Intro & Call to Action The SEC's new securities exchange / ATS amendment proposal has been published, alongside a strenuous dissent from Commissioner Hester Peirce. The proposal is massive and, as noted by Peirce, encompasses a radical paradigm shift that was not contemplated in the SEC’s previous related concept release and would overrule previous no-action guidance. It does not make express reference to blockchain, DeFi, automatic market-making protocols, etc., but I nevertheless believe the SEC staff is very likely to use its expanded definitions of securities “exchange” to bolster the SEC’s currently weak arguments that AMMs constitute securities exchanges. At the same time, the proposal offers no method of registration and reporting that could actually be followed by anyone who arguably “makes available” an AMM protocol or other DeFi systems—thus, to whatever extent the proposed changes might purport to turn AMMs and other DeFi systems into “securities exchanges”, it is at a minimum irresponsible and thoughtless as regulation. Because the proposal achieves this expansion by providing new restraints on “communication protocols,” I believe it may also be unconstitutional as a restraint on free speech.
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