SEC Cryptocurrency Regulation Shift: From "Gray No-Fly Zone" to Infrastructure Development Era

On May 7, 2026, at the Miami Consensus Conference, Nasdaq President Tal Cohen used a striking analogy: “Four years ago, the gray area was equivalent to a no-fly zone. Now, the gray area is a region we can build in — we can scale, experiment, and perhaps face no backlash.” This statement refers to the near-complete regulatory shift by the U.S. Securities and Exchange Commission (SEC) under the leadership of Paul Atkins.

What does the shift from “enforcement-oriented” to “framework-oriented” regulation by the SEC mean?

The personnel change in the SEC chair position has played a decisive role in this regulatory overhaul. Under Gary Gensler’s tenure, the SEC used the “Howey Test” as its core tool for identifying the securities nature of crypto assets, pushing an agenda of “enforcement-driven regulation” through numerous enforcement actions. Data shows that in 2024 alone, the SEC initiated 33 crypto-related enforcement actions, with fines totaling nearly $4.7 billion. However, this strategy has not led to a regulatory boom of compliance but rather to high uncertainty — starting with major lawsuits against Ripple and Coinbase, industry players have generally been left guessing about regulatory boundaries, and many crypto products have effectively been excluded from the U.S. market as target customers.

After Paul Atkins officially took office in April 2025, the SEC’s regulatory style underwent a structural shift. In its FY2025 enforcement report, the SEC unusually acknowledged that the $2.3 billion in fines from 95 crypto cases “did not find direct investor harm, did not generate investor benefits or protections,” and were in fact “a misallocation of the Commission’s resources and a bias toward case quantity.” Throughout 2025, the SEC’s crypto enforcement actions dropped to 13, about 60% less than the previous year. More importantly, the SEC’s crypto enforcement division — the Crypto Assets and Cyber Unit — was reorganized into the Cyber and Emerging Technologies Unit, with staff reduced from about 50 dedicated lawyers to around 30, shifting focus from “developing new legal theories” to “fraud detection.” These institutional adjustments send a clear and ongoing signal: the SEC no longer views crypto assets as inherently enforcement targets.

Why is the classification of tokens as securities a turning point for the U.S. crypto market?

On March 17, 2026, the SEC and CFTC jointly issued a 68-page guidance document, marking the first systematic qualitative assessment of the securities attributes of crypto assets from federal regulators. The document categorizes crypto assets into five types: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities, explicitly stating that the SEC’s jurisdiction applies only to the last — tokenized traditional securities. Bitcoin, Ethereum, Solana, and 13 other mainstream tokens are classified as “digital commodities,” primarily regulated by the CFTC. Cohen also pointed out at Consensus that projects previously stalled due to classification ambiguity, such as blockchain infrastructure projects, can now “build, scale, and experiment in the gray area without fear of crackdown.”

This classification system fundamentally alters the compliance framework for project teams and exchanges. SEC Chairman Atkins has repeatedly emphasized publicly, “We are no longer the ‘Securities and Exchange Commission for everything’.” The previous uncertainty costs — not knowing whether a token would be deemed a security or require SEC registration — have been significantly reduced legally. Meanwhile, the SEC is promoting an “innovation exemption” framework, providing experimental space for compliant on-chain trading of tokenized securities, allowing market participants to facilitate on-chain transactions within limited structures while buying time for long-term rulemaking. This indicates that U.S. crypto regulation is shifting from a passive “enforce first, classify later” model to an active “target first, regulate later” approach.

How can traditional financial infrastructure embrace innovation opportunities?

The clarification of regulatory boundaries directly opens the door for traditional financial institutions to massively deploy digital asset infrastructure. Nasdaq itself is a compelling example: on March 18, 2026, the SEC officially approved Nasdaq to allow ETFs tracking the Russell 1000 index and benchmarks like the S&P 500 and Nasdaq 100 to be traded in tokenized form, making it the first major U.S. exchange to receive such regulatory approval. Cohen disclosed during his speech that Nasdaq is strategically investing in “always-on” market infrastructure, tokenization, and AI, aiming to accelerate the integration of traditional finance channels with digital asset systems.

Cohen also pointed out that interoperability between traditional platforms and digital platforms remains the industry’s biggest obstacle, with clients “not wanting to maintain two separate infrastructures.” This insight reveals the core direction of this round of infrastructure innovation: not building a completely isolated crypto financial system from scratch, but creating hybrid infrastructure capable of supporting both traditional and digital assets. Nasdaq is testing AI-driven matching engine simulation systems for stress scenario modeling and supporting longer trading hours, which is both a technical preparation for extended trading sessions and a practical step toward integrating crypto infrastructure into mainstream market architecture. As more exchanges and clearinghouses move toward system integration in the same direction, barriers to market interoperability are expected to gradually diminish.

How will tokenized assets change the roles of market operators?

Tokenization itself is not a new concept, but its implementation is shifting from narrative to systemic infrastructure upgrades. Cohen’s view on tokenization is straightforward: “It really makes assets move.” “Moving” refers to a more liquid asset trading system: tokenization enables faster transfer, financing, and trading of assets, while providing issuers with more precise shareholder insights. Under current regulatory frameworks, tokenized securities are classified as “digital securities” — the only crypto asset category explicitly under SEC jurisdiction. This means that tokenized versions of traditional securities will operate within relatively clear compliance paths.

For market operators, roles are expanding from “trading venue providers” to “full-cycle asset managers.” Deep cooperation between Nasdaq and institutional-grade crypto infrastructure essentially involves integrating crypto asset trading and risk management tools into platforms used by traditional financial firms for risk, margin, and collateral management. This means crypto infrastructure is no longer an isolated “shadow system” but is designed as an integral part embedded within the core of the financial system. From liquidity management agencies to clearing and settlement systems, crypto assets are being incorporated into the operational standards of mature financial markets. Clarified regulatory frameworks are transforming this process from “marginal experimentation” into a “mainstream option.”

What uncertainties remain in the reshaping of market landscape?

Although SEC’s regulatory shift has released structural benefits for the market, several uncertainties still warrant ongoing attention. First, the collaboration between SEC and CFTC over jurisdiction needs further solidification. While the joint guidance initially delineates regulatory boundaries, the cross-category nature of digital assets — projects may evolve from “non-securities” to “securities” — means the switch mechanisms have not been extensively tested in practice. Project teams must remain vigilant to legal status changes. Second, internal consensus within the SEC is not complete. Some Democratic senators have already expressed concerns to Chairman Atkins about the SEC’s lenient policies, worried about the exemption of most crypto markets from securities law. The sustainability of the current regulatory framework remains to be further observed amid political cycles and legislative battles in Congress.

Additionally, frameworks like “innovation exemptions” are still in consultation and rulemaking stages, with their final form and implementation timing still flexible. Lastly, at the industry level, interoperability between traditional and digital platforms remains the biggest technical and institutional challenge. Cohen himself admits that integration will not be smooth. This implies that the reshaping of the market landscape will be a systemic effort spanning years or even longer, not something that can be achieved through short-term policy gains.

Summary

From Gensler’s enforcement-driven “pressure campaign” to Atkins’s leadership focusing on token classification, innovation exemptions, and cross-departmental collaboration, SEC’s regulatory philosophy is undergoing a profound reorientation. Clarifying the classification of tokens as securities clears compliance hurdles for infrastructure projects, while the systemic involvement of traditional financial institutions like Nasdaq accelerates the embedding of crypto assets into mainstream finance. Between 2025 and 2026, SEC crypto enforcement cases have decreased by about 60%, and the token classification framework has established clear paths for digital commodities and digital securities. The “innovation exemption” further provides a regulatory buffer for compliant on-chain trading of tokenized assets. These changes collectively point toward a more open yet long-term strategic market environment — for infrastructure providers, the significant reduction in regulatory uncertainty greatly enhances the business predictability of technological investments.

FAQ

Q1: What impact does the SEC’s classification of “digital commodities” and “digital securities” have on ordinary users?

“Digital commodities” (including mainstream tokens like Bitcoin and Ethereum) are primarily regulated by the CFTC, making compliance paths clearer for trading and holding related assets. “Digital securities” refer to tokenized versions of traditional stocks, bonds, and other financial assets, under SEC jurisdiction. Users participating in tokenized securities trading need to follow investor protection rules similar to traditional securities, but trading efficiency (such as settlement times and operational pathways) may improve due to tokenization.

Q2: What does Nasdaq’s approval to trade tokenized securities mean for the crypto industry?

It is the first major U.S. exchange approved by the SEC to conduct trading of tokenized securities. This signifies that tokenized assets are being integrated into compliant mainstream financial infrastructure, no longer viewed as experimental products outside regulation. It sets a regulatory precedent for other exchanges and financial institutions and builds a more direct bridge between traditional asset managers and crypto infrastructure.

Q3: Is the SEC’s regulatory framework already finalized?

Not entirely. The joint guidance from SEC and CFTC is still in the public comment phase, and specific frameworks like “innovation exemptions” are also under development. However, the overall direction is clear: shifting from a law enforcement-centric model to a rule-based, constructive approach. Future legislation in Congress may further formalize these rules.

Q4: How will interoperability issues between traditional and digital platforms affect the market?

Interoperability is currently the biggest technical barrier to integrating traditional finance with digital assets. Cohen pointed out that clients do not want to operate two separate infrastructures. If this obstacle is effectively addressed within the next 2–3 years, liquidity and accessibility of crypto assets will significantly increase, and traditional financial institutions will adopt these systems more rapidly.