SEC Order Gives Crypto Exchanges New Legal Defense Strategy

On October 31, the SEC issued an exemptive order that delays compliance deadlines for Regulation NMS—the comprehensive rulebook governing U.S. equity trading—until February and November 2026. While ostensibly focused on traditional market mechanics like tick-size rules, access-fee caps, and transparency mandates, the order’s reasoning creates a crucial precedent for cryptocurrency exchanges facing enforcement actions. The Commission cited a lapse in appropriations and the need to ‘facilitate orderly market functions’ after a court denied a stay petition, with Chairman Paul Atkins framing the relief as procedural housekeeping during a partial government shutdown.

This regulatory breathing room for established institutions like Nasdaq and the New York Stock Exchange establishes a clear principle: when rules are in flux and regulators cannot provide clear guidance, enforcement should be paused until the agency establishes workable standards. The same logic now applies directly to cryptocurrency platforms like Coinbase, Kraken, and Binance, which have been fighting enforcement actions while waiting for crypto-market-structure rules that still do not exist. The SEC’s action effectively validates the core argument these platforms have been making in courtrooms from San Francisco to Washington.

The ‘fair notice’ defense, long invoked by cryptocurrency exchanges in their legal battles with the SEC, has gained substantial credibility through the Commission’s recent action. Kraken, Bittrex, and Binance have all argued that if the agency hasn’t instructed platforms on how to comply with securities law in the crypto context, punishing them for noncompliance would violate constitutional due process. This argument received judicial validation in January 2025 when Judge William Orrick allowed Kraken’s fair-notice defense to proceed, finding the exchange ‘plausibly alleged’ a lack of notice about how the Howey test would apply to secondary-market token trades.

The Third Circuit amplified this critique in January 2025 when it remanded Coinbase’s rulemaking petition back to the SEC. Judge Stephanos Bibas wrote in concurrence: ‘The SEC repeatedly sues crypto companies for not complying with the law, yet it will not tell them how to comply.’ This due-process problem, tied directly to regulatory opacity, mirrors exactly the issue the Reg NMS order acknowledges exists in traditional markets when compliance dates collide with unfinished rulemaking and appropriations lapses. The Commission’s own actions now provide crypto defendants with documented evidence of this regulatory inconsistency.

Regulation NMS governs fundamental market mechanics including minimum pricing increments, exchange access fees, and quote transparency—elements that shape how orders route and execute in U.S. equities. The SEC adopted amendments in December 2022 but stayed portions pending judicial review. When the D.C. Circuit denied the petition for review, which would have normally triggered compliance on November 3, the Commission instead issued temporary exemptive relief pushing deadlines into 2026, citing exchanges’ inability to reasonably implement changes during a funding lapse.

The procedural parallels to cryptocurrency regulation are striking. While the SEC has spent three years bringing enforcement cases against digital-asset platforms for operating unregistered exchanges and acting as unregistered broker-dealers, it hasn’t finalized rules explaining what compliant crypto custody, trading, or token listing looks like. Platforms argue they cannot comply with standards that don’t exist in written form, while the agency maintains that existing securities law is clear enough. Yet when it comes to equity market plumbing, the same agency just granted multi-month relief because participants need time and regulatory clarity to implement new obligations.

The SEC’s exemptive relief runs until February 2026 for fee-determinability rules and November 2026 for tick sizes and access-fee caps, creating a timeline that aligns perfectly with ongoing cryptocurrency litigation. Crypto defense teams can now cite the Commission’s own acknowledgment that delayed compliance serves orderly markets when rules are contested and resources are limited. This argument will likely appear in every motion for stay, every preliminary injunction hearing, and every appeal brief throughout the coming legal battles.

If the SEC eventually finalizes crypto-market-structure rules, whether through formal rulemaking or settlement frameworks in major cases, similar exemptive orders would logically follow, giving platforms time to build compliant systems. The procedural logic is identical: regulators cannot enforce obligations that participants cannot reasonably meet because standards are unwritten or the agency is in the midst of rulemaking. Today’s order gives that argument the SEC’s official endorsement, providing crypto lawyers with a litigation roadmap that leads straight through the same exemptive-relief process the Commission used to buy time for Nasdaq and the NYSE.