Key Points
- The SEC is set to undergo sweeping changes under the second Trump administration, with a Republican-controlled Commission setting a new agenda.
- The agency is expected to focus on easing regulatory burdens and creating a crypto-friendly regulatory framework, as well as on capital formation and an enforcement program that focuses on investor harms.
The rulemaking and enforcement priorities of the Securities and Exchange Commission (SEC or the Commission) will be substantially different under the incoming administration.
As is customary, Chair Gary Gensler will step down on January 20, 2025. Either Republican Commissioner Hester Peirce or Mark Uyeda is expected to serve as interim chair until the Senate confirms the nominee for SEC chair, Paul Atkins. Once he is confirmed, the three Republican commissioners will constitute a majority of the Commission.
Regulatory Reform
Environmental, social and governance (ESG) rulemaking is not expected to survive 2025 intact. In March 2024, the SEC adopted final rules mandating climate-related disclosures in public companies’ annual reports and registration statements. Although the Commission scaled back the final requirements from its original proposal, the rules were subject to multiple legal challenges, and the SEC voluntarily stayed the rules in April 2024.
It is likely that the Trump administration will not defend the lawsuits and may significantly reshape or even reverse the climate-disclosure rules. (See “Some States Prepare for the Expected Rollback of Biden Environmental Regulations.”)
The Trump administration is expected to be more crypto-friendly than its predecessor, providing clarity and “rules of the road” for digital assets.
In December 2024, in a 9-8 decision, the U.S. Court of Appeals for the Fifth Circuit vacated Nasdaq Stock Market’s board diversity rules. The court held that the SEC had exceeded its authority under the Securities Exchange Act in approving such rules. The new Commission is not expected to challenge the decision. (See also “Employers’ DEI Initiatives Are Likely To Be Targeted in the Second Trump Administration.”)
In October 2024, the SEC delayed the timeline for other ESG-related disclosure proposals on its agenda, including human capital management and corporate board diversity. The new Commission will likely remove these rulemakings from the agenda, and we anticipate that there will be a fundamental shift away from new ESG rulemakings.
Creating a regulatory framework for cryptoassets is likely to become a high priority. The Trump administration is expected to be more crypto-friendly than its predecessor, providing clarity and “rules of the road” for digital assets. Under Chair Gensler, the SEC pursued several enforcement actions against crypto companies for alleged violations of securities laws.
While there appears to be consensus on the few digital assets that are not securities, there is room for Congress or the Trump administration to promulgate laws or regulations governing digital assets more generally. A new framework could include defining when digital assets are offered and sold as securities and proposing related rules. During this period, there could be a pause in enforcement actions.
There is also the possibility that the government may deem cryptoassets a commodity rather than a security, bringing crypto under the governance of the Commodity Futures Trading Commission (CFTC). (See “Cryptocurrencies Stand To Gain From New Regulators and a Receptive Congress.”)
We also expect that the new leadership at the SEC will rethink and likely repeal the staff guidance included in Staff Accounting Bulletin No. 121 covering the accounting for obligations to safeguard cryptoassets that an entity holds for platform users. Republicans widely criticized this guidance, which effectively barred banks and broker-dealers from most crypto-related activities, when it was issued in April 2022. (See “Trump 2.0 Could Mean a More Bank- and Fintech-Friendly Environment.”)
Additional potential agenda items include easing burdens relating to capital formation, particularly for smaller companies or offerings. Further, under the first Trump administration, the SEC imposed higher minimum stock ownership requirements for shareholder proposals. The second Trump administration may wish to revisit shareholder proposals, possibly making it more challenging for shareholders to include resolutions in a company’s proxy statement.
Enforcement Priorities
During the first Trump administration, a key focus of the SEC’s enforcement efforts was on protecting retail investors. While the SEC under Chair Gensler tested novel legal theories in enforcement actions, we expect the incoming administration to take less aggressive positions and fewer legal risks. We also anticipate that enforcement cases will focus on clear investor harms and principles-based views on materiality. (See “Approach to Corporate Enforcement May Become More Business-Friendly.”)
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This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.