SENATE APPROPRIATIONS COMMITTEE SUBCOMMITTEE ON FINANCIAL SERVICES & GENERAL GOVERNMENT
On June 3, the Senate Appropriations Committee Subcommittee on Financial Services and General Government held a hearing entitled “A Review of the President’s Fiscal Year 2026 Budget Request for the Securities and Exchange Commission (SEC).” SEC Chairman Paul Atkins was the witness, with his opening statement available here.
Key Takeaways
- Subcommittee Chairman Hagerty (R-TN) highlighted the SEC’s role in preserving market integrity and ensuring U.S. capital markets as a source of competitive advantage and market innovation, but that it must do so without stifling innovation or unduly burdening investors with excessive compliance costs. He noted how the SEC’s request for approximately $2.2 billion in appropriated funding for 2026 supports its single appropriations account of salaries and expenses, which has remained relatively flat since 2023.
- Subcommittee Chairman Hagerty stated that while enforcement is a necessary tool, it must be used responsibly. He criticized past SEC Chairman for aggressively pursuing unrelated social or political goals with little bearing on fiduciary duty. He called for consideration of the benefits of prudent regulations against the economic burden imposed, emphasizing that it is incumbent on the SEC to ensure that the regulatory environment supports growth, investment, and financial resilience.
- Subcommittee Chairman Hagerty supported exploring the SEC’s evolving role in digital assets and criticized the prior administration’s approach as a regime of regulation by enforcement that chilled and offshored U.S. innovation. He commended Chairman Atkins for providing regulatory clarity for digital assets, referencing support for the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, and anticipated action on digital asset market structure. Chairman Atkins said that the GENIUS Act would provide market protections and produce a regulatory foundation, noting stablecoins for payments as a primary digital assets use case.
- On whether the SEC needs any new statutory authorities to regulate crypto, Chairman Atkins stated authority would be better undergirded by statute and a firm foundation in current law, but the SEC has enough authority under securities laws in the meantime.
- Chairman Atkins outlined his priorities to develop a rational regulatory framework for crypto assets and markets as well as quickly establish clear rules of the road for the issuance, custody, and trading of crypto assets, while continuing to discourage bad actors. He emphasized the need for clear rules of the road, with policymaking to be done through notice-and-comment rulemaking, not through regulation by enforcement. He warned that innovation, and subsequent regulation, cannot occur in a vacuum, otherwise risking offshoring innovative products and domestic investment due to a lack of regulatory certainty.
- Subcommittee Chairman Hagerty noted that, although the SEC is funded through appropriations, its costs are offset by transaction fees, approximately $20 billion over the past decade, which are ultimately borne by investors and should be considered a form of taxation. Subcommittee Chairman Hagerty discussed how E.U. adoption of the corporate sustainability due diligence directive (CSDDD) imposes extraterritorial regulation on U.S. companies, citing his introduction of the Prevent Regulatory Overreach from Turning Essential Companies into Targets (PROTECT) USA Act of 2025. Chairman Atkins responded noting his concerns about the extraterritorial impact of certain foreign rules, with some directives, such as those involving third-party litigation rights, as a threat to U.S. manufacturers and suppliers. He committed to taking steps with international counterparts to convey these concerns and push back on effects on the U.S.
- Chairman Atkins supported the request of $2.149 billion for the SEC operations, with a focus on returning to the SEC’s core mission set by Congress, as well as resource needs for the Crypto Task Force. He noted that the budget level is flat as compared to enacted funding levels for FYs for 2024 and 2025.
- Chairman Atkins discussed how the SEC will use its existing authorities to set fit-for-purpose standards for market participants, returning rulemaking and enforcement to regular order and congressional intent. He referenced that comment periods will not be artificially short and allow ample time to provide public feedback. He emphasized SEC consideration of how rules overlap and regulatory burdens build, with an obligation to consider costs and benefits.
- Chairman Atkins stated there will be targeted and common-sense reorganizations to come, starting with approval from Congress to disband the Strategic Hub for Innovation and Financial Technology (FinHub) and integrate its purpose through the SEC. He explained that innovation should be ingrained across the Commission and not limited to a relatively small office, with the SEC also reviewing technology infrastructure and contractual obligations.
- Subcommittee Ranking Member Reed (D-RI) cited concerns that the SEC is disarming itself as he called for Chairman Atkins to reaffirm its independence and integrity. He and Senator Coons cited concerns over fifteen percent staff losses across the agency and proposed budget cuts, with an eleven percent reduction in the Division of Corporate Finance, fifteen percent reduction in Enforcement, and rapid brain drain regardless of volition. In questioning whether the budget request provides sufficient resources and the presence of outside and undue influence, he stated that a previously underfunded SEC and eager industry failed to detect and address market concerns.
- Senator Coons questioned how to ensure the same rigorous standards are applied to traditional banks and investment regarding crypto exchanges being permitted to offer more traditional products like stocks and bonds. He referenced concerns of traditional industry facing direct competition from a financial sector that is lightly regulated or not at all. He supported the SEC’s Crypto Task Force recognizing the value of innovation, and ensuring the U.S. remains on the cutting edge of innovation and financial services.
- Senator Van Hollen (D-MD) questioned Chairman Atkins on the proposed folding of the Public Company Accounting Oversight Board (PCAOB) into the SEC under the House reconciliation bill, raising concerns about diminished oversight capabilities in “auditing the auditors.” He noted the SEC lacks staff experienced in auditing public accounting firms and pointed out a $300 million funding gap, as the PCAOB’s $400 million budget would not be matched by the SEC’s available $100 million. He also flagged that elimination of the PCAOB’s fee-based funding authority could disrupt international audit agreements based on the PCAOB’s independent status.
- Chairman Atkins noted that the SEC does not currently perform in-depth inspections of registered public accounting firms but could with sufficient funding and absorption of PCAOB staff, committing to request resources from Congress if necessitated by integration.