Delta Strategy Group, which includes several high-level takeaways, followed by summaries of opening statements and discussion.
Key Takeaways
- Chairman Hill (R-AR) emphasized that the Securities and Exchange Commission’s (SEC’s) statutory mission is to protect investors, maintain fair and orderly markets, and facilitate capital formation. He framed how, during the prior administration, the Commission moved beyond its core mandates, imposing rulemakings that increased compliance burdens and contributed to reduced public market participation and regulatory uncertainty.
- Chairman Hill and Chairman Atkins underscored the importance of establishing a durable digital asset market structure framework. Chairman Hill noted that he looks forward to sending a market-structure bill to the President’s desk in 2026 to provide regulatory clarity, protect investors, and promote innovation.
- Several Republican members commended Chairman Atkins for strengthening coordination with the Commodity Futures Trading Commission (CFTC) and advancing harmonization efforts, emphasizing that clearer jurisdictional boundaries and interagency cooperation are critical to delivering durable digital asset market structure.
- Members on both sides of the aisle discussed the proposed innovation exemption, with Chairman Atkins explaining that it would be time-limited, incorporate investor protections, and allow responsible experimentation within defined guardrails.
- Congressmen Loudermilk (R-GA) and Meuser (R-PA) raised concerns about the Consolidated Audit Trail’s (CAT’s) constitutionality, data privacy risks, and escalating costs. Chairman Atkins said the SEC is conducting a comprehensive review aimed at reducing costs, improving efficiency, and ensuring the system complies with constitutional standards. He stated that the Commission is working to bring costs below $100 million and evaluate the scope of collected data.
- Chairman Atkins emphasized that data security remains a high priority and reiterated his focus on ensuring disclosures are tailored and material, while conducting retrospective rule reviews to eliminate requirements that are outdated or unnecessarily burdensome.
- Congressman Lucas (R-OK) discussed how market participants need a sufficient runway to execute changes in the cross-margining Treasury clearing rule and urged the SEC to coordinate with the Senate Banking Committee on capital rules that reflect the risk-reducing benefits of netting. Chairman Atkins agreed that this coordination is important for the market.
- Several Democratic Representatives expressed concerns about how the SEC has not prioritized investor protection and is lacking in enforcement, citing the dismissal of cases against crypto actors such as Binance, CZ, and Justin Sun, as well as the broader withdrawal of lawsuits against crypto companies.
SUMMARY
Opening Statements and Testimony
Committee Chairman Hill (R-AR)
During the Biden administration, the SEC strayed from its mandates. Instead of focusing on its core mission, the Commission pivoted towards politicized rulemakings that stretched far beyond the bounds of those core statutory mandates to embed political and social objectives into securities regulation, all at the expense of American investors and small business owners. The consequences of these policies speak for themselves, and coupled with crushing compliance burdens, they accelerated the shrinking of our public markets. Cutting-edge innovation was driven offshore by regulatory uncertainty. It is imperative that Congress provide a functional and durable framework for digital assets. We look forward to sending a market structure bill to the President’s desk in 2026. Our shared goal is straightforward: a marketplace where investors have the information and protections that they need to participate with confidence and where American businesses can access capital to innovate, expand, and create new opportunities for both jobs and investment.
Ranking Member Waters (D-CA)
The SEC under Chairman Atkins is yet to investigate a single instance of the potential large-scale fraud and market abuse being carried out by this administration and its allies. The SEC is supposed to be an independent agency, free from political influence. Today, the SEC does not have a single Democratic Commissioner. The SEC is not making policy in an open, bipartisan manner without the usual public notice-and-comment period. It is clear that the federal government no longer functions for the people, by the people, it functions for Trump. By not enforcing the rule of law against the President and his friends, we are openly engaged in grift and corruption.
Subcommittee on Capital Markets Chairman Wagner (R-MO)
The new, pro-growth agenda will make it easier for companies to go public, increase investor opportunities and support innovation and entrepreneurship throughout the U.S. My bipartisan INVEST Act will cement that work. We are giving Americans more investment options, small businesses the ability to expand, and getting big government out of Main Street’s way. Our bipartisan reforms in the INVEST Act and the SEC’s regulatory reforms could not be more aligned.
Subcommittee on Capital Markets Ranking Member Sherman (D-CA)
A lot of people are concerned about the reduction of enforcement staff at the SEC because people are concerned about honesty in our capital markets and the role they play in the economy.
SEC Chairman Atkins
I support Congressional efforts to enact the Digital Asset Market Structure Clarity (CLARITY) Act. A federal framework for crypto markets is long overdue. The Commission stands ready to implement this landmark legislation. A federal framework for crypto markets is long overdue. Under Commissioner Hester Peirce’s leadership of our Crypto Task Force, SEC staff has provided more clarity in the past year than in the prior decade, but there is no action we can take that future-proofs our rulebook more formidably than nonpartisan market structure legislation. CFTC Chairman Mike Selig and I intend to provide a bridge toward legislation. Through our new joint Project Crypto, we will consider a token taxonomy to offer both investors and innovators a clear understanding of their regulatory obligations. We will also look to consider exemptions that would allow market participants to move and transact on chain. As we modernize oversight for digital assets, we must also reassess whether our legacy tools for traditional markets remain appropriately aligned with regulatory needs and the public interest.
I have directed SEC staff to conduct a comprehensive review of the CAT, which will consider, among other things, issues related to governance, funding, potential cost-savings measures, design, functionality, scope, regulatory use, and security. The Commission has also recently approved amendments to the CAT National Market System (NMS) Plan with respect to the Customer and Account Information System that self-regulatory organizations (SROs) state would result in approximately $7-9 million in cost savings annually. In addition, the SROs recently proposed further amendments to the CAT NMS Plan to implement certain measures that would further reduce costs significantly. Those cost reductions reflect the SEC’s broader commitment to disciplined oversight across our regulatory ecosystem.
Capital markets thrive on many factors, but they endure based on the trust of those who participate in them. To fulfill that charge, the SEC is returning its enforcement program to first principles of rooting out fraud and remedying investor harm. We have brought enforcement actions to address offering frauds, insider trading, accounting and financial frauds, and breaches of fiduciary duty by investment advisers. Markets are global, and investor protection must be as well. The SEC is returning to a core mission that remains as vital today as it was when Congress first set it for us over ninety years ago.
DISCUSSION
Ranking Member Waters (D-CA): Your Commission has been lax on policing crypto fraud. Does that extend to fraud in the crypto market? Atkins: Whatever involves securities. That is our job to investigate fraud involving securities, wherever it may be.
Congressman Huizenga (R-MI): In the last administration, the SEC and CFTC fined dozens of firms billions of dollars for failure to keep records of channel communications. Do you have plans to propose updated, common-sense record-keeping rules that would give firms clear and reasonable guidance on what records they need to keep? Atkins: We are working on that.
Congresswoman Velazquez (D-NY): Since taking office, the SEC has pulled back from sixty percent of cases against the crypto industry. Of the crypto cases the SEC has dropped, are you saying none of them have to do with the $1.2 billion the President and his family have made from the crypto industry since taking office? Atkins: Most of those were withdrawn or changed before I arrived. What we are trying to do is realign what hopefully will be the market structure statute. Most of them have to do with registration, Section 5 under the Securities Act of 1933. The SEC has a mixed record in court regarding those cases. I was not involved in many of those decisions, but I cannot imagine my colleagues would have been swayed by that.
Congressman Lucas (R-OK): Under your leadership, the SEC has approved two more clearing agencies to offer Treasury clearing. The SEC requested comments on a proposed change to extend an existing cross-margining agreement to end-users in order to reduce costs and make clearing more efficient. Is the SEC incorporating feedback from market participants, and what still needs to be addressed to ensure there are no disruptions to the Treasury market at the end of the year? Can we expect a resolution to the proposal well before the clearing rule goes live? Atkins: We are working closely with Treasury and with the industry to ensure that as this goes forward, there will not be hiccups and that it goes smoothly. We want to make sure things go smoothly, there are no hiccups, and people have plenty of notice and ability to gear up for those changes.
Congressman Lucas: Will you ensure that the Commission seeks broad and diverse stakeholder input through a notice and comment period to mitigate unintended consequences of the potential innovation exemptions? Atkins: The notice-and-comment period is important, but the innovation exemption I have been discussing would be time-limited and anchored in strong investor protections. We would police that carefully.
Congressman Sherman (D-CA): Would two Democratic Commissioners for the SEC make the agency better? Atkins: I leave that to the President and the Senate. I have been at the SEC for thirty-five years, and have seen it work well with five Commissioners, but also when Arthur Levitt and Steve Wallman were the only Commissioners. The work gets done, but it is good to have a lot of input. I would be happy to work with whoever gets sent our way.
Congressman Sherman: Congressman Scott (D-GA) has a bill that I and others have joined, the SEC Data Protection Act. Will you review the bill and the SEC’s data security, and develop a program that reflects the need to keep that data secure? Atkins: Yes, that is a big priority after the mishaps that have happened in the past.
Congressman Loudermilk (R-GA): My concerns with the CAT are first and foremost that it is unconstitutional in the way it is being operated. You announced in September that the SEC was doing a comprehensive review of the CAT. Can you comment on that and what you are finding? Atkins: That is an active matter, and we are looking into it. We are working with various stakeholders in the industry to try to get the situation under control. It has grown topsy as far as it costs, and we are out to get that under control, and make sure it is gathering information that comports with the Constitution. I called all the heads of the CAT Committee to say that we need to get the cost under $100 million and justify all the information we are collecting. I have been working internally with SEC staff on our enforcement and investigation staff. Some things have gone away, like blue sheets, so we would make sure whatever replaces those aspects makes sense and is efficient while comporting to all the points you have made.
Congressman Steil (R-WI): The House passed the CLARITY Act to provide a framework in the digital asset space to do two important things, protect consumers and make sure the U.S. is a global leader. Could you give some additional clarity as to how the MOU with the CFTC is working, and how you are operating with the CFTC, particularly as it applies to the digital asset space? Atkins: That is a space that is near and dear to my heart. President Trump appointed Chairman Selig, who came from my office and was Chief Counsel for the Crypto-Task Force, so he is well-positioned to do what he is doing at the CFTC. Our intent is to harmonize activities between the two agencies, particularly with digital assets. That is why we are hoping for a good statute to be enacted from all the discussions here in Congress. As far as the two agencies working together, we are actively working on an MOU. It is kind of silly to think that two agencies that are serving the taxpayer must have an MOU between them to work together.
Congressman Steil: Can you provide clarity on where you are on token taxonomy? Atkins: I have outlined how I believe the two agencies will march ahead to bring clarity to this area. It will be consistent with the CLARITY Act that passed in the House, and hopefully, what will come out of the joint work that you are doing in the Senate. We will carry that forward, and it will help give certainty as to where the jurisdiction of the two agencies is. If we marry that with a super app where we will have recognition of substituted compliance between the two agencies, I think that will be best.
Congressman Barr (R-KY): How does durable digital asset market structure legislation impact the U.S. ability to lead in financial market innovation and protect investors? Atkins: The President has set out the challenge to be the crypto capital of the world. I feel strongly that we can and should do that. To achieve that, we need a framework that is fit for purpose. Unfortunately, traditional rules that the SEC has are not fit for purpose here and have created a lot of uncertainty in the marketplace. Thus, the CLARITY Act, and thus the true importance of the SEC working hand in glove with the CFTC to ensure there are no gaps in oversight, but also innovators have assurance in what they are doing and are not going to be in a “gotcha” situation that has happened in the past with some of the enforcement actions the SEC has brought. We want to make sure people know the rules of the road and can abide by it and that those will foster innovation here in the U.S.
Congressman Barr: How do you ensure SEC enforcement actions and investigations are conducted and completed in the most timely and expedited way possible as well as driven by clear statutory and evidentiary standards, not by political, ideological, or personal considerations? Atkins: I have a good, tough head of enforcement. She has been looking at the aging of the enforcement inventory we have, and I started to when I became Chairman. We are focused on that, and it is very important. Reputational risk and all that to people who go through investigations plus the cost is important, so we take that very seriously.
Congressman Foster (D-IL): Is there any interagency discussion of trying to standardize the release of market-making information, and potentially making it more robust? Atkins: That is a very important issue.
Congresswoman Kim (R-CA): Can you provide an update on the efforts to unlock tokenization and the benefits that tokenization promises to bring to U.S. capital markets? Atkins: Yes, I think tokenization is an important innovation that is coming about in tokenized securities that can be traded on-chain. I think it has future benefits from the transparency that distributed ledger technology (DLT) brings to the issue. The prospect for T+0 sort of payment versus a delivery type regime on-chain. That can help de-risk the financial services industry a lot. We want to encourage that and then have rules around this that protect investors, issuers, and other stakeholders in this effort.
Congresswoman Kim: How is the Commission approaching the innovation exemption, and is there a timeline to issue that exemption? Atkins: We are planning to do that this year and hoping that Congress will adopt the CLARITY Act, or however something lands on the President’s desk. We are working at pace, and this innovation exemption will be a good water shed.
Congresswoman Kim: How does the Commission plan to utilize the industry feedback it has collected on topics such as tokenization? Atkins: We have done a number of roundtables and have received a lot of commentary coming in from all sorts of stakeholders in and around the digital assets industry. We are distilling and using that to help refine what will come out with respect to the innovation exemption.
Congresswoman Kim: As you review Form PF, will the Commission consider a new rulemaking to return Form PF to its original FSOC-focused purpose? Atkins: Absolutely, it is a joint rulemaking with the CFTC, and we have also been working with the Federal Reserve (Fed) and Treasury in this regard.
Congressman Timmons (R-SC): What is your approach to recalibrating rules that may have gone too far? Atkins: We are undertaking the review of all our rules across our Divisions.
Congressman Timmons: Can you share how the Commission is thinking about potential changes to the public company reporting framework, including possible approaches to reducing short-term reporting burdens? Atkins: I announced that we were looking at that. This debate has been going on for decades. We want to hear comments from people about what is best. We are considering doing this for small businesses as well.
Congressman Gottheimer (D-NJ): Can you explain the timeline and the scope of the innovation exemption and how you are building consumer protections into it? Atkins: Fraud is fraud, whether it happens in the crypto world or in paper certificates. We take that very seriously and it is a detriment to investor confidence. We are active in that area. With respect to the innovation exemption, the goal is to make it a cabin limited type of exemption but to allow innovators to operate within those limits and under supervision.
Congressman Gottheimer: Would you agree that market-making activities of tokenized securities should be treated in a similar manner to traditional market-making activity? Atkins: Those are the big issues of how to adjust the rules to deal with a new reality. We are looking at that in our trading and markets area, having roundtables in this regard, and working with the CFTC as well.
Congress Gottheimer: Can you discuss some of the challenges that market makers in digital asset markets face when navigating across conflicting regulatory frameworks? Atkins: I like to use the analogy of the SEC and CFTC as two fortresses with a no-man’s land in the middle. Traditionally, that no man’s land is littered with products that could never make it through that gauntlet. We are out to change that and work in harmony.
Congressman Davidson (R-OH): From your perspective, what should the distinction be between digital assets, tokenized real-world assets (RWAs), and tokenized securities? Atkins: Ultimately, the answer is harmony between the SEC and CFTC, so that no one is unsure about where to go. That has been a problem for a long time. If we focus on tokenized securities through investment contracts and that analysis but also concede that we have digital commodities and other digital tokens that are clearly in the CFTC realm, I think that will help bring clarity. The CLARITY Act takes great steps towards that, and then the two agencies working in harmony can help.
Congressman Rose (R-TN): Given that it is a new day at the SEC, what is your enforcement philosophy in returning the SEC to its core mission? Atkins: We are focused on going back to the basics. As in our mission, it is to build fair, orderly, and efficient markets, investor protection, and capital formation. We are calibrating our enforcement efforts to that, so that there are no more “gotcha” situations, and no regulation through enforcement. We are focused on going about our rulemaking to have a notice and comment period, and regular order is to be returned. With respect to enforcement, I take the investor protection mandate very seriously and combatting fraud very seriously. Not chasing numbers and not chasing things that are not at our mission core.
Congressman Torres (D-NY): Have you taken enforcement action on any actor in the crypto industry? Atkins: Yes, we have brought cases for outright fraud, and we are litigating some of those right now.
Congressman Torres: I believe tokenization has the potential to create a better, faster, and cheaper financial system, and hopefully a greater democratization of finance. How do we pursue innovation that disrupts traditional securities without destabilizing the traditional securities regime that has served our country reasonably well for ninety years? Do you have a timeline for the tokenization of securities? Atkins: I agree with you very much, that is why we are going to do this very deliberately and will make sure issuers have insight into where their securities are and what tokenized securities are and will be treated as such. We need to adjust the rules where we have to, to ensure there is integrity and trust in the markets and to make sure the national market system is upheld. It will be unfolding in the next few years. What we do now will be critical to ensure it is done deliberately and in good order. I think it might be better for it because you will know where securities are, and I think there will be more accountability and transparency.
Congressman Stutzman (R-IN): Do you have a timeline on when any rulemaking on Form PF will be finalized? Atkins: Yes, we extended the deadline for compliance with the action that was taken a few years ago. We are working actively with the CFTC on a joint rulemaking.
Congressman Flood (R-NE): From an investor protection and market integrity standpoint, does the Commission have concerns about potential intersections between litigation finance and trading activity? Atkins: I have trouble with that, and I know there are ethical issues that have presented themselves over time. It bears some attention and is an issue worth addressing.
Congressman Meuser (R-PA): Many Republicans have concerns over the scope of the data collection and privacy risks CAT holds as such a large centralized system collecting this data. Does the SEC believe it has or should seek the authority to reimburse the industry mandate to fund the CAT or eliminate the system altogether? Atkins: We are actively working with members of the CAT Committee to try to right-size it. We have several issues that need to be addressed, and we are working on them.
Congressman Meuser: How have you achieved success this year with making IPOs great again? Atkins: The change of tone and telling people that we are out to make it attractive again to be public, and that we are serious about upholding the SEC’s three pillars.