TD Cowen: SEC and CFTC rules more durable than orders, but both lag behind legislation

When Congress can’t get it done, agencies step in. That’s the short version of what just happened in US crypto regulation, and TD Cowen’s Washington Research Group wants investors to understand why the distinction matters more than it might seem.

The investment bank’s analyst Jaret Seiberg has been tracking the regulatory fallout after the Senate’s 49-50 procedural vote killed the CLARITY Act on September 15, sending the most ambitious attempt at a durable digital asset framework to the legislative graveyard. Within days, the SEC and CFTC moved independently to fill the vacuum. The problem, as TD Cowen sees it, is that what agencies giveth, agencies can taketh away.

What the agencies actually did

The SEC moved fast. On September 17-18, the commission granted a five-year conditional “innovation exemption” that lets regulated venues trade tokenized NMS stocks through automated market makers without requiring full exchange or dealer registration.

The CFTC matched the pace, broadening its staff no-action relief for passive software providers that help users access regulated derivatives markets. No-action relief is essentially the agency saying “we see what you’re doing and we won’t sue you for it,” which is less reassuring than an actual law but more reassuring than silence.

Both actions were positioned as regulatory progress that doesn’t need congressional approval. And that’s technically true. It’s also the source of the vulnerability TD Cowen is flagging.

The durability gap

TD Cowen’s core observation is deceptively simple: SEC and CFTC rules are more sustainable than orders, and both are dramatically less durable than legislation.

Congressional statutes require another act of Congress to undo. Agency actions, by contrast, can be rescinded by a new commission chair, a shift in the political composition of the commission, or a successful legal challenge in federal court.

The five-year window on the SEC’s innovation exemption illustrates the point. A new SEC chair appointed in 2029 could let the exemption expire, modify its conditions, or revoke it outright. The CFTC’s no-action relief carries even less formal weight. Staff-level no-action letters can be withdrawn without the full commission vote that formal rulemakings require.

Why the CLARITY Act’s failure matters

The CLARITY Act was designed to establish a clear jurisdictional framework defining which digital assets fall under SEC oversight and which belong to the CFTC, creating the kind of durable policy architecture that doesn’t evaporate with a change in administration.

The 49-50 cloture vote means the bill didn’t even reach a floor debate, falling one vote short of the threshold needed to advance.

JPMorgan has separately emphasized the need for durable legislative solutions, echoing the concern that agency-level actions cannot substitute for the certainty that comes from statutory law.

What this means for the market

For crypto firms and tokenization platforms, the immediate news is positive. The SEC’s innovation exemption opens a genuine pathway for tokenized securities trading that didn’t exist before. The CFTC’s expanded no-action relief reduces legal risk for an entire category of software providers.

The practical takeaway for market participants is to treat these agency actions as valuable but provisional. The difference between an SEC exemption and a federal statute isn’t academic. It’s the difference between a regulatory framework that survives a single election cycle and one that might not.