Paul Atkins, President Donald Trump’s nominee to serve as SEC Chair, has not even yet assumed his new office – his nomination apparently is scheduled to go before the relevant Senate committee on March 27 – but big changes are already underway at the agency under Mark Uyeda, the agency’s acting Chair. Indeed, based on the changes so far, a group of five leading academics including Columbia Law Professor John Coffee Jr. and calling themselves the “Shadow SEC” has already raised the alarm, warning in a March 13, 2025 post on the CLS Blue Sky Blog  that as a result of current and proposed staffing and budget cuts,  the agency is well on the way to becoming a “shell of its former self,” as it “becomes an agency with little power, capacity, or independent judgment.”

The academics’ concern about what will become of the SEC under the Trump administration is largely due to efforts to cut staffing at the nominally independent agency. Their concern relates to the health and security of the U.S. securities markets and questions whether the agency will have the ability to fulfill its traditional missions. They worry that under a short-staffed SEC, “there may be entrepreneurs who are willing to gamble that violations will not be detected by undermanned regulators or that technical rules will not be enforced closely.”

But even without the pending and prospective staffing and budget cuts, there are reasons for concern.

For starters, on March 10, 2025, the SEC, under acting Chair Uyeda, issued a Final Rule eliminating the delegated authority to the head of its Division of Enforcement to issue formal orders of investigation, which, among other things, allow the Enforcement Division staff to issue subpoenas and compel testimony. As a result, a majority of SEC Commissioners must now approve the initiation of a formal SEC investigation. As discussed in a March 18, 2025 memo from the Cooley law firm (here), the new rule – representing alteration of the prior more than 15 year old delegated authority arrangement — ” will make it more difficult for staff to gain subpoena power, adding a bureaucratic hurdle that could slow investigations down.”

At the same time, the agency has also indicated that it will change its enforcement priorities, deemphasizing, for example, ESG and other social and cultural issues, and reemphasizing traditional agency concerns including Ponzi schemes, accounting fraud, insider trading, deceptive market practices, disclosure issues and breaches of fiduciary duty.

The changes at the agency under the Trump Administration is not limited just to enforcement issues.

The agency has clearly adopted a different approach to the agency’s regulatory authority as well. The regulatory changes were launched on the first day of the Trump Administration when the President issued an Executive Order directed federal agencies – including the SEC – to stop all rulemaking activity pending within an agency and consider all rules already published as paused for 60 days.

The agency has also already signaled that it does not intend to defend regulations finalized under the Biden Administration; for example, in the litigation pending in the Eighth Circuit challenging the agency’s Climate Change Disclosure guidelines, the Acting Chair Mark Uyeda issued a statement explaining that he directed SEC staff to request the Eighth Circuit not to schedule oral arguments on the challenge to the SEC’s climate-related disclosure rules until the SEC decides whether to continue defending them. It seems likely that Biden administration regulatory priorities, such as board diversity and human capital management disclosures, will also be dropped or deemphasized.

One particular area where the agency has already definitively changed its priorities is with respect to cryptocurrency. Paul Atkins is a known critic of the SEC’s prior approach to cryptocurrency. But Atkins has not even yet arrived at the agency and it has already substantially retooled the agency’s approach to crypto.

The agency has rolled back numerous crypto-related enforcement actions initiated under previous leadership. Notable cases that have been dropped or paused include those against Coinbase, Kraken, Gemini, ConsenSys, Robinhood, and Yuga Labs. The agency has also announced that it has dropped numerous other pending crypto- and digital asset-related investigations, including, for example, its investigation of decentralized exchange Uniswap Labs.

The agency under its current acting leadership has also announced the formation of a Crypto Task Force, “dedicated to developing a comprehensive and clear regulatory framework for crypto assets.” In addition, under the current leadership, the agency staff has issued a statement that in the agency’s view that transactions in so-called Meme Coins “do not involve the offer and sale of securities under the federal securities laws.”

On the one hand, the agency’s revised approach to crypto is at one level no surprise. Indeed one of President Trump’s first acts in office was the issuance of an Executive Order calculated to try to make the U.S. the “crypto capital of the world.” 

On the other hand, the agency’s new approach is not without its critics. As discussed here, at least one agency observer has said with respect to the agency’s crypto-related moves under the Trump administration that “the SEC’s shameless abdication of its sacrosanct investor protection mandate sounds the death knell for a once proud, storied and vital financial watchdog.”

To be sure, change is clearly the watchword under the new Trump Administration. Change is hitting pretty much every federal agency like a sledgehammer, and there is no reason to think that the SEC among all federal agencies was going to be spared.

At the same time, however, I share the concerns of the academics on the Shadow SEC. Our financial markets here in the U.S. are so widely respected around the world precisely because there has been an attentive and effective cop on the beat. There is every reason to be worried that even a well-intentioned agency subject to staffing and budget cuts see its effectiveness diminished, to the potential detriment of both investors and those seeking capital formation.

I am particularly concerned about the agency’s revised approach to crypto currency. I fear that the whole digital asset circus is going to end in some colossal scandal or crash, like FTX on steroids.

I recognize that a good case could be made that I am overreacting. From time to time over the years, the SEC has faced various budget challenges and other bureaucratic threats. Changes in policy priorities between Presidential administrations is a feature of the agency’s existence, not a bug. The agency will continue to pursue enforcement actions. The financial markets are not facing any direct existential threats.

All of that said, it is definitely the case that the next three and three-quarters years are going to be eventful. Strap yourself in, because it is going to be a heck of a ride.