Tag: Regulation & Policy

Comprehensive artificial intelligence (AI) regulation is unlikely to be enacted by the US Congress before the end of the year, primarily due to a compressed legislative calendar and a lack of bipartisan consensus. The House of Representatives has adjourned, and while negotiations continue in the Senate, key lawmakers describe progress as insufficient.

Legislative Stalemate
The legislative session has seen limited movement on AI policy. The House adjourned on September 17 and will not reconvene until after the November midterm elections, effectively ending the possibility of significant AI legislation reaching the president’s desk this year. In the Senate, bipartisan negotiations within the Commerce Committee are ongoing, but progress has been described as “not there yet” by key senators, indicating a substantial gap in viewpoints.

Divergent Priorities
Divergent priorities between Democrats and Republicans are a significant obstacle. Democrats generally advocate for stronger guardrails concerning AI safety and transparency. Conversely, Republicans, including House Speaker Mike Johnson, express concerns that overly stringent regulations could hinder the competitiveness of American companies, particularly in their race against Chinese competitors. In the view of Speaker Johnson, any regulatory approach must avoid undermining US competitiveness.

International Context
This legislative stalemate means that Congress has so far enacted only one standalone AI-related law: the Take It Down Act, which addresses non-consensual deepfakes. This contrasts with the European Union, which has already implemented its comprehensive AI Act. This divergence means American companies operating in Europe must adhere to the EU’s framework, regardless of domestic legislative progress. The longer the US delays, the more its companies may find themselves adapting to foreign rules rather than shaping global standards.

Uncertainty and Outlook
A bipartisan congressional task force issued 85 recommendations in 2024, covering areas such as algorithmic transparency and liability for AI-generated content. However, the follow-through on these recommendations has been minimal. One prominent bill, the Frontier Act, which aimed to enhance transparency and risk mitigation for powerful AI systems, faced opposition over preemption issues concerning federal versus state regulations.

Leaders at Anthropic and OpenAI have warned about the risks associated with deploying increasingly capable AI systems without adequate oversight. Some lawmakers view calls for regulation as a potential strategy for incumbents to create regulatory moats, imposing rules that are costly for smaller competitors to meet. Former President Trump has also weighed in, dismissing existential-risk warnings from AI researchers as a “hoax” in September 2026, aligning with industry voices who argue that slowing development could benefit adversaries.

The current situation leaves several uncertainties. It remains unclear if any AI regulation will be passed by Congress before the year concludes. The specific outcomes of the ongoing Senate negotiations are also uncertain, as is the extent to which US companies will need to adapt to international AI regulations. The potential impact of delayed domestic legislation on US competitiveness against global rivals also remains a key concern.

Given these factors, the immediate outlook suggests a continued lack of comprehensive AI regulation in the United States for the remainder of the year, with implications for the global AI landscape and the domestic tech sector.

Broader Context

Source materials place the factual news in this context: The House adjourned on September 17 without advancing a single major AI bill.

President Donald Trump is set to host Chinese President Xi Jinping in Washington for a two-day summit commencing September 23, with artificial intelligence (AI) positioned as the central theme of diplomatic discussions. The meeting is slated to address complex issues including AI safety, trade tariffs, the supply of rare earth minerals, and technology export controls, underscoring AI’s escalating significance in bilateral relations.

Preparatory talks for the summit have been spearheaded by US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, reflecting a concerted effort to integrate AI discussions into the broader economic negotiations between the two global powers. A state dinner is scheduled for September 24, with a guest list that notably includes prominent figures from the technology sector, such as Sam Altman of OpenAI, Jensen Huang of Nvidia, and Tim Cook of Apple.

Navigating Complex Agendas
The summit’s agenda encompasses critical areas where US-China interests converge and diverge. Discussions are expected to cover AI safety and shared risks, including cyber threats and the potential consequences of a bifurcated tech ecosystem. However, significant challenges loom, particularly concerning technology export controls, a long-standing point of contention. US officials have signaled a firm stance, indicating they will not trade relaxed AI export controls for assurances on rare earth mineral supplies. This position highlights the delicate balance the US aims to achieve between fostering technological advancement and safeguarding national security interests.

Lessons from Past Engagements
Previous high-level engagements between Trump and Xi, such as their meeting in Beijing on May 14-15, 2026, touched upon AI but did not yield formal agreements. Notably, chip export controls, a key point of contention, were not even discussed during those prior talks. The current summit is expected to navigate these sensitive issues with a focus on dialogue and potentially setting regulatory standards, though the path to concrete agreements remains uncertain.

Industry Implications and Uncertainties
Nvidia, a company whose chips are integral to the vast majority of global AI training workloads, finds itself at the nexus of these discussions. The presence of its CEO, Jensen Huang, at the state dinner is symbolic, but the regulatory decisions emerging from the summit could have substantial consequences for the company’s ability to supply advanced chips to Chinese customers. Discussions around AI regulation and standards may shape compliance requirements for companies operating in both US and Chinese markets, potentially leading to divergent regulatory regimes that introduce complexity and cost to global operations.

Donald Trump has publicly acknowledged the profound impact of AI, describing it as potentially more consequential than the internet. This perspective underscores the strategic importance both nations place on the development and governance of artificial intelligence. However, the summit is marked by significant uncertainties. It remains unclear whether formal agreements will be reached on AI or other agenda items. The precise outcomes of regulatory decisions, particularly concerning export controls, are yet to be determined, and the full consequences of a potential bifurcation in US and Chinese tech ecosystems are still unfolding.

The summit’s success will likely be measured not by immediate breakthroughs, but by the progress made in managing the complex interplay between technological innovation, economic competition, and geopolitical strategy. The potential implications for global technology policy, trade, and the future trajectory of AI development are substantial, making this diplomatic event a critical juncture for US-China relations.

Broader Context

Source materials place the factual news in this context: President Donald Trump will welcome Chinese President Xi Jinping to Washington on September 23 for a two-day summit that puts artificial intelligence at the center of US-China diplomacy.

Greg Jensen, co-chief investment officer at Bridgewater Associates, the world’s largest hedge fund, has put forth a straightforward thesis: when a few companies gain control over critical infrastructure to a degree that could destabilize society, regulators inevitably intervene. He believes artificial intelligence compute is the next frontier for such oversight.

Jensen is advocating for regulatory frameworks similar to those applied to systemically important financial institutions (SIFIs) to be implemented for any company that commands more than 5% of global or U.S. AI compute resources.

The SIFI framework emerged in the wake of the 2008 financial crisis, a period when regulators recognized that certain institutions had become so large and interconnected that their collapse posed a systemic risk. This designation subjects these entities to stringent capital requirements, stress testing, and regulatory scrutiny far beyond what typical firms encounter.

Jensen’s remarks, which surfaced around September 17-18, 2026, following an interview with The Information, are strategically timed. He cited projections indicating that OpenAI and Anthropic could collectively control between 35% and 50% of the world’s AI compute capacity within approximately two years. This level of concentration, in his view, mirrors the conditions that led regulators to regret their previously hands-off approach to financial conglomerates before 2008.

Jensen draws an analogy to February 2020, the period just before COVID-19 escalated into a global emergency. He appears to believe that the discourse surrounding AI governance is at a similar critical juncture, with the window for establishing proactive structures closing. He warns that reactive regulation, implemented after a significant incident, will inevitably be more costly and less effective.

A Complex Proposition

Jensen’s call for oversight is complicated by Bridgewater’s own significant involvement in the AI sector. In 2023, the firm launched AIA Labs, a dedicated unit for AI investment and development. This division now employs over 80 staff and manages approximately $4.5 billion in assets dedicated to AI-driven strategies.

Bridgewater has emphasized that AIA Labs incorporates deliberate human oversight into its operational processes. This design choice aligns with Jensen’s broader argument: AI systems wielding substantial influence over critical decisions should not operate without robust accountability mechanisms.

Translating Jensen’s proposed 5% threshold into concrete policy presents considerable challenges. The SIFI designation for banks is supported by a well-established global regulatory architecture, with the Financial Stability Board coordinating international standards and national regulators implementing them domestically. AI compute currently lacks a comparable institutional structure.

Furthermore, defining what constitutes “compute” for regulatory purposes is a complex undertaking. Questions arise as to whether it refers to raw chip capacity, data center square footage, model training runs, or inference throughput. Each definition would yield a different understanding of who controls what and create distinct incentives for companies seeking to remain below a regulatory cap.

The companies most directly implicated by Jensen’s proposal, OpenAI and Anthropic, are both privately held and receive substantial backing from some of the world’s leading technology and venture capital firms. The imposition of regulatory concentration limits could significantly impact their current growth trajectories, particularly at a time when both are making substantial investments in infrastructure.

The US Senate’s failure to pass a cloture vote on the CLARITY Act introduces regulatory uncertainty for the cryptocurrency market, with implications for XRP. This legislative setback delays the establishment of clearer market structure rules, though it does not negate prior progress in digital asset regulation.

Following the vote on Tuesday, XRP experienced a price correction, declining by over 8% and dipping below $1.30 to reach a monthly low. The cumulative volume delta also turned negative, falling to -10.5 million. This suggests the price movement was more significant than routine profit-taking, according to market analysis.

Despite the legislative development, Ripple CEO Brad Garlinghouse has affirmed that the company’s business operations and momentum remain unaffected. He also reassured XRP investors that the asset’s existing legal footing in the United States remains unchanged by the Senate’s decision. XRP’s situation has seen improvements in recent years, notably after the conclusion of the lawsuit between Ripple and the SEC.

The CLARITY Act’s failure shifts more responsibility to regulatory bodies such as the SEC and the CFTC, which are continuing to develop cryptocurrency rules under their existing authorities. However, the article suggests that agency-enforced rules can be more susceptible to change by future administrations, highlighting the importance of legislative clarity.

Market analysis, including insights attributed to ChatGPT, anticipates a period of consolidation for XRP. The most probable scenario, according to this analysis, involves XRP trading within a range of $1.25 to $1.50 as the market absorbs the news and observes ETF flows. The significant institutional interest in digital assets, evidenced by ETFs attracting over $1.7 billion in less than a year, could influence XRP’s future trajectory.

Looking ahead, a recovery above the $1.50 mark could potentially lead to a retest of XRP’s recent high of $1.70. Renewed institutional demand and broader strength in the altcoin market might even bring the $2.00 level into play. Conversely, a more cautious outlook suggests XRP could fall to $1.20 if ETF flows deteriorate and overall market momentum wanes.

These future price movements remain speculative. Significant uncertainties persist regarding the ultimate long-term impact of the CLARITY Act’s failure on XRP, the future rule-making by the SEC and CFTC, and the direction of ETF flows. The market may closely monitor these developments to gauge XRP’s path forward.

Broader Context

Source materials place the market analysis in this context: The CLARITY Act’s failure to pass a cloture vote.

Bitcoin Surges on Tokenized Stock News, But Critics See Bearish Signal

Bitcoin experienced a notable rally following the U.S. Securities and Exchange Commission’s (SEC) announcement of a broad new exemption for trading tokenized stocks. However, prominent Bitcoin critic Peter Schiff believes the market has misinterpreted the development, arguing it is actually a negative signal for the cryptocurrency.

Schiff contends that the SEC’s “Innovation Exemption,” which permits qualifying U.S. trading platforms to engage in liquidity pool trading of tokenized National Market System (NMS) stocks, diminishes Bitcoin’s appeal. His reasoning is that if investors can acquire tokenized versions of real equities, complete with dividends and voting rights, the necessity for Bitcoin diminishes.

SEC’s Innovation Exemption Explained

On September 17, the SEC unveiled a five-year conditional exemption. This allows eligible platforms to trade tokenized NMS stocks without the need for registration as traditional exchanges or dealers under current securities laws.

Crucially, these tokenized stocks must be fully backed by their underlying equities and grant identical shareholder rights, including dividend payouts and voting power. The exemption explicitly excludes synthetic products, which merely track a stock’s price without conferring ownership.

Platforms seeking to tokenize stocks are also subject to a notification requirement. They must inform issuers at least 30 days prior to the commencement of trading, and issuers retain the authority to prevent their stock from being tokenized altogether.

The practical implications of this exemption are substantial. Tokenized stock trading could operate on a 24/7 basis, unbound by traditional market hours, and settlement times could be drastically reduced from the current T+1 standard to near-instant finality.

Schiff’s Counter-Argument: A Substitution Thesis

Peter Schiff did not hold back in his assessment of the market’s reaction. “Yesterday’s big Bitcoin rally following the SEC’s tokenized stock announcement makes no sense. The news is actually bearish for Bitcoin,” he stated.

Schiff’s argument is rooted in a substitution thesis. He posits that if tokenized stocks can offer round-the-clock trading, borderless transfers, and freedom from intermediaries, all while providing dividends and voting rights, Bitcoin’s competitive advantages are significantly eroded.

As of September 19, Bitcoin was trading at approximately $81,290, representing a daily increase of about 1.6%.

The Bullish Interpretation

The optimistic view of the SEC’s announcement suggests that the agency’s formal acknowledgment of blockchain-based infrastructure’s suitability for trading regulated securities serves as a validation of the entire technological framework underpinning crypto markets.

Furthermore, proponents highlight a “composability” argument. Within decentralized finance, tokenized stocks could potentially be utilized as collateral, integrated into lending protocols, or combined with stablecoins in liquidity pools.

Ultimately, tokenized securities and Bitcoin serve distinct purposes. Tokenized securities represent regulated equity instruments that leverage blockchain technology, while Bitcoin is a decentralized, scarce digital asset viewed by its holders as a hedge against monetary debasement.

Kalshi, the parent company of crypto exchange Payward (which operates Kraken), and Coinbase have simultaneously submitted proposals to the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to launch perpetual futures contracts for individual U.S. stocks. These filings signal a significant move by crypto-focused entities to introduce a derivative product popular in the digital asset space into traditional equity markets.

Perpetual futures contracts are characterized by their lack of a predetermined expiration date. Their pricing is typically kept in alignment with the underlying asset’s price through a mechanism of periodic funding rate payments exchanged between holders of long and short positions. Kalshi’s proposed contracts will be cleared by Kalshi Klear, a CFTC-registered clearinghouse, and will be classified as ‘security futures products’.

Payward, operating through the Bitnomial Exchange, has submitted a rule change proposal to the SEC. The company plans to initially offer perpetual contracts for 10 U.S. stocks, including major companies like Tesla, Nvidia, Apple, Microsoft, and Amazon. Payward aims to facilitate 24-hour trading, five days a week, for these products on the Kraken platform for U.S. traders.

Coinbase has also submitted proposals for individual stock perpetual futures contracts on the same day. Related reporting mentions Coinbase’s previous proposal for 50 U.S. stocks. The simultaneous nature of these applications from multiple entities suggests a perceived market opportunity and a potential trend of crypto exchanges expanding their derivative offerings into traditional financial markets.

This development follows Kalshi’s May approval from the CFTC to launch perpetual futures contracts for cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and XRP. The current push into U.S. stock perpetuals by these firms may also be influenced by the regulatory landscape, particularly following the failure of the CLARITY Act, which some interpret as creating a vacuum that these entities are seeking to fill.

Several uncertainties remain regarding these proposals. It is not yet reported whether the SEC and CFTC will approve the rule change applications, nor is the exact timeline for the potential launch of these contracts clear. The specific regulatory framework that may govern these ‘security futures products’ is also a point of consideration.

The introduction of these products could lead to increased availability of derivative products within the U.S. stock market and represents a continued expansion of crypto exchanges into traditional financial markets. The regulatory bodies are actively considering these new derivative products for U.S. equities.

Why This Matters

The materials describe a narrow update: Three entities, Kalshi, Coinbase, and Payward (Kraken’s parent company), have submitted proposals to the SEC and CFTC to introduce perpetual futures contracts for individual US stocks. Whether the SEC and CFTC will approve the rule change proposals.

Broader Context

Source materials place the factual news in this context: Kalshi, Kraken’s parent company, and Coinbase are simultaneously applying to the SEC/CFTC to launch ‘no expiration date, 24-hour trading’ US stock perpetual contracts.

Senate Vote Fails on CLARITY Act, Agencies Push Alternative Regulatory Paths

Following the Senate’s procedural vote defeat of the CLARITY Act, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have moved swiftly to implement alternative regulatory frameworks. However, SEC Chair Paul Atkins himself has acknowledged that without congressional legislation, these rules remain vulnerable to being overturned by future regulators.

Regulatory Vacuum Filled by Agency Action

The U.S. cryptocurrency market’s regulatory landscape, which many expected to revert to a state of ambiguity after the Senate’s 49-50 vote against the CLARITY Act, has seen the SEC and CFTC take immediate action. On the same day the bill faltered, both agencies began efforts to fill the legislative void with their own rules.

The CLARITY Act’s primary objective was straightforward: to categorize digital assets and clearly delineate which agency, the SEC or CFTC, would oversee them. For the past decade, trading platforms like Coinbase and Kraken have been embroiled in numerous legal battles with the SEC, centered on the fundamental question of whether issuing a token constitutes issuing a security. Enforcement actions and substantial settlements during former SEC Chair Gary Gensler’s tenure largely revolved around this issue.

Had the bill passed, it would have also expanded the CFTC’s oversight role in the spot cryptocurrency market. Tokens like Bitcoin and Ethereum, classified as “commodities,” have long lacked direct regulatory supervision in their spot trading, with the CFTC intervening only in cases of market manipulation. The act also addressed contentious issues such as anti-money laundering provisions and limited legal exemptions for DeFi developers, though these were not the primary reasons for the bill’s ultimate demise.

SEC’s Project Crypto Initiative

Just two days after the bill’s failure, SEC Chair Paul Atkins unveiled a policy initiative for tokenized securities, a core component of his “Project Crypto” framework. Atkins, appointed by President Trump and known for his pro-crypto stance, has prioritized digital asset regulation since taking office. With the legislative path now closed, he believes the SEC must utilize its existing authority to advance what it can.

Last month, the SEC proposed its first significant crypto rule, “Regulation Crypto Assets.” This aims to establish a compliant fundraising channel for crypto projects, allowing them to raise capital without triggering the full suite of securities laws. This rule was advanced by the Republican-majority SEC commission, with the White House intentionally leaving two Democratic seats vacant to enable its passage without Democratic votes.

CFTC’s Independent Actions

The CFTC’s situation is unique. Current Chair Mike Selig, who previously served as Atkins’ crypto lead at the SEC, is the sole remaining member of the five-person commission, granting him the ability to act unilaterally. The CFTC has begun developing rules for prediction markets and recently opened the door to crypto perpetual futures.

Selig stated that his team is creating a classification for “crypto asset markets,” analogous to the CFTC’s existing “Designated Contract Market” (DCM) classification, which would allow compliant exchanges to obtain official certification.

Fragility of Agency Rules

While the SEC and CFTC’s current piecemeal approach offers more clarity than the pre-legislative environment, these are “rules,” not laws. In essence, they are an improvement over the enforcement-driven policies of the Gensler era but are significantly more fragile than actual legislation.

These rules can be challenged in court on grounds of “lack of legislative authority” and can be overturned by subsequent regulators. Although the SEC’s rules were passed unanimously by Republicans, a future Democratic president could nominate a new commission that, while requiring considerable effort, could potentially rewrite them. The CFTC’s Selig is currently operating alone, with only one seat filled on the five-member commission, meaning any new appointees could shift the direction.

Atkins’ Acknowledgment of Weaknesses

Atkins himself is acutely aware of these vulnerabilities. In August, he explicitly stated, “Legislation is still indispensable for establishing forward-looking rules that are durable enough to protect the work we do today from being overturned by rogue regulators in the future.” He has repeatedly emphasized in speeches this year and last that “only Congress can provide forward-looking safeguards for regulation in this space.”

However, he also believes the SEC can be a crucial ally in the legislative process. When he launched Project Crypto in November of last year, he remarked, “The plan I envision is consistent with legislation under consideration by Congress, designed to supplement, not supplant, Congress’s vital work.” The challenge is that Project Crypto can currently only operate independently, awaiting congressional action.

The Shifting Battlefield

The failure of the CLARITY Act does not signify a halt to crypto regulation but rather a shift of the battlefield from Congress back to the regulatory agencies. In the short term, the joint actions of the SEC and CFTC will provide greater clarity. The taxonomy of asset classifications, the framework for tokenized securities, the labeling of crypto spot markets, and rules for prediction markets are all more predictable than the “enforcement as policy” approach of the Gensler era.

However, the durability of these rules is far less than that of legislation. If the power structure in the Senate changes after the midterm elections next year, the bill could potentially be reintroduced. If legislation fails, the industry may face another cycle of rules being completely overturned following a change in political party. Atkins’ repeated emphasis on the “indispensability of legislation” is not mere rhetoric; it highlights the critical weakness of the current policy solutions.

The US Senate’s failure to advance the Clarity Act, a landmark bill intended to structure the cryptocurrency market, has shifted the primary focus of regulatory efforts from Capitol Hill to federal agencies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The legislative path for comprehensive crypto market structure has been blocked, necessitating an immediate understanding of how agencies like the SEC and CFTC are now shaping the regulatory environment. This shift marks a pivotal moment, moving the primary locus of crypto regulation from Congress to federal agencies.

The Clarity Act failed to garner the necessary 60 votes for advancement in a procedural vote on Tuesday, with the final tally at 49-50. The bill, which had been the subject of over a year of bipartisan negotiations, fell short due to partisan disagreements and political maneuvering. Senator Thom Tillis (R-NC) initially voted in favor but switched his vote to no, a procedural move that allows for the bill to be revisited.

Following the legislative setback, regulatory bodies have stepped up their activities. On Thursday of the same week, the SEC released a new innovation exemption measure. This measure reportedly opens a pathway for tokenized U.S. stocks to trade on-chain, a development that has generated excitement within the industry. Concurrently, the CFTC issued a no-action position for passive software providers. The agency also submitted a broader crypto markets rulemaking proposal to the White House for review, though the specific details of this proposal are not yet public.

The failure of the Clarity Act has coincided with finger-pointing between the parties. Republicans, including Senator Cynthia Lummis, a chief architect of the bill, accused Democrats of not being serious about passing the legislation. Conversely, some Democrats suggested that Republican leaders forced the vote prematurely. Despite the outcome, some senators involved in the negotiations, such as Senator Angela Alsobrooks, stated that the bill is not dead and that there remains a responsibility to regulate the industry, which involves over 70 million Americans.

This legislative roadblock has contributed to fatigue within the industry, with many participants now looking to regulators for guidance rather than waiting for Congress to act. Kristin Smith, President of the Solana Policy Institute, noted that while Congress had opportunities, the political will was not present, making regulatory guidance the more viable path forward.

The SEC’s new innovation exemption is seen by some as being explicitly tied to the Clarity Act’s failure to advance, indicating a proactive approach by the agency in response to Congressional inaction. The industry is now receiving clarity, albeit from regulators rather than lawmakers.

However, uncertainties remain. The precise details of the CFTC’s broader crypto markets rulemaking proposal are not yet public, and the full implications of agency-led regulation are still unfolding. The immediate future of crypto regulation in the U.S. appears to be shaped by these agency actions, presenting both opportunities for innovation and potential for continued uncertainty.

Why This Matters

The materials describe a narrow update: The Senate failed to pass the Clarity Act, a crypto market structure bill, by a vote of 49-50, falling short of the 60 votes needed. The specific details of the CFTC’s broader crypto markets rulemaking proposal are not yet public.

Broader Context

Source materials place the factual news in this context: For anyone tracking the twists and turns of crypto policy in Washington, it was a long and bruising week.