a16z and DeFi Education Fund Push for Clear DEX Rules
TREE NEWS reports: Andreessen Horowitz (a16z) has submitted a detailed proposal to the U.S. Securities and Exchange Commission (SEC), urging the agency to establish a safe harbor that would exempt qualifying decentralized exchange (DEX) protocols and DEX applications from registering as exchanges under the Securities Exchange Act. The filing, co-authored with the DeFi Education Fund, arrives as the SEC advances its “Project Crypto” initiative to migrate U.S. capital markets on-chain.
The proposal follows a series of SEC actions: April guidance clarifying that certain user interfaces need not register as broker-dealers, a June proposal to repeal Regulation NMS Rule 611, and last week’s “innovation exemption” for tokenized securities trading platforms (TSVs). While a16z praises these steps, it argues they only address part of the regulatory uncertainty and provide a single, intermediated path for securities to move on-chain.
The Four-Pillar Safe Harbor Framework
Under the proposed safe harbor, DEXs would be presumed not to be exchanges if they meet four objective criteria:
- Non-custodial: The DEX never controls user funds; all signatures and transaction submissions are initiated by users.
- Automated: No human intermediary executes trades, and no individual or group can unilaterally alter system rules.
- Permissionless: Access is unrestricted, and no party can limit others’ access.
- Credibly neutral: No private privileges or hardcoded advantages that could discriminate against specific users or use cases.
DEX applications must additionally provide objective, independently verifiable market data; avoid discretionary control over trade matching, pricing, or execution; and limit developers to maintaining interfaces, pushing technical updates, and applying neutral, publicly disclosed asset-filtering rules.
A Complementary Path for Centralized Platforms
a16z also submitted a companion proposal for crypto asset trading platforms (CTPs) that act as traditional intermediaries. It recommends a tailored registration framework modeled on Alternative Trading Systems (ATS), allowing CTPs to trade crypto asset securities, non-security pairs, and mixed pairs. Platforms trading NMS-stock crypto securities above a volume threshold would face public Form ATS-N disclosures; below the threshold, disclosures on conflicts, operations, and fair access would be filed confidentially with the SEC and subscribers. CTPs would follow ATS-like recordkeeping rules, with blockchain-based records permitted.
Why It Matters
The SEC has at least once signaled in a Wells notice that a DEX supporting securities could be deemed an exchange. a16z argues this approach would force software developers into roles they never intended—gatekeepers and intermediaries—undermining blockchain’s core advantages and introducing new user risks. Commissioner Hester Peirce has echoed this view, stating that truly decentralized, automated systems do not generate the core risks securities regulation targets.
The proposal aims to draw clear regulatory lines: qualifying DEXs and DEX apps would be explicitly exempt, while other platforms gain a tailored registration path. As Congress stalls on legislation, a16z urges the SEC to act decisively through guidance, exemptive relief, and rulemaking. The coming comment period on the innovation exemption will be a key test of whether the agency embraces this vision.
