The new SEC Chairman Paul Atkins plans to introduce a regulatory easing for crypto companies by the end of 2025: a so-called “Innovation Exemption,” designed to allow firms to launch new products more quickly while being subject to less stringent regulation.
The planned Innovation Exemption is intended to partially suspend traditional regulatory requirements and instead rely on principles-based regulation, so as not to stifle innovation. Atkins sees it as a tool to integrate digital assets into the US market more rapidly. However, details such as scope of application and security requirements remain open. In parallel, Atkins is pursuing a broader deregulation agenda – for example, abolishing the requirement for quarterly reports for listed companies – showing that the Innovation Exemption is part of a broader reform course.
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What is the Innovation Exemption?
The Innovation Exemption is a proposed rule change allowing crypto companies to introduce products that do not clearly fall under existing regulations. Instead of rigid, prescriptive rules, they would operate under certain conditions that respect the core objectives of securities law – such as transparency and investor protection.
Atkins has stated that current requirements for crypto products are often too rigid and stifle innovation. He emphasizes that the new system is not meant to provide a free pass for unregulated activities but that core obligations such as disclosure and transparency will remain in place.
In a joint statement with the CFTC on September 5, 2025, it was officially reaffirmed for the first time that both agencies are considering “Innovation Exemptions” to create safe harbors for peer-to-peer trading, DeFi protocols, and new products such as perpetual contracts. Atkins and Pham stressed that a lack of coordination between regulators had hindered innovation in the past – now the aim is to establish a harmonized framework that ensures both market integrity and competitiveness.
“We confirm that both agencies are prepared to examine so-called ‘Innovation Exemptions’ to create safe harbors or exemptions that allow market participants to conduct peer-to-peer trading in spot crypto assets – including leveraged or margined products as well as derivatives such as perpetual contracts – via DeFi protocols.” - Source: SEC – Joint Statement, September 5, 2025
Opportunities and risks for the crypto sector
The exemption could allow faster product launches and more room for experimentation, fostering innovation and competition. Startups and novel protocols in particular could benefit without being stifled by regulatory hurdles from the outset.
But easing regulations also carries risks: if rules are too generous, fraud, project failure, or a lack of transparency could increase. There is also the danger of legal uncertainty – for example, if a future SEC leadership interprets the exemptions more strictly in retrospect. Moreover, the strong political dependence of this exemption could pose a risk for companies.
Another important aspect is the international comparison: while the EU has already introduced a comprehensive framework with MiCAR and countries like Singapore are using targeted innovation sandboxes, the SEC wants to use the Innovation Exemption to prevent the US from falling behind in the global race for crypto innovation. If the model proves successful, it could serve as a blueprint for other financial markets – or increase pressure to create similarly flexible regulatory approaches worldwide.
