INVEST Act passes in the House with momentum toward the Senate

Topline

• INVEST Act clears the House with strong bipartisan vote

• SEC Commissioner Crenshaw to depart SEC with words of caution for private markets

• White House EO aims to preempt state AI patchwork

• Quick hits

INVEST Act clears the House with strong bipartisan vote

The House of Representatives passed the INVEST Act this week with a decisive 302-123 vote. Despite a last minute progressive push, 87 Democrats joined Republicans to advance this legislative package that will broaden access to capital for more founders and fund managers across the country and provide more Americans the opportunity to benefit from growth and diversification in private markets.

Here’s why it matters to the innovation economy…

More capital. The INVEST Act will promote broader access to capital, particularly for founders and fund managers in underserved markets by:

• Enabling venture capital fund managers to invest more capital in other venture capital funds and portfolio company investments acquired through secondary transactions, driving more capital into emerging markets and helping unlock liquidity so capital can be recycled back into the ecosystem

• Expanding the size and investor limits for qualifying venture capital funds, helping emerging managers assemble competitive funds and reach a broader base of investors

• Raising the private fund exemption threshold and indexing it to inflation, ensuring smaller fund managers can continue to support small business capital formation without added regulatory burdens that come with SEC registration

• Making it easier for startups and small businesses to connect with investors by clarifying that demo days do not violate fundraising rules and increasing crowdfunding thresholds

More investment opportunities. The INVEST Act will enable more individuals to benefit from the growth and diversification benefits of private markets by:

• Modernizing the accredited investor standard by adding new on-ramps based on education, experience, or examinations, not just financial metrics

• Enabling retail investors to get exposure to private funds through SEC-registered funds, where investors benefit from diversification, fiduciary oversight, and institutional diligence  

• Permitting 403(b) retirement plans to invest in collective investment trusts (CITs) and insurance products available to other retirement savers, ensuring equal access to professionally managed investment opportunities 

More liquidity. Not only does the INVEST Act increase liquidity by allowing more VCs to participate in secondaries, it also contains provisions to make it easier for companies to IPO, lowering barriers and reducing costs for companies to enter and remain in the public markets.

This is not a drill: The INVEST Act is the most significant bipartisan capital formation package in Congress since the 2012 JOBS Act was passed over a decade ago. Unlike recent capital formation packages, this effort is bipartisan, which means there is a real shot at advancing these policies and getting them signed into law. The bipartisan House vote provides a strong foundation and positive momentum to move to the Senate, where Senate Banking Committee Chairman Tim Scott also plans to advance capital formation legislation after the committee advances a crypto market structure bill. 

Engagement matters: Carta and our Innovator Alliance partners have been working over the past year to educate, shape the contours, and engage the broader innovation community to build consensus. In advance of the floor consideration, Carta led a coalition of 27 organizations from across the country and across the ecosystem in support of the INVEST Act. To be clear, we do not get this result without this engagement, but we need to amplify it to push these important policies over the finish line in the Senate. And it will take the entire stakeholder community to make it happen. 

If you’d like to get involved, please reach out to policy@carta.com, visit the InnovatorAlliance.org, or connect with us on LinkedIn.

SEC Commissioner Crenshaw to depart SEC with words of caution for private markets

SEC Commissioner Caroline Crenshaw—the agency’s sole Democrat—is set to depart the agency when her term ends at the beginning of January, though she is not doing so quietly. In several appearances this week, Crenshaw outlined a series of concerns about the agency’s current direction and the implications for investor protection and market integrity. For private capital, here are the highlights:

• Growth of private markets: Crenshaw reiterated that the rapid growth of private markets—particularly private credit, venture capital, and large late-stage private companies—has outpaced existing oversight frameworks, and limited transparency on valuations, leverage, and interconnected risks could contribute to future instability. Crenshaw has advocated for imposing new disclosures on private issuers and strongly supported the SEC’s private fund adviser rules.

• Retail access to private markets: Given her broader concerns about private market opacity, Crenshaw also cautioned that the push to democratize access requires stronger guardrails. She stressed the need to ensure retail investors are not offered products they cannot fully assess or left at a disadvantage relative to larger, more sophisticated investors with access to more information and better investment opportunities.

• Data gaps and systemic risk monitoring: Crenshaw emphasized the need for more comprehensive data collection to help regulators understand linkages across funds, nonbank lenders, fintech platforms, and market infrastructure providers. Her concern: Regulators may be “flying blind” as private markets scale.

• AI governance: Crenshaw urged a more robust regulatory framework to manage model risk, bias, and the concentration of critical AI capabilities among a small number of firms.

Upon Crenshaw’s departure, the five-member commission will be left with three Republicans (Chairman Paul Atkins, Commissioner Hester Peirce, and Commissioner Mark Uyeda), and there is no signal that the White House intends to fill the Democratic vacancies any time soon (though movement on digital asset legislation could shift that calculus—more below).

Why it matters: As a minority commissioner, Crenshaw would not have been able to slow or stop the agenda, but she could influence the contours of the policy and serve as a counterweight during internal deliberations. Now, opposition will largely shift to the comment process, public sentiment, and the courts to attempt to shape SEC policy. And as Crenshaw noted, the Atkins SEC has leaned more heavily on staff guidance and interpretation to date rather than formal rulemakings, which has further limited opportunities to shape policy.

Bigger picture: The larger issue is the growing politicization of independent agencies and what this means for market participants having to navigate the resulting regulatory whiplash. The Supreme Court has signaled it is prepared to expand presidential influence over independent agencies, further raising the stakes. While the Commission’s current posture is focused on deregulation and modernization, Crenshaw’s concerns signal a roadmap of issues for a future Democratic majority to address, now with the political and legal cover to act more aggressively.

Engagement matters: This is why it is so important to build a sustainable framework based on industry best practices that can survive political shifts. Congress and the legislative process will become even more critical to providing certainty. That’s why the INVEST Act is so important: it modernizes key capital formation rules and creates a long-term foundation for expanding access to private markets that is rooted in statute if we are successful.

But even absent legislation, building consensus around best practices will be critical to providing stability and predictability for founders and fund managers across the innovation ecosystem.

White House issues EO aimed at preempting state AI patchwork

On Thursday, President Trump signed a sweeping executive order aimed at creating a unified federal approach to artificial intelligence policy and pushing back against the accelerating wave of state AI regulation. Framed around the need for the U.S. to lead the world in AI development, the EO asserts that innovation requires a minimally burdensome and consistent national standard, and the developing state patchwork of AI laws is creating fragmentation and compliance costs that hinder this goal. The eo directs agencies to take immediate steps toward preemption, including:

• Litigation mandate: The Attorney General must establish an AI Litigation Task Force responsible for challenging state AI laws that conflict with federal policy, including on grounds that they impermissibly regulate interstate commerce or violate the First Amendment.  

• Evaluation of onerous state laws: The Commerce Secretary must publish an evaluation that identifies state laws deemed overly burdensome or constitutionally suspect, including state laws requiring AI models to alter truthful outputs or comply with disclosure or safety requirements that conflict with federal objectives.

• Federal reporting and disclosure standard: The Federal Communications Commission (FCC) must initiate a proceeding to determine whether to adopt a federal reporting and disclosure standard for AI models that would expressly preempt conflicting state laws.

• Legislative recommendations: The administration must prepare legislative recommendations establishing a national AI framework that includes statutory preemption of conflicting state laws to send to Congress. 

Why it matters: In 2025, all 50 states introduced AI-related legislation, and 38 states enacted about 100 measures, ranging from model disclosure mandates to algorithmic audits and civil liability schemes. As we previously noted, the Trump Administration has a more permissive regulatory posture on AI and has pushed for congressional action to impose a moratorium on state AI laws, but the effort lacks sufficient support from both sides of the aisle. This EO attempts to move forward administratively, despite legal uncertainty over whether the president can unilaterally override state police powers without congressional directive.

What’s next: There are tight turnarounds for EO implementation. Constitutional challenges are almost guaranteed, as there is legal uncertainty over whether the president can unilaterally override state police powers without congressional directive. But if litigation does not halt efforts immediately, agencies will likely begin taking steps to implement the EO in accordance with its tight timelines.

Quick hits

• Crypto corner: Lots of action, so expect a deeper dive next week. But here are some highlights:

  • SEC grants DTC approval for tokenization pilot. SEC staff issued no-action relief that allows the Depository Trust Company (DTC) to support the settlement and asset serving of tokenized securities, so long as DTC maintains the authoritative recordkeeping function and the blockchain layer is used as a mirror or supplemental record. This significant step essentially clears the path for tokenized securities to plug directly into the existing market infrastructure, enabling large-scale, compliant adoption of blockchain-based settlement without requiring a new regulatory regime.

  • OCC permits banks to act as intermediaries in crypto-asset trades. The Office of the Comptroller of the Currency (OCC) confirmed national banks are permitted to engage in riskless principal crypto-asset transactions, which officially validates a pathway for banks to serve as intermediaries (similar to brokers) in cryptocurrency trades, enhancing regulatory clarity for integrating digital assets into traditional banking services.

  • Crypto market structure update. Senate Banking Committee Republicans and Democrats are trying to reach a deal on a digital asset market structure framework before the holiday recess. This week, Republicans proposed concessions that would ensure minority party appointments to the SEC and CFTC, while Democrats pushed for stronger protections to address illicit finance concerns and additional stablecoin guardrails. Progress is being made, but at this point, it looks like any markup will slip into January.

• Final NDAA includes outbound investment restrictions. The National Defense Authorization Act (NDAA) includes long-discussed language to restrict outbound investment from U.S. companies into China. This would prevent U.S. companies from investing in sectors of the Chinese economy that are important to the country’s military, intelligence and surveillance capabilities, including investments into artificial intelligence and semiconductors. U.S. investors, including venture capital and private equity, will also be required to disclose information about certain foreign transactions to the U.S. government. The House passed the negotiated version of the NDAA this week, with Senate passage expected next week.

• SEC chief accountant explores rule changes. The SEC’s Chief Accountant Kurt Hohl is evaluating changes related to audit inspections and conflict-of-interest rules with an eye toward modernizing oversight while considering cost and market implications. Hohl has also emphasized concerns that compliance costs and overly burdensome rules might deter companies from accessing the public markets, a theme aligned with the agency’s current focus on capital formation.

• FSOC pivots its focus. Treasury Secretary Scott Bessent, chair of the Financial Stability Oversight Council (FSOC), will shift FSOC’s focus away from post-crisis “prophylactic” risk management to boosting economic growth and alleviating the “undue burdens” of financial regulation. This signals a move toward deregulation, with new working groups forming on market resilience, household resilience, and AI, indicating an intent to accelerate the easing of key financial rules, such as bank capital requirements. 

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