SEC outlines policy priorities to boost VC ecosystem

Topline

• SEC & CFTC leadership discuss agency priorities and partnership

• SEC Investor Advisory Committee discusses tokenization recommendations

• CFTC prediction market guidance kicks off formal rulemaking

• Congress poised to reauthorize SBIR/STTR this week 

• Quick hits

• Upcoming events

SEC & CFTC leadership discuss agency priorities and partnership

Last week, SEC Chairman Paul Atkins and CFTC Chairman Michael Selig announced agency harmonization as a central priority, formalizing their vision in a new Memorandum of Understanding (MOU). The MOU is backed by a Joint Harmonization Initiative—the structural vehicle for both chairs’ vision of a regulatory “super-app” where one agency’s oversight satisfies the other’s wherever they overlap.

The duo also appeared on the All-In Podcast, where both chairs covered their mutual and respective agency priorities. Here are the highlights:

• VC fund formation. While many constraints like investor limits are set in statute, the SEC is exploring how to use its existing authority to lower barriers and expand access to capital for venture funds. [Carta Policy view: passing the INVEST Act would provide statutory authority and clear congressional directive to modernize outdated VC rules that would bolster and broaden this critical engine of innovation.]

• Expanding private market access. Rules modernizing the accredited investor standard are coming this year, including sophistication-based on-ramps based on education, credentials, or demonstrated investment knowledge. There are active workstreams to increase private fund exposure through retirement accounts—with guardrails.

• Fixing IPOs. Atkins called for a “spring cleaning” of IPO disincentives: compliance costs untethered from materiality, litigation exposure, and the weaponization of shareholder proposals.

• Innovation going offshore. Selig’s top concern is regulatory uncertainty driving crypto firms, AI developers, and prediction market operators offshore, underscoring the need for clearer, more coordinated federal frameworks to keep innovation and capital formation in the U.S.

• Crypto classification. Atkins drew a line: tokenized securities stay under SEC jurisdiction, while certain digital assets that function as commodities or network tools fall within the CFTC’s remit. Selig emphasized a functional distinction between the fundraising transaction and the underlying asset: a token used to raise capital may trigger scrutiny, not the token itself. The SEC regulates the offering, not necessarily the asset, an approach that is shaping how policymakers think about crypto market structure.

Why it matters: Regulatory alignment is becoming a core policy lever to unlock capital formation and keep innovation onshore. The SEC–CFTC partnership signals a shift toward a more coordinated, interoperable regulatory framework that reduces duplicative oversight while modernizing rules across private markets, IPOs, and digital assets. For market participants, the implication is clear: less jurisdictional friction, clearer rules of the road, and a policy environment increasingly focused on enabling capital formation and driving innovation.

SEC Investor Advisory Committee discusses tokenization recommendations

The SEC’s Investor Advisory Committee (IAC) met last week to discuss Reg S-K disclosure reform and fund proxy voting, and recommendations on the tokenization of equity securities. The latter topic drew the most attention, given the Commission’s focus on providing regulatory clarity for crypto markets and its forthcoming innovation exemption, which will facilitate limited trading of tokenized securities.

The IAC voted to approve the recommendations, which define tokenized equity securities as crypto assets meeting the definition of an equity security under current federal securities law. Rather than endorsing a blanket exemption from existing rules, the IAC advised a targeted, rule-by-rule approach subject to public notice and comment, organized around three principles:

• Mandatory disclosures: Issuers of tokenized equity securities must clearly document investors’ ownership rights—including voting rights, dividend entitlements, and treatment in corporate actions like mergers and bankruptcies—publicly filed on EDGAR and the issuer’s website.

• Intermediary oversight: Any entity issuing, trading, or settling tokenized equities must remain subject to SEC, state, and/or FINRA regulation, preserving KYC requirements and preventing fully anonymous trading that could compromise enforcement and raise national security concerns.

• Best execution protections: Tokenized equity trading must preserve existing market structure safeguards, including order protection, fair access, and the duty of best execution, to ensure retail investors receive the best available terms.

Why it matters: The recommendations are not necessarily misaligned with SEC leadership, but highlight a growing tension as to the approach. Chairman Paul Atkins has signaled an openness to innovation exemptions or pilot frameworks to enable controlled experimentation with new trading and settlement technologies, which could support faster settlement, reduced counterparty risk, and improved shareholder transparency. The IAC’s preferred approach is more cautious: it acknowledges the potential of tokenization so long as the decentralized trading infrastructure does not come at the expense of the market safeguards on which retail investors depend. While IAC recommendations are not binding on the SEC, they will have an ally in traditional market infrastructure players, who are also pushing for a public comment process.

What’s next: The SEC is actively working on an innovation exemption, which is expected in the coming weeks. But it is likely to be narrower in scope than the blanket exemption that the IAC cautioned against, as noted by Commissioner Hester Peirce. While the specific conditions remain under development, the potential framework could include whitelisted participants, volume limits, and temporary relief from certain rules. Atkins has framed the innovation exemption as a bridge, which could lead to new rules and amendments down the road.

CFTC prediction market guidance kicks off formal rulemaking

The CFTC issued new guidance for prediction markets, encouraging Designated Contract Markets (DCMs) to engage with regulators early when launching event contracts that may be vulnerable to manipulation or insider trading. Under existing rules, DCMs may self-certify contracts so long as they are not readily susceptible to manipulation. That framework remains in place, but the CFTC is now clearly signaling heightened expectations around contract design and pre-listing engagement, particularly for event contracts tied to discrete or easily influenced outcomes, such as those involving small groups, individuals, or sports events. The move reflects growing regulatory pressure as the market scales and jurisdictional tensions with states intensify, with policymakers focused on risks tied to market integrity and contracts linked to real-world events.

At the same time, the agency launched an Advance Notice of Proposed Rulemaking, seeking public input on how existing rules should evolve to govern prediction markets. The feedback will shape future formal proposals and ultimately define the scope and structure of this rapidly growing market.

Why it matters: Prediction markets have evolved into a multi-billion-dollar industry, but regulatory infrastructure has lagged. DCM applications more than doubled this past year, fueled by sports-focused and retail-facing platforms. This growth has sparked jurisdictional battles with state regulators, who argue these contracts constitute gambling under state law. CFTC Chairman Selig has been clear in asserting federal authority over derivatives markets, setting up a broader debate around federal preemption and the boundaries between financial contracts and gaming.

What to watch: The ANPR seeks input on how to interpret the CFTC’s statutory authority to prohibit certain contracts, particularly those involving “gaming” or activities contrary to the public interest. How the agency defines that category will be central to determining which types of prediction market contracts can be listed going forward. The outcome has two key implications:

• Product scope. A narrower interpretation could limit contracts tied to sports, elections, or other real-world events; a broader interpretation could allow these markets to scale under federal oversight.

• Regulatory perimeter. Ongoing litigation around federal preemption of state gambling laws will shape whether prediction markets operate under a unified federal regime or continue to face fragmented state-level challenges.

For platform operators, exchanges, and their investors, proactive engagement with the CFTC on contract design, disclosures, and market integrity safeguards will be critical to bringing products to market.

Congress poised to reauthorize SBIR/STTR this week

The House is expected to approve the Small Business Innovation and Economic Security Act, a five-year reauthorization of the SBIR/STTR programs, which would send the bill to the President’s desk. The bill introduces a new “Strategic Breakthrough” funding path worth up to $30 million with required matching funds, strengthens foreign-risk screening against Chinese influence, and replaces proposed lifetime caps with annual proposal-submission limits starting in FY2027.

Why it matters: The vote ends a nearly six-month stalemate that left federal agencies and the $6 billion R&D pipeline in limbo. Known as “America’s seed fund,” the SBIR/STTR programs are a critical non-dilutive capital source for early-stage startups and defense tech. The lapse disrupted research pipelines and capital planning for small firms and universities. Passage would bring a meaningful shift that preserves growth pathways for startups and emerging companies that depend on the programs as a critical early-stage source of capital while addressing concerns about program concentration.

Carta played a role in ensuring this critical program was reauthorized. We worked with ecosystem partners and testified before Congress about its impact on expanding access to capital. We are proud of this result and will continue to advocate for our nation’s growth-stage companies and competitiveness.

Quick hits

• U.S. regulators plan to relax some bank capital measures. U.S. federal banking regulators are preparing to propose a new package of capital rule changes aimed at encouraging bank lending and improving risk alignment. As previewed by the Fed Vice Chair for Supervision, the proposal is expected to include a revised Basel III framework, along with updates to stress testing, leverage ratios, and the G-SIB surcharge, as part of a broader effort to recalibrate bank capital requirements to better reflect actual risk. While overall capital levels remain robust, the changes are designed to improve efficiency and support credit availability without compromising safety and soundness. Regulators are specifically targeting areas like mortgage, consumer, and corporate lending, where current rules may be overly restrictive and have contributed to activity shifting into the non-bank sector. For the broader market, the goal is to rebalance lending capacity back toward banks, improving credit availability and creating a more level playing field across institutions. More risk-aligned capital treatment and reduced regulatory friction could improve the availability of bank credit to startups, growth-stage companies, and the funds that support them.

• Tech industry rallies behind Anthropic in Pentagon fight. Major tech groups representing companies like Google, Microsoft, Nvidia, and OpenAI have filed an amicus brief supporting Anthropic’s challenge to the Pentagon’s supply chain risk designation. The filing argues the government bypassed established procurement and supply-chain security processes designed by Congress to handle these disputes. The broader concern is precedent: using national security authorities to resolve contractual disagreements could turn federal procurement into a de facto regulatory tool, politicizing vendor eligibility and chilling investment in frontier AI. The outcome may shape not just this case, but how aggressively the federal government uses procurement power to influence AI development going forward. A hearing to determine whether Anthropic receives temporary relief is set for March 24.

• Early polling signals soft support for wealth tax; tough ballot fight ahead. California’s proposed one-time 5% wealth tax leads in early polling (50% support and 28% opposed), but the numbers appear soft and highly susceptible to reversal. A majority of voters express concerns that the bill could drive wealthy residents and businesses out of state, ultimately shifting the tax burden to the middle class. Some ultra-high-net-worth individuals have moved their assets elsewhere, while others are funding opposition efforts. If enacted, the policy could accelerate migration among the investor base that underpins California’s venture ecosystem, creating downstream pressure on fund formation and startup activity—a key reason Gov. Gavin Newsom also opposes the measure. The November ballot is months away, but a costly and contentious ballot fight is already underway.

• Senate clears housing bill, but hurdles remain. The Senate passed the 21st Century ROAD to Housing Act, addressing supply constraints, affordability, grant-backed housing production, and a prohibition on large institutional investors owning 350 or more homes from purchasing additional single-family properties. The administration is backing this bill as part of its broader affordability push, but the President’s reported focus on the Iran war and the SAVE America Act could mean the House—which passed its own housing bill and has expressed concerns with the Senate version—could force a formal conference negotiation, which could doom the housing reform effort. But the broader dynamics could also negatively impact other pieces of legislation, like the crypto market structure bill and any capital formation effort.
  

Upcoming events

• House Small Business Committee Hearing: SBA Field Operations/Rural Affairs - March 18 at 7:00 a.m. PT/10:00 a.m. ET
  

• House Financial Services Committee Hearing: Oversight of the Export-Import Bank - March 18 at 7:00 a.m. PT/10:00 a.m. ET
  

• Senate Commerce, Science and Transportation Committee Hearing: Liability or Deniability? Platform Power as Section 230 Turns 30 - March 18 at 7:00 a.m. PT/10:00 a.m. ET
  

• House Small Business Committee Hearing: Connecting SBA to Main Street: Examining the SBA Offices of Field Operations and Rural Affairs - March 18 at 7:00 a.m. PT/10:00 a.m. ET
  

• Carta Virtual Event: What’s New, What’s Next: The Connected ERP for Private Capital - March 24 at 10:00 a.m. PT/1:00 p.m. ET
  

• House Financial Services Committee Hearing: Revisiting the Treasury-Fed Accord - March 18 at 11:00 a.m. PT/2:00 p.m. ET
  

• House Financial Services Committee Hearing: Tokenization and the Future of Securities: Modernizing Our Capital Markets - March 25 at 7:00 a.m. PT/10:00 a.m. ET
  

• House Financial Services Committee Hearing: Innovation at the Speed of Markets: How Regulators Keep Pace with Technology - March 26 at 7:00 a.m. PT/10:00 a.m. ET
  

Sign up below to receive Carta's Policy Weekly Brief