The public IPO market has hollowed out because private capital captured the value-creation phase, leaving retail investors to buy mature companies at peak valuations. SEC Chair Paul Atkins and CFTC Chair Brian Selig outline a coordinated agenda to reverse that trend.
1. The IPO Decline: What Changed and Why
Atkins points to an a16z bar chart comparing ROI distribution between insiders and public investors across two eras. In the 1980s, Apple, Microsoft, and AMD went public at 4-5 years old with roughly $400M in today's revenue, giving public market buyers the lion's share of long-term returns. Today, the U.S. has half the public companies it had 30 years ago, the IPO is a liquidity event for insiders rather than a financing round, and the return distribution has inverted entirely toward private capital.
Atkins identifies three structural inhibitions to going public: compliance cost and disclosure burden with no materiality filter, class action litigation risk with every stock dip, and weaponized corporate governance through shareholder proposals. His remedy: a full rulebook review focused on materiality, litigation reform including mandatory arbitration and fee-shifting, and curtailing frivolous governance campaigns.
2. SEC-CFTC Coordination: From No Man's Land to Harmonization
Atkins describes the historical relationship between the two agencies as two fortresses with no man's land between them, where would-be products died in the crossfire over jurisdictional ambiguity. Casualties include single stock futures and portfolio margining. Atkins and Selig are formalizing a memorandum of understanding to share information, coordinate policy, and implement substituted compliance regimes so products with cross-jurisdictional features, such as prediction markets touching both securities and sports outcomes, face a single primary regulator rather than duplicative registration. Atkins's stated ambition is a super-app capital markets framework where jurisdictional lines are blurred in practice through coordination.
3. Crypto Regulation: Clarity Over Enforcement
Selig describes the prior administration's approach as regulation by enforcement that drove crypto firms, prediction market operators, and AI companies offshore. The current agenda centers on purpose-fit rules ahead of the Digital Commodity Exchange Act (Clarity Act), which would give the CFTC broad authority over spot crypto markets. The working framework: tokenized securities remain under SEC jurisdiction and securities laws apply including insider trading; digital commodities, utility tokens used within networks like Ethereum or Solana, and digital collectibles fall under CFTC oversight. The capital raise around a token is regulated separately from the token itself.
4. Prediction Markets: Cop on the Beat Already Exists
Selig pushes back on the idea that prediction markets are unpoliced. The CFTC has required exchanges to certify since the Iowa Electronic Markets in the 1990s that listed contracts are not readily susceptible to manipulation. Kalshi recently brought two enforcement actions, including one against an employee of MrBeast who insider traded on video launch information. The legal standard mirrors securities insider trading: a duty of care to an employer applies. The streaker-bets-on-own-streaking scenario is acknowledged as a genuine manipulation risk that exchanges must screen for at the listing stage.
5. Quarterly Reporting and the Reporting Burden
Annual reporting was the SEC standard at its 1934 founding. Semi-annual reporting began in 1955. Quarterly reporting only started in 1970. The UK reverted to semi-annual in 2014 while allowing voluntary quarterly disclosure. Atkins is agnostic on the right cadence but is launching a proposed rule and comment period. The practical challenge for small-cap companies: fewer analysts follow them, and analysts may actually prefer quarterly data. A separate issue is that real-time data streams enabled by AI agents could make cadence debates obsolete for any company willing to publish a continuous accounting feed.
6. Accredited Investor Reform
Atkins commits to a proposed rule this year to revise the accredited investor definition. The Investment Company Act of 1940 already includes knowledge, not just net worth, in its statutory definition. The reform under consideration: a knowledge-based test analogous to a driver's license or CFA/CPA credential, administered by FINRA or a similar body. Current rules restrict approximately 95% of Americans from private market investment. Atkins notes the asymmetry: a finance professor earning $100K cannot invest in a startup, but an uninformed heiress with $10M can.
7. Systemic Risk, Leverage, and Autonomous Agents
Both chairs acknowledge that 24/7 tokenized markets and AI-driven autonomous trading agents represent risks regulators have not previously encountered. Selig's framework: set rules that permit building without prior permission, operate nodes on blockchains, and employ technologists to audit smart contracts. Atkins flags the need for potential speed bumps even as T+0 settlement becomes technically achievable. On bilateral swaps, Selig credits Dodd-Frank's swap data reporting for reducing opacity but criticizes its complexity, calling for a minimum effective dose regulatory approach.
Key Takeaways
- The IPO market shrank because private capital absorbed the early-stage return phase. Retail investors now only get access to mature companies, and fixing this requires reducing compliance costs, limiting class action exposure, and reining in governance activism.
- The SEC and CFTC are formalizing coordination through a memorandum of understanding and substituted compliance regimes to eliminate the jurisdictional ambiguity that killed products like single stock futures for decades.
- Crypto regulation is moving toward a clear split: tokenized securities stay under the SEC, digital commodities and utility tokens go to the CFTC, and the capital raise around any token is regulated separately from the token itself.
- Accredited investor rules that bar 95% of Americans from private markets are under active review. Atkins is proposing a knowledge-based test this year to replace the net worth threshold as the primary gating mechanism.
- The two chairs' top shared concern is innovation fleeing offshore to the Cayman Islands, Bahamas, or worse, while their top domestic concern is AI-enabled fraud targeting retail investors and wiping out retirement savings through social engineering.