Andreessen Horowitz Crypto (a16z Crypto) and the DeFi Education Fund submitted a letter to the SEC on September 22 requesting regulatory relief for decentralized exchanges (DEXs) and the developers and applications that support them.
The request seeks clarification on when developers of DEX protocols and the applications providing access to them fall outside the Exchange Act's registration requirements. According to Miles Jennings, General Counsel at a16z Crypto, such relief would "extend regulatory clarity to truly permissionless systems."
The firms propose that this exemption should apply even when a platform handles tokenized securities, provided the system is fully non-custodial and does not control user funds.
In a second request, a16z proposed a different approval pathway for crypto asset trading platforms that function as traditional intermediaries and control user funds.
Industry Motivation and Precedent
The Commodity Futures Trading Commission (CFTC) previously granted similar relief to passive software like Phantom from being classified as an introducing broker under the Commodity Exchange Act, though that relief only applies to derivatives trading.
a16z cited the SEC's 2024 enforcement action against Uniswap as motivation for seeking clarity on DEX regulation, noting that the SEC classifies tokenized stocks as securities.
Potential Opposition
Traditional broker-dealers, including Citadel Securities, represented by SIFMA, have already raised concerns about the SEC's Innovation Exemption proposal. While SIFMA may support a16z's second request regarding trading platforms with intermediaries, the group is unlikely to back exemptions for DEXs and developers.
