Call for Regulatory Clarity: Solana Policy Institute Seeks SEC Exemption for DeFi Developers
The Solana Policy Institute has submitted a formal request to the US Securities and Exchange Commission (SEC) to grant an explicit exemption for decentralized finance (DeFi) developers. The institute argues that releasing open-source software without custody should not require engineers to take on the same regulatory risks as centralized crypto exchanges or other market intermediaries. This appeal comes as regulatory pressure, enforcement actions, and legal uncertainty continue to weigh on DeFi development in the United States.
According to the institute, the SEC’s existing framework, built on centralized intermediaries, does not fit with how smart contract-based systems actually work. In DeFi systems, users maintain custody of their assets, approve their own transactions, and interact directly with public blockchains. The software does not manage funds, exercise discretion, or act on behalf of users. The institute claims that applying broker, dealer, exchange, or clearing house rules to non-custodial software would be misplaced and counterproductive.
The Need for a Technology-Neutral Approach
The Solana Policy Institute recommends a technology-neutral approach based on custody and control. Under this framework, genuine intermediaries would be regulated because they hold customer funds or control execution, while developers of non-custodial, non-discretionary software would remain exempt from registration requirements. The institute calls on the SEC to issue interpretive guidance confirming that publishing and maintaining such software does not amount to operating an exchange or conducting transactions for others.
Requiring registration of non-custodial software as an Alternative Trading System (ATS) would be impractical and, in many cases, impossible. In practice, the institute says, it would force decentralized protocols to either close or reimpose centralized control, undermining the very investor protections regulators want to preserve. The institute’s position is consistent with recent public statements from SEC leadership, including Chairman Paul Atkins and Commissioner Hester Peirce.
Protecting Developers and Promoting Innovation
Crypto developers are demanding protection as enforcement pressure increases. In recent years, several high-profile cases have targeted individuals who wrote or managed open-source software, including prosecutions related to crypto mixer projects. The lack of clear exceptions means developers must choose between innovation and personal legal exposure. The Solana Policy Institute’s request for an SEC exemption aims to address this issue and promote innovation in the DeFi space.
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