The U.S. Securities and Exchange Commission (SEC) has implemented a procedural change requiring lawyers to seek approval from its politically appointed leadership before initiating formal investigations, two sources briefed on the matter told Reuters.

The shift, which has not been publicly disclosed, could potentially slow down regulatory probes.

According to the report, enforcement staff were told they must obtain the Commission’s approval before initiating formal investigations, which are necessary to issue subpoenas for testimony or documents, sources said. Previously, lower-level staff had the authority to do so, while the Commission retained the right to intervene but rarely exercised it.

This change comes under the SEC’s new leadership since President Donald Trump took office. The Commission, an independent agency typically comprising five commissioners including the chair, currently has three members—two Republicans and one Democrat—who are appointed by the president.

What prompted this shift?

Over the past year, the U.S. Securities and Exchange Commission (SEC) has intensified its scrutiny of cryptocurrency companies, leading to several high-profile enforcement actions.

In June 2023, the SEC filed a lawsuit against "Binance" and its CEO, Changpeng Zhao, alleging violations of U.S. securities laws.

In September 2024, "eToro" settled with the SEC for $1.5 million over allegations of operating as an unregistered broker and clearing agency related to its crypto platform.

Additionally, in October 2024, "Jump Trading" agreed to pay $123 million to settle an SEC investigation concerning its involvement with the failed (TerraUSD) stablecoin.

These enforcement actions have faced significant backlash from the cryptocurrency industry. Critics argue that the SEC's "regulation-by-enforcement" approach suppresses innovation and lacks clear guidelines for compliance.

The SEC's series of enforcement actions has fueled tensions with cryptocurrency companies, leading to demands for clearer regulatory guidelines and influencing changes in the agency's internal procedures.