The Monday Deadline #
Monday, October 20, marks the close of the comment period for the Securities and Exchange Commission’s proposed Regulation Crypto Assets (Release No. 33-11434, Docket S7-2026-27). The proposal, published in the Federal Register on August 21, creates a tailored offering regime with a startup exemption for up to $5 million over four years and tiered fundraising pathways for up to $75 million over 12 months, alongside a conditional safe harbor from the investment contract definition. While the industry has spent the last two months dissecting those mechanics, a more structural problem remains unresolved: the intermediary liability gap.
What the Proposal Leaves Open #
According to analysis from A&O Shearman, while the SEC provides pathways for issuers, exchanges, brokers, and dealers that transact in covered investment contracts remain subject to existing federal securities law registration requirements. The proposal does not create an exemption for these intermediaries. Furthermore, Rule 500 explicitly excludes dealers from the secondary-market preemption provision.
This creates a scenario where the legal status of a fungible crypto asset may trace back to its initial issuance, yet secondary market participants may find it impossible to distinguish between assets based on how they were originally sold. As A&O Shearman notes, this fungibility challenge means intermediaries face an additional burden that the proposal does not resolve. The SEC acknowledged the gap in a footnote, stating it “will continue to consider whether further action with respect to covered investment contracts beyond the proposed rules in this release is warranted.”
The Reproposal Push #
The critique is mounting. A group of five legal scholars – John Coates, John C. Coffee Jr., James D. Cox, Merritt B. Fox, and Joel Seligman – writing as the Shadow SEC on the CLS Blue Sky Blog, has argued that the proposal is deeply flawed and should be reproposed to address two fundamental weaknesses: the case for treating crypto investment contracts differently from other investment contracts has not been made, and the case for principles-based disclosure compliance has not been effectively made. They note that between 2013 and 2024, 9,746 crypto assets were listed under the existing system of exemptions, suggesting the current framework is already functional. The scholars also flag that the disqualification provisions in Rule 104 would not apply to pre-existing bad conduct – effectively a free pass for prior misconduct.
A Parallel Void for AI Agents #
While the SEC proposal struggles with intermediary liability in crypto markets, a separate, parallel void is widening regarding AI agents operating in commerce. It is critical to distinguish these issues: the SEC crypto intermediary gap concerns traditional securities broker-dealers, while the AI agent liability gap concerns autonomous systems making purchases, bookings, and transactions on behalf of users. These are not the same regulatory space, but they share a common condition – the federal government has not provided a clear answer on who is responsible when automated systems act. Colorado is moving to fill the federal void on the AI agent side. The Colorado ADMT Act, which faces a formal hearing on October 26, establishes the first binding developer and deployer obligations for AI agents involved in consequential decisions. The act mandates documentation duties, 30-day adverse-outcome disclosures, and 45-day human reviews with independent reviewers holding override authority. Enforcement rests with the Colorado AG, with a 60-day cure period running through 2030 and rules effective January 1, 2027.
The Enforcement Posture #
The federal government’s stance compounds the fragmentation. The Department of Justice has signaled a hands-off approach to standalone AI enforcement. The Warner AI AGENT Act (S. 5051, introduced July 21) has seen no markup. The Hawley-Murphy AI Agent Accountability Act (announced October 1) has seen no committee action. The Great American AI Act remains a discussion draft. Meanwhile, the Clarity Act failed a cloture vote on September 15 (49-50), leaving the industry without a federal roadmap for either domain.
Private Ordering Fills the Gap #
In the absence of clear federal guidance, the market is turning to private ordering. Muse operates with insured purchases. GrokBot imposes a $100-per-user liability cap. These are stopgap measures – commercial experiments filling a structural vacuum that regulation should occupy. As the Monday deadline passes, the SEC’s comment file will close on a framework that addresses the past – primary offerings – while leaving the secondary market’s automated future to state law and private contracts.